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The European chemical industry can still be portrayed as vibrant and strong.
However, worldwide competition is getting fiercer. In 2008, world chemicals sales
were valued at €1950 billion, an increase of nearly 5% compared to the previous
year. With €566 billion, the EU chemical industry is still in a top position, but has lost
its first place in the ranking to Asia, mainly due to the rise of China. Taken together,
the EU, Asia and NAFTA (North American Free Trade Area) account for 88.6% of
world turnover.
Developments in the previous 10 years (1998-2008) show that the EU was the
leader in world chemicals sales but has gradually lost ground against Asia.
Comparing 2008 to 1998, the contribution of the EU to world chemical sales was
reduced by 4.8 percentage points. In fact, Europe’s sales have been growing
continuously, but world chemical sales are growing faster. The value of word
chemicals sales increased by 78% in 2008 compared to 1998.
In 2008, the key trading regions were the EU, Asia (including China and Japan) and
NAFTA. The EU was the world's leading exporter and importer of chemicals,
accounting for 42% of global trade (exports + imports). This includes intra EU trade,
mainly for reasons of comparison with other regions, as their figures include this
trade as well.
Chart 1.5: Sectoral breakdown of EU chemicals industry sales: 2002 versus 2008
The output of the EU chemicals industry covers three wide ranges of products: base
chemicals, speciality chemicals, and consumer chemicals.
• Specialty chemicals cover the auxiliaries for industry, paints & inks, crop
protection, and dyes and pigments. Specialty chemicals are produced in small
volumes but nevertheless represented 23% of total EU chemicals sales in
2008.
By 2009, nearly half of sales were intra EU (excluding domestic sales). While intra
EU sales are rising, the importance of domestic sales is decreasing, accounting only
for 26% of EU sales. 26% of chemicals sales are exported outside of the EU area.
NAFTA, neighbour countries of the EU and Asia are the key markets.
With regard to its gross operating profit, chemicals compares favourably to other
manufacturing sectors as well. The ratio of gross operating profits to sales is the 8th
highest in industry and is well above the manufacturing average.
Data Source: Cefic Chemdata International and Eurostat, *Public administration and defence, compulsory social security; education; health
and social work; other community, social and personal service activities; private households with employed persons, ** Wholesale and
retail trade, repair of motor vehicles, motorcycles and personal and household goods; hotels and restaurants; transport, storage and
communication, ***Financial intermediation, real estate, renting and business activities
The EU chemical industry comprises 29 000 enterprises (data covering firms with no
employees are excluded), 96% of which have less than 250 employees and may be
considered as small and medium sized enterprises. These account for 28% of sales
and 35% of employment. Only 4% of the EU enterprises employ more than 249
employees and generate 72% of total chemicals sales.
In a pan- European poll on the image of the EU chemical industry, chemicals in 2008
are in 6th position out of 8 benchmark industries and rank below the average. Apart
from Nuclear Energy which registered a slight improvement, most sectors
experienced no significant changes or followed in some cases a negative trend such
as Food, Electricity and Petrol/Oil. The image of the chemical industry in 2008 is still
at the same level as in 2006. This result is also in line with the average of all
industries where no improvement has been perceived during the last two years.
The EU has always been an important player in the global chemicals market and so
far it has been in a position to benefit from trade opportunities. In 2009, the EU
generated an extra-EU trade surplus of euro 42.6 billion, which represents about
euro 3.4 billion more compared to 2008. As a consequence of the economic crisis,
extra-EU chemical exports declined by 13.3% while imports to the non-EU area fell
by 16.8%.
