HELSINKI (ICIS)--The future of chemicals production in European lies in innovation-driven specialties chemicals, not lower-margin commodity chemicals, the executive director of the European Chemicals Agency (ECHA) said on Tuesday.
Speaking on the sidelines of the ECHA’s stakeholder forum in Helsinki, Finland, Geert Dancet said that the expertise of European chemical companies in producing innovative high-end specialties was where companies should be concentrating, as margins for commodity chemicals are eroded by competition from elsewhere in the world and from the cost of regulation in Europe.
“That is generally my conclusion,” Dancet said. “That does not mean that we have to discontinue overnight all the commodity chemicals. There is definitely a need to see how long companies can remain competitive, but you do see some premature departures from companies that wish to cut their losses.”
Europe’s share of the global chemicals market fell from 32% to 21% between 1999 and 2010, according to European Commission (EC) data.
“While still in a strong position, the EU has lost its top ranking to Asia, mainly due to the rise of China and of the Middle East,” the commission said in its 2012 review of the Reach (Registration, Evaluation and Authorisation of Chemicals) regulation.
According to the review, the costs of Reach – estimated at €25,000-€250,000 ($32,051-$320,512) or even more in some cases – are not tending to prove too heavy a burden for specialty chemicals producers. But producers of commodity chemicals, already finding margins squeezed by strong international competition, are finding the burden of additional regulation especially onerous.
The commission said in the review: “It appears, therefore, that the EU chemical industry is doing much better in innovation-driven sub-sectors (eg specialty products) than in more cost-orientated sub-sectors (eg commodity products) or sub-sectors for which important downstream industries have moved a substantial proportion of their activities out of the EU.
“In consequence, the competitiveness of the chemical industry is very much dependent on its capacity to conduct research and development, commercialise the results and ensure rapid uptake of innovation results,” the report concluded.
According to Dancet, however, the cost of registering each chemical produced with Reach can force a company to take a more dispassionate look at its production portfolio and to prioritise the most profitable parts of the business, leaving it healthier in the long run.
Dancet said: “I don’t call this [approach] negative, necessarily. In a way, Reach has focused companies very much on to looking more at their portfolio of chemicals much more strategically than they used to do. The registration deadlines force them to think more strategically.
“And that can also be an advantage in a way, that they can take earlier decisions to concentrate on the profitable part of the business, and thereby have a bigger overall survival of the companies than they would otherwise have had. They can also themselves relocate certain productions to areas where it is much more competitive to do so.” he added.
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