EPCA ’18: Pessimism descends upon Europe petchems as challenges mount - EPCA president

08 October 2018 14:50 Source:ICIS News

VIENNA (ICIS)--European petrochemicals face several challenges amid an increasingly uncertain geopolitical outlook but the real, long-term test for the industry will be sustainability and how to become participants of a true circular economy, the president of the European Petrochemical Association (EPCA) said on Monday.

Marc Schuller, who is also a board member at French chemical major Arkema, added that the paramount feeling among petrochemical players in Europe is how a number of problems which could greatly impact the industry remain unresolved.

Among others, he mentioned the UK’s exit from the EU (Brexit), the trade war between the US and China, rising crude oil prices that could affect petrochemicals margins, and the re-imposition of sanctions by the US against Iran.

“There are a number of areas of uncertainty without any clear answer, and it’s a long list. Frankly speaking, I haven’t met anybody with a clear answer, and this is something very specific [to this year’s EPCA meeting] and, at the same time, we have the increasing pressure coming from sustainability issues,” said Schuller.

“The mix of the two makes it quite interesting in terms of challenges.”

In terms of short-terms issues, Schuller said that, while the European petrochemicals industry and the wider stock markets had been “quite lucky” this year, they had remained in a positive mood, ignoring the “threat” posed by Brexit and the trade war.

“I don’t think this optimism can continue forever without the certainty that those two issues can be resolved,” said Schuller.

On Brexit, he said that he still worried about the impact Brexit could have on petrochemicals due to the lack of certainty around how trade relations will be ruled post-exit. The UK is due to leave the 28-country bloc in March 2019.

“And we still don’t have any detail of what’s going to happen. We don’t know the shape of any future trade agreements [and] we don’t know if there will be a transition agreement. My feeling is that large companies have probably been making contingency plans for Brexit for some time – I hope this is the case,” said Schuller, pictured right.

“However, smaller companies, which depend on our supply chain, do not have the resources to do the same and we all know that it only takes one product not to arrive at a chemical plant, or a piece of equipment not to arrive at a car factory, to impact the whole production process. We need to watch this very carefully.”

Adding to the gloomy picture, he said that the US withdrawal from the Iran nuclear deal was also adding uncertainty, as the country’s crude oil sector may suffer the consequences of re-imposed sanctions, which are to kick in earnest by November.

Crude oil prices have been feeling the prospect of less supply from key producer Iran. On Monday, the international referential Brent was trading at $82.75/bbl, for deliveries in December. A year ago, Brent prices stood at $55.26/bbl.

“Our job is to face reality. There are things that are under our control, others are not. Our job as industry is to adapt to whatever the reality is whether we like it or not. Everybody needs to be cautious and prepare to face some unexpected development, one way or another,” said the EPCA president.

However, anyone wandering around the EPCA annual meeting in Vienna may wonder why these key issues for the industry are not being debated in the official sessions during the convention.

The conference's main round tables feature sustainability issues, with titles like ‘Petrochemicals and smart cities – combining energy efficiency and creative design’ or ‘Innovation and innovative concepts for a more sustainable supply chain’.

According to Schuller, these topics are the real, long-term challenges for the industry.

On one hand, there is regulatory pressure to advance towards a circular economy, like the EU’s new targets for plastics recycling, he said, while on the other the companies themselves could take this is an opportunity to develop new technologies leading to new products which would be able to meet those regulatory demands.

One of the keynote speakers at EPCA this year will be Steven Chu, former US secretary of energy during President Barack Obama’s first term (2009-2013).

However, the current administration, led by Donald Trump, pulled the US out of the Paris Agreement singed by more than 200 nations in 2015 in order to limit carbon dioxide (CO2) emissions, while some energy and environmental regulations passed during Obama’s time have been revoked.

“I think we need to differentiate what is happening in the short term from the long term. As EPCA, we think the theme of a low carbon economy and sustainability will be key and it will remain a very critical theme worldwide, regardless of the specifics that may or may not develop in certain countries during certain times,” said Schuller.

“And, very clearly, there are some short-term elements in the US which may have been unexpected, but I don’t think it changes the long-term challenges for the industry.”

The annual EPCA meeting runs in Vienna on 8-10 October.

Picture sources: Google Earth, Arkema

Interview article by Jonathan Lopez

By Jonathan Lopez