2.2 Extra-EU chemicals trade (exports + imports) by region: 1999 versus 2009
2.3%
14.3%
29.9%
27.5%
17.0% 27.2%
7.7%
4.8% 4.8%
19.9%
1.6% 5.3%
5.4%
5.4%
Asia* Others
3.1
LAC**
7.0 5.1
Japan
5.3
2.4
Africa 1.4 Rest of
8.0 5.4 the World
The three major geographic blocs trading with the European Union in 2009 were
North America, Asia (excluding Japan) and Rest of Europe. Rest of Europe plays a
major role. The EU has a surplus with each main trading region (NAFTA, Asia,
Japan, Latin America, Africa, Rest of Europe and Africa) and has broadly retained its
market share in global chemicals sales over the last decade. However, the Trade
Competitiveness Indicator (TCI) - an indicator that compares the trade balance to the
total trade (exports plus imports) of a region - reveals a deteriorating competitiveness
of the overall EU chemicals industry since 2003. This means that imports are
growing faster than exports.
The sectoral analysis shows specialty chemicals and consumer chemicals continue
losing ground. The trade surplus in these sectors decreased by (7.5%) and (6.2%)
respectively in 2009 compared to 2008. However, petrochemicals and polymers
registered an increase in their trade surplus of 38% and 31% respectively in 2009.
A look at the EU’s trade balance in relation to a number of key countries and regions
shows that the position is deteriorating with certain key countries in Asia for almost
all sub-sectors. India and China are the only two countries with which the EU
currently has a trade deficit for chemicals in overall.
Trade development with the Middle East indicates that this region increasingly uses
its feedstock availability to develop an integrated chemicals value chain and to
strengthen its position in a wider range of basic chemicals. Russia has up to now
only been successful in using its competitive advantage regarding raw materials in
base chemicals.
EU has a trade deficit and its EU has a trade surplus but its positive
competitive position weakened
competitive position weakened
EU has a trade deficit but its weak EU has a trade surplus and its healthy
competitive position improved competitive position improved
The trade position of certain important sub-sectors, in particular the raw material and
energy -intensive parts of the chemicals industry, namely basic organics such as
petrochemicals, and basic inorganics such as fertilizers, shows signs of serious
erosion. Their global competitive position is at risk.
International trade is vital for growth and employment of the European chemicals
industry. The industry has placed itself at the centre of global trade and thus
depends vitally on open markets. As growth is concentrated in the emerging
economies, favourable access to these markets is of high importance.
The EU chemicals industry was affected strongly by the spill-over effects of the
economic and financial crisis. The magnitude of the economic crisis (which has
started during the second half of 2008) was much more severe than expected and
many companies were certainly not expecting such a dramatic downturn. Chemical
companies are experiencing strong pressure on margins due in particular to the lack
of demand from customers and weak consumer spending. Moreover, the European
chemicals industry is facing additional pressure from its competitors outside Europe
and mainly from the Middle East where new petrochemical capacity is built-up and
very likely a large proportion of its output will find its way into European markets.
All in all, the European chemicals industry reached its lowest point in December
2008, and since that time, production has been dragging along posting mild growth
each month at best, but remains sharply down compared to last year's figures
(2008). Output in the EU chemicals industry experienced a decline of 11.3% in 2009
compared to 2008.
Looking ahead: Cefic forecasts a year-on-year production growth of 9.5% for 2010
and 2% in 2011 (Source, Economic Outlook, June 2010).
Basic chemicals sectors are now registering the fastest rebounds, but in all cases
chemicals output* remains well below previous levels. Growth in chemicals
production has continued more strongly and for longer than was expected at the time
of our November 2009 forecast. However, the overall economic recovery in Europe
remains fragile. Consequently, Cefic still expects a pause in the rate of growth of
most commodity chemicals sectors, since underlying market demand must be
rebuilt: a recovery built on inventory corrections alone is not sustainable.
Surveys also indicate that capacity utilisation within the industry remains well below
normal levels. There remain significant uncertainties in the economic environment.
Any defaults on sovereign debt could trigger renewed problems for those banks
whose loans turned bad, and the chemicals sector would be sensitive to the further
economic shocks resulting from such a scenario.
