Substance availability key Reach challenge for Austrian chems – FCIO

LONDON (ICIS)–The threat of reduced substance availability in Europe as a result of the final Reach deadline in May this year is the key obstacle presented to Austria’s chemicals sector by the legislation, according to the director general of the country’s chemical trade group FCIO on Friday.

Covering materials produced in quantities of one to 100 tonnes, the final Reach deadline will cover many small and medium-sized enterprises (SMEs) in Europe for the first time, with registration costs disproportionately higher for smaller single-office companies than for large multinationals.

Aside from a few larger players such as Borealis and OMV, Austria’s chemicals sector is dominated by SMEs, but the threat of lost supply exceeds the problem of fees, according to Sylvia Hofinger.

“The real problem is we face is the availability of many substances,” she said.

“What we are telling our companies is they really have to get in touch with their suppliers asking whether the product will still be on the market. In the smaller volume bands the regulatory costs are disproportionate to the larger tonnages.”

FCIO’s core members are prepared for Reach, Hofinger said, but the costs of registration can exceed the projected profit on a product line for several years in the case of smaller players, meaning that some low-margin products may be discontinued.

At the time of regulator the European Chemicals Agency (ECHA)’s stakeholder day in early February, 15,000 registrations had been received for 6,500 substances, significantly below projections of 60,000 registrations for 25,000 substances with under four months to go.

If the number of substances registered remains significantly below forecasts, the impact could be dramatic, according to Hofinger.

“If you look at the difference between the numbers of pre-registrations and the number of substances that are on the market, then you see that there are dozens of substances in danger. ECHA is aware of that of course,” she said.

The Austrian chemicals industry is the country’s manufacturing second-largest sector, generating around 12% of industrial added value and comprising 7.6% of employment.

Industry turnover dipped slightly year on year in 2016, dropping from €14.77bn compared to €14.86bn the year earlier, but revenues have been broadly static since early in the decade.

“Before the economic crisis, our industry performed very well,” Hofinger said.

“After the crisis, it suffered a drop in revenues, but not as big as in many other countries. In 2010, there was a very fast recovery… Ever since then, the numbers were stable.”

Hofinger cited the rapid post-crash rebound as a factor why the industry missed out on some of the higher growth levels seen in other parts of Europe in 2014-2016, but the broad-based global economic rally during the second half of 2017 has put wind back in Austria’s sails.

Numbers have not been finalised, but Hofinger estimates that year-on-year growth for the sector in 2017 stood at 4%, a rate not seen since 2012.

“Our companies are quite optimistic. We think that the growth we had last year will continue the next year, so expectations are quite good at the moment,” she added.

The centrality of the chemicals sector to the Austrian economy is underlined by the legal mandate given to the FCIO, which gives the group the right to participate in any government consultation on new legislation, as well as a responsibility for collective bargaining with industry unions.

“That gives us quite a lot of influence in what is going on, regulation-wise,” she said.

“There is not a single law we do not have the possibility to command on… Of course, we cannot bring all of our positions to a reality, but to a certain extent we can influence [the development of legislation]”, she added.

Maintaining competitiveness is a key challenge for industries across Europe, particularly in light of an expected increase in supplies of competitively-priced basic chemicals from North America and the Middle East expected to flow into the continent later this year.

SMEs can find themselves in a particularly precarious position, but Austria’s industry has remained resilient, Hofinger said.

The number of companies operating in the sector has fallen from 270 to 245 over the last five years but export demand for Austrian products has remained strong, comprising 70% of all sales.

“[Competitiveness] is a big problem, but the strength of our companies it their high grade of innovation [and] R&D expenditure… which is necessary because a country like Austria can only compete if it has high-quality product,” Hofinger said.

“Because our companies are smaller they tend to be more flexible, and can react quickly to certain trends. Smaller companies are often specialised, which gives them a competitive advantage.”

Picture source: FCIO

Interview article by Tom Brown