EPCA '17: Europe chems thriving; caution needed for challenges - EPCA president

03 October 2017 13:04 Source:ICIS News

Marc Schuller. Source - EPCABERLIN (ICIS)--European chemicals are having a stellar year but challenges will haunt the industry in coming years and caution is needed, according to the new president of the European Petrochemical Association (EPCA).

Marc Schuller, an executive at French chemical major Arkema, was chosen as president of EPCA on Tuesday, effective 4 October, replacing INEOS’ executive director Tom Crotty.

The new EPCA president said European chemicals have been lucky in 2017 as low crude oil prices and the strong economic recovery in the eurozone, fuelled by the European Central Bank’s (ECB) quantitative easing programme, had boosted sales volumes and profits for most companies.  

However, he warned about upcoming challenges, mainly the UK’s departure from the EU planned for 2019.

“This year seems to be good year for chemicals in Europe, but also elsewhere, and I haven’t heard many people complaining like they were a few years ago. Although 2017 is proving to be a definite good year, one can question whether this is sustainable,” said Schuller.

He added his voice to that of other economists who have started to question if the compound annual growth rates in the eurozone, around 2%, were sustainable once the ECB starts tapping its QE programme, which could happen in the first half of 2018.

Started in January 2015, the ECB’s QE has pumped more than €1,000bn in the eurozone banking system in order to boost inflation and encourage lending to businesses and households.

Together with a policy of historic low interest rates, the eurozone economy finally picked up in 2016 and strengthened in 2017 as the highest growing developed economy.

“It’s a question, no doubt [whether the ECB’s tapering could dampen the recovery]. This injection of cash and the low interest rates policy has probably triggered growth which may not last forever, that’s a given. This was one of the factors helping chemical companies, one of many elements, but there are indeed questions about how long this could last,” said Schuller.

“Growth in Europe, in terms of GDP, is not that impressive anyway. We need to remain very careful.”

Schuller also noted how Brexit has surprisingly been absent from this year’s EPCA discussion, a complete different mood from the 2016 edition when the UK had just voted to leave the 28-country bloc.

Moreover, he said that after 15 months since the vote in June 2016, the negotiations to leave the EU are somewhat in an impasse, warning that the actual departure may dampen economic growth in both the EU and the 19-country eurozone.

“Brexit could be a significant factor for Europe in coming months and years. It’s surprising that, after being a big thing in last year’s EPCA, people seem to have switched off their priorities and I am not hearing much about Brexit,” said Schuller.

“However, this topic will surely come back, because even if it not a hot topic right now, we all know it is going to come, and may have a bigger implication than some believe.”

Schuller, a French national, said that his own country’s prospects are somehow positive at the moment, following the victory of the reformist President Emmanuel Macron in the election earlier this year.

The politician, who came to office promising to pass economic reforms to boost growth and employment, has already started preparing the ground to overhaul France’s labour laws, which trade groups have always seen as an impediment to create jobs given the rigid structures of the regulation.

French trade unions, however, are not convinced and see the reforms as a way to snatch well-established rights from workers, prompting Schuller to describe the issue as “sensitive”.

“In September the government has already entered into hot subjects like the labour reform. It’s a very sensitive topic and the unions and part of the opposition have promised to fight the reform, but so far so good,” he said.

“In French politics you always need to be careful though, because implementing changes in France has always been tough. Historically, there has always been resistance because people are afraid of changes and how those changes are implemented is important."

The French chemical trade group UIC also urged the new government to look after the manufacturing sectors as industries like chemicals were risking losing its global competitive edge if more support from the state is provided, according to UIC's managing director Magali Smets in an interview with ICIS.  

“So far I am optimist [about France's prospects]. Manufacturing has entered the government's priority list, and I would say France needs reforms to have a labour system less disconnected from other major countries, for instance,” the new EPCA president concluded.

The EPCA annual meeting runs from 30 September to 3 October in Berlin.

Interview article by Jonathan Lopez

By Jonathan Lopez