The development of the EU chemicals industry will also depend on the effectiveness
of consolidation measures taken within EU countries. The European chemicals
industry continues to face relentless global competition. Access to raw materials and
energy at globally competitive prices remains a prerequisite for a successful
recovery.
Over the past five years (2004-2009), the EU chemical industry showed the lowest
growth rate compared to the biggest world regions and it is, with -1.4%, well below
the world average growth of chemicals of 1.7%. Asia Pacific region is booming, with
average growth rates in chemicals of 5.2% over the past five years. Asia is heavily
influenced by the extraordinary performance of the Chinese chemicals sector and a
booming economy and industrial sector.
The long-term trend shows that also over the years (1999-2009), the European
chemical industry showed the lowest growth (0.1%), whereas Asia Pacific (4.9%)
and Latin America (2.5%) started their steep rise several years ago.
In 2008, The 30 major countries had a combined sales turnover of € 1793 billion.
Eleven of the top 30 world chemicals majors countries are Asian and generated a
chemicals sales of euro 709 billion, which represents nearly 40% of the top 30 and
36% of world chemicals share. Nine of the top 30 are members of the European
Union (27), representing 26% of world chemicals sales.
Chapter 4 Costs
In 2006, purchases by the EU chemical industry accounted for 76.3% of the sales
value (covering both trading and other purchases costs). Among purchases, it is
possible to single out the costs of trading. Trading represents the cost of chemicals
purchased from third parties and resold in their original condition, and amounts to
6.7% of the sales value.
Other purchases costs accounted for some 69.6% of the chemicals sales value, and
they cover energy costs and other production costs. It needs to be underlined that
energy costs from the purchase of feedstock and fuel and power represent a key
factor in cost competitiveness of the EU chemicals industry. Certain sub sectors are
much more sensitive to energy cost as for them it represents a more important input
factor - for example the Chlor Alkali industry.
The remaining 23.7% constitutes the gross value added of the sector, which
comprises gross operating surplus (11.2%) and payroll (12.5%). The gross operating
surplus is defined as profits before taxes, financial charges and depreciation.
The payroll accounts for a significant share of chemicals production costs (12.5%)
and is therefore a major factor in competitiveness. Labour cost per employee in the
EU chemical industry has increased by an average 3.3% per annum over the years
(1999-2009). People in the chemical industry are highly qualified and the chemical
industry redistributes part of its profit to its employees through competitive salaries.
Chapter 5 Energy
The chemical industry upgrades energy and raw materials into products required by
other industrial sectors as well as by final consumers. The cost of these inputs is a
prime factor in competitiveness on world markets.
From the energy sector, it consumes coal, oil products, natural gas, electricity and
renewables, using them both as raw materials (feedstock) and as power and fuel. In
2007, the European chemical industry (including pharmaceuticals) used a total of
138.7 million tonnes of oil equivalent (TOE) of energy. Feedstock accounted for
almost 61% of total energy products and fuel and power for nearly 40%, taking all
sources of energy into account. This means that most of the energy used by the
chemical industry as feedstock is stored in the products and can still be reused,
through recycling (Chart5.1).
Regarding other raw materials, the chemical industry also uses a wide variety of
natural or processed starting materials, e.g. metals, minerals and agricultural raw
materials (sugar, starch, fats, etc.).
For many years, the EU chemical industry (including pharmaceuticals) has made
strenuous efforts to improve energy efficiency, reducing its fuel and power energy
consumption per unit of production. In 2007, energy consumption per unit of
production in the chemical industry (including pharmaceuticals) -energy intensity-
was 55% lower than in 1990 (Chart 5.2).
Energy efficiency is subject to decreasing returns: the higher the level of energy
efficiency attained, the more difficult it becomes to make further improvements.
However, over the last 17 years the chemical industry has succeeded in increasing
continuously its output and at the same time keeping its energy input constant, and
consequently lowered its energy intensity significantly by 4.6% per year on average.
