AFPM ’24: Europe must take action to stop deindustrialization – Huntsman CEO

SAN ANTONIO (ICIS)–The EU must take action on industrial policy instead of just talking about it, to stem the tide of deindustrialization, the CEO of Huntsman said.

While the US is boosting its manufacturing base with programs such as the Inflation Reduction Act (IRA), as imperfect as it may be, the EU has yet to implement any meaningful policies to support manufacturing, according to Huntsman chief Peter Huntsman.

“One thing the IRA does is transmit to the rest of the world is that the US is open for business, or trying to be open for business… whereas Europe is sending a sign that it’s really not open for business,” he said.

Huntsman spoke at a breakfast meeting at the International Petrochemical Conference, hosted by the American Fuel & Petrochemical Manufacturers (AFPM).

Recalling recent conversations with EU prime ministers, European Commission President Ursula von der Leyen and industry CEOs, he expressed disappointment at the outcome from these meetings.

“All I heard during the entire meeting was, ‘We need to talk about it’,” said Huntsman.

‘BEYOND THE POINT OF TALKING’
“It’s beyond the point of talking. When you start to see the rapid deindustrialization with plants shutting down”, it is not readily reversible, he added.

Companies that decide to invest in chemical projects elsewhere are not going to suddenly come back to Europe if it ever regains competitiveness, he said.

“You’re not going to get companies coming back to Europe. You’re just [trying] to stop the bleeding and that’s what Europe should be focused on right now – and I don’t believe that is happening, unfortunately,” said Huntsman.

The US needs a strong Europe – economically, militarily and diplomatically, he pointed out.

“The world is at a loss when Europe is meandering in the dark, unsure what to do with its industrial policy,” said Huntsman.

“I’m not here bashing Europe – I’m here begging Europe… I’ve spent almost half my time in Europe, especially in the last 12 months. I’ve met more politicians and have spent more time lobbying in Europe than I have in my entire career combined,” he added.

UNREALISTIC ENERGY EXPECTATIONS
Plans to rapidly transition away from hydrocarbons and towards renewables are not well thought out, he said.

Huntsman supports the Antwerp Declaration for a European Industrial Deal but said it needed stronger policy around hydrocarbons and the use of oil and gas for industrial development.

Powering Europe’s cement, steel, electric vehicle (EV) and chemical industries – just those industries along – by 2050 would require around 500,000 onshore wind turbines on an area the size of Spain, or solar panels covering an area the size of Ireland, or 836 nuclear plants, he said, citing a study by Accenture.

“Do policies take this into account?” Huntsman asked.

The International Energy Agency (IEA)’s projections on rapidly declining oil, natural gas and coal supply through 2050 for Europe as well as the rest of the world are completely unrealistic, he said.

“The problem is that people are making policy around this” and companies believe they will be penalized if they don’t meet these targets, said Huntsman.

“This is going back to the Stone Age, and nobody seems to care. They are making policy around this,” he added.

The fall in Europe’s energy consumption in the past several years and the more recent fall in costs are not so much due to conservation or sound policy but to deindustrialization, he contends.

“That is not an incentive to invest. It’s quite the opposite,” said Huntsman.

Deindustrialization is being reflected in the stock prices of European chemical stocks, which are trading at around a 15% discount to their US-based counterparts on an EV/EBITDA (enterprise value/earnings before interest, tax, depreciation and amortization) basis, the CEO pointed out.

Europe also has to determine if it will fight more effectively in trade against dumping from other countries – not just China, as well as how it implements carbon taxes on imports, he said.

ENERGY AND REGULATORY PRESSURES
Huntsman said he is “comfortable” on the position of its assets in Europe today but wants to see how energy and industrial policy plays out in the next year or so.

While European energy prices have subsided recently, they are still high and subject to the vicissitudes of international trade until Europe decides to secure its own energy future, he said.

And on the regulatory front, a third-party study commission by Huntsman found that EU regulations will cost the company an additional €75-80m over the next 8-10 years, nearly half of its payroll in the region.

“To offset that, we either have to raise prices, which makes Europe that much less competitive, or cut the workforce,” said Huntsman.

As this is simply unsustainable for companies like Huntsman, Europe has to decide if they want industry or not. Offshoring supply chains and thus also CO2 emissions, will only worsen competitiveness as well as harm the environment, he said.

“A lot more is being said than done. I’m not terribly optimistic there will be any [shift in] industrial policy in Europe. But perhaps the upcoming election will do something,” he added, referring to the EU Parliamentary elections in June.

Europe will land on its feet – it’s just a matter of how much it will cost before it does so, he noted.

“We’ve got to be able to work together as an industry. We’ve got to be able to speak more loudly and advocate for what we all know to be true, and mot worry about being cancelled,” said Huntsman.

Hosted by the American Fuel & Petrochemical Manufacturers (AFPM), the IPC took place on 24-26 March in San Antonio, Texas.