INSIGHT: France’s ‘friendlier’ industrial policy attracts chemicals investments

Jonathan Lopez

24-Jan-2022

MADRID (ICIS)–The French chemical industry has seen some of its historic demands fulfilled under President Emmanuel Macron’s five-year term and the “friendlier” environment has contributed to a flurry of chemicals investments recently announced, trade group France Chimie told ICIS.

Just three months away from the next presidential election in April, Macron is now courting the chemicals sector, in a sign he needs to shore up his support among the urban working classes who protested over his policies in the so-called ‘yellow vests’ revolts in 2018.

In the past two weeks, Macron has been photographed with the CEO of the largest European chemicals company, Germany’s BASF, as well as with the CEO of US major Eastman, after both companies announced investments in France.

Significantly, Eastman’s plans would fall under the umbrella of the more circular economy the EU wants to build, in line with the Green Deal which is aiming to make the 27-bloc a carbon neutral economy by 2050.

Earlier in January, Eastman said it was aiming to invest up to $1bn to build a plant that would chemically recycle up to 160,000 tonnes/year of polyethylene terephthalate (PET) waste via a methanolysis depolymerisation unit.

BASF also announced this month it was to build in Chalampe, northeast France, a hexamethylenediamine (HMDA) plant, a chemical used as a feedstock for polyamide 6,6 (or nylon 6,6), also used in specialty amines for coatings, plastics, personal care, and rubber additives.

Within the flurry of chemicals investments announced as of late, US-based cellulose specialties producer Rayonier Advanced Materials is to build a 21m litre/year second-generation (2G) bioethanol plant at its site in Tartas, southwest France.

The facility would produce fuel from wood and start up in 2023; its output is to be sold to a large international petrochemical company under a long-term offtake deal, said Rayonier, without disclosing more details.

Other investments have also been announced within pharmaceuticals.

France’s chemical industry is the second largest in Europe after Germany’s. Its sales in 2020, the latest full-year dataset available, stood at nearly €70bn; the figure was 15% lower than the prior year, before the pandemic hit.

INDUSTRY-FRIENDLY AND THE NUCLEAR FACTOR
While Macron’s opportunistic photography set with big wigs from the chemical industry are aimed to shore up his support ahead of the April poll, his re-election probably was the last thing the companies investing in France had in mind.

The policies implemented in the past five years under his watch may have helped, however, with legal changes to improve infrastructure at chemicals parks as well as lower taxes for corporations.

France’s nuclear energy prowess – which produces around two thirds of electricity demand – make the country’s energy costs much lower than those in Germany or Spain.

With natural gas-produced electricity costs rocketing in the past few months, the certainty of France’s reliable, safe, and lower-cost electricity must have been at the centre of company executives’ deliberations about their investments.

In fact, the EU’s executive body, the European Commission, got in trouble earlier in January when it proposed to catalogue nuclear as a ‘green energy’, a move widely seen as of France’s making and vehemently opposed by countries turning away from nuclear, like Spain or Germany.

High electricity costs are always cited by Germany’s trade group VCI as a deterrent for chemical companies to invest in that country – industry and consumers have for years been paying a fee to finance green energy assets which have dented its competitiveness, according to VCI.

‘Choose France’ is precisely the motto of one of Macron’s plans to attract investments, a plan praised by France Chimie.

Back in 2017, soon after Macron took office, France Chimie’s director general, Magali Smets, set in an interview with ICIS some homework for the new Administration.

The trade group, at the time called Union des Industries Chimiques (UIC), demanded a friendly corporate tax environment and, crucially, more specific legislation targeting chemical parks to make them more competitive.

Both demands became a reality under Macron.

“The legal and tax environments are much better than a few years ago, with lower taxes for industrial companies and the wider private sector. Legally, things have been made simpler and legislation has been implemented to improve chemicals’ parks competitiveness,” said the France Chimie spokesperson.

Under this model, long rehearsed in Germany’s thriving chemicals parks, companies enjoy lower electricity costs thanks to exemptions as well as legislation that allows several companies in a chemical park to share the services, splitting the costs.

Those services can range from utilities, waste management or logistics, for example.

“The implementation of this changed has increased interest from chemical companies to invest in France,” added the spokesperson.

In Spain, its chemicals trade group Feique keeps demanding the same legal changes now implemented in France without much success so far.

France Chimie cited another factor helping attract investment into chemicals: the country’s ageing facilities, which companies can acquire at relatively low prices to overhaul them.

“Over the past years, we have put a lot of effort in explaining to the different public administrations nationally and regionally, that things for chemicals parks had to be made easier to keep the industry’s competitiveness: the efforts have paid off,” said the France Chimie’s spokesperson.

“Things are now better, not only for chemicals but for all industrial sectors. Moreover, President Macron’s ‘France 2030’ strategy placed chemicals at its heart, and in the past three years large public investments benefitting the sector have been announced. This is all good and prepares the country for the future.”

Insight article by Jonathan Lopez

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