Chart 5.3 shows that energy intensity in the US chemicals industry has been
reduced over the past seventeen years (1990-2007) but not as much as in Europe
(-1.9% per year on average)
Chapter 6 Employment
6.1 Employment
In the EU, some 29,000 chemical companies employ a total staff of about 1.205
million. Employment in the EU chemical industry has decreased by 2% over the past
10 years (1999-2009). Employment in the USA has experienced a steeper decline
for chemicals over the same period with a decrease of 2.9%.
The EU chemical industry is a leading industry with high skills and productivity, due
to high investment per employee and highly educated and trained employees. As a
consequence, labour productivity in the EU chemical industry rose by 2.2% p.a. over
the period 1999-2009.
Investment per employee and personnel cost are two important factors for the
international competitiveness of the European chemical industry. The equipment of
workplaces in the chemical industry is top quality and investment per employee is
rather high-double the manufacturing average. Chemicals are the first manufacturing
sector in terms of investment per employee.
Additionally, the labour force employed in the chemical industry is more qualified,
trained and better paid than the average industrial worker. Personnel costs for the
EU chemical industry are 47% higher than the average of other manufacturing
sectors. After pharmaceuticals, chemicals is the second leading sector in terms of
labour cost per employee followed by the “automotive” and “other transparent
equipment” sectors.
Due to intensifying global competition, the EU chemical industry has taken vigorous
restructuring and cost-saving steps in order to improve its competitiveness over the
last decade. As a consequence, labour productivity in the chemical industry is
growing faster than labour productivity in the total manufacturing sector: 2.2% and
1.6% average annual growth 1999-2009 respectively.
Employees with medium and high education account for around 80% of workers in
the chemical industry (data 2005). While the percentage of people with lower and
medium education has been decreasing since 2001, workers with a high level of
education are gaining importance, accounting for almost 27% in 2005. The success
of the European chemical industry depends on its well trained employees. Skills and
education are an important factor in international competitiveness and the European
chemical industry is facing a global challenge for talent.
Investments in innovation (including research & development R&D) are key elements
in securing the future of the chemical industry. They not only promote the adaptation
to and the development of new technologies and innovation, but are necessary
prerequisites for the continuous adjustment of corporate structures to the needs of
the market-place. It is worth noting that the currently available figures on R&D
investments give only part of the picture as R&D is only the starting point on the path
to successful innovation. Innovation spending in companies is more and more
included under business development.
After some up and down movements in previous years, the ratio of capital spending
to sales of the chemical industry (including pharmaceuticals) in the EU has been
declining almost steadily since 2000. In absolute figures investment had been
growing steadily between 1994 and 2000 and then declined almost continuously till
2004, with a slight recovery in the next three years (2005-2007).
The high value added products of the chemical industry continuously open up new
fields of application and pave the way to progress and innovation in other industries.
Typical examples are the health, food, consumer goods, aerospace industry, the car
industry, telecommunications, electrical engineering and electronics. Wide variations
in R&D efforts are observed across the chemical industry. Turning R&D into
innovation is becoming increasingly important in relation to the competitiveness of
the region.
Analysing the ratio of R&D spending to sales of the chemical industry it can be
observed that over the past years (1991-2006), the USA had on average a slightly
higher ratio (2.3%) than the EU (2%), but has decreased to similar levels in recent
years whereas Japan has a ratio (5.3%) around twice as high as the other two
trading regions.
.
Hence, GHG emissions per unit of energy consumption have been reduced by more
than 34% and GHG emissions per unit of production (GHG intensity) by nearly 62%
since 1990. This shows the enormous effort that the chemical industry is making to
minimise the environmental impact of its production.
In comparison to the US, the EU has reduced its GHG emission intensity (emissions
per unit of production) much more and is today more GHG emission-efficient. The
US chemical industry has decreased its emission intensity by 36% since 1990, the
EU by 62%.