The European chemical sector is headed for a watershed moment

The European chemical sector is headed for a watershed moment

Fifty years from now, historians and economists will look at the events of the last few years and define it as a turning point for the country. european chemical industry,

In recent months and years, certain events and situations have begun to put pressure on chemical companies, They are forcing the entire industry to react and adapt. after these changes chemical field The same will never happen again in Europe.

Factors driving this sea change include:

1. Supply Chain Crisis

A few years ago, globalization seemed to be the only way chemical industry Profitability and economic success in the wider global economy. With the start of the Asian Tiger economy and the rapid expansion of middle class consumerism all over the world, the chemical business proceeded to increase production, raw material supplyand fresh market.

supply chain crisis The inherent risk of such a long-range trading strategy created by the COVID pandemic has been shown. A factory shutdown in Shenzhen, a shipping issue in the Port of Los Angeles, and health restrictions in New Zealand are all intertwined today. it’s abandoned chemical companies And their customers are exposed to factors over which they have no control.

In the medium term this will drive demand for onshoring and focus on more stable supply lines And Reliable source for raw material,

2. Ukraine and energy prices

Complicating the issue of the COVID supply chain has been the Russian invasion of Ukraine. A war that has prompted a surprisingly united response from Western economies and politicians, and which has also exposed Europe’s dependence on Russian energy.

While the EU has now confirmed that it will remove all Russian oil from its economy, other products may not be so easily replaced.

As well as heating European homes, gas is widely used a major feedstock and energy source chemical industry, Ukraine and Russia are also major suppliers of other important materials such as nickel, titanium, wheat, uranium, iron ore, mercury, shale gas, barley and sunflower oil.

stabilization of europe raw material supply chain Will be a big undertaking. For example, 44% of Europe naphtha import Came from Russia in 2021. how is it possible european chemical industry change easily a large amount of feedstockNow that sanctions (both politically motivated and self-imposed) have changed everything since the war began.

“Nobody in Europe is buying Russian volumes and amid limited regional availability, buyers have to pay a premium for non-Russian barrels,” says Shruti Salwan, market expert at ICIS. “Russian Crunch” kerosene Inflows are exacerbating the market woes, while relatively low refinery throughput, amid high energy costs and upstream prices, is keeping the market tight. ,

European buyers of products such as Polypropylene (PP), High Density Polyethylene (HDPE), Caustic Soda, And kerosene Now they have to source from somewhere else and for doing so they have to pay a premium. All of this is happening at a time when businesses are trying to ramp up production. delivery method Struggling to overcome the pandemic.

In response, Europe wants to become far more self-sufficient for energy. At the same time, it is trying to diversify its raw material source, For example, efforts have already begun to increase access to basic chemical products from the Persian Gulf.

“Like Russia, the Middle East is also a major exporter of naphtha,” says Michael Connolly, ICIS principal analyst for refining. “But at the moment most Middle East material goes east to Asia, and hardly any comes to Europe. If Russia finds a home for it kerosene (Rejected from Europe) With buyers in Asia, mainly China and India, then we could see some swing in Middle East material to Europe to maintain the global balance.

3. Plastic Waste

The next important factor to re-align european chemical industry We will tackle the problem of plastic pollution.

Images from around the world showing the damage caused to wildlife by plastic waste – such as the great Pacific garbage patch, dirty beaches in Asia, or dead seabirds in the Antarctic Ocean – are all definitive on the need to reduce or at least do better. There are polls. Control plastic waste.

with production of plastics being a key element of chemical industry Any move from consumers or legislation that reduces consumption of single-use plastics or requires more recycling (including chemical recycling) will have a major impact on European chemical producer,

4. Net Zero

While the United Nations has made sustainability a key goal for the better health of all humanity, it is Europe (and the European Union in particular) that is leading the global march towards Net Zero.

European Commission said that, “the EU aims to be climate-neutral by 2050 – an economy with net-zero greenhouse gas emissions. This objective is at the heart of the European Green Deal and in line with the EU’s commitment to global climate action under the Paris Agreement ”

Beyond the ideal of true stability, the European Union is unique in envisaging what it describes as “[A] Transition to a climate-neutral society [which] It is both an immediate challenge and an opportunity to build a better future for all. [Where] From the power sector to industry, mobility, building, agriculture and forestry, all segments of society and the economic sector will play a role.”

stands at the center of this transition european chemical zone Again being told to move the mountains.

european chemical industry The coronavirus has been at the heart of the health crisis, experiencing a decline in demand for some goods (such as aviation fuel and clothing) and an increase in demand for others (such as PPE, sanitizer, and COVID testing). It also suffered from massive lockdowns and closed production, yet was important in the development and production of vaccines.

A major player in the production and consumption of the European chemical industry plastic products, Manufacturing 58 million tonnes, following market trends to reduce plastic use (eg through better packaging) petrochemical products Durable is huge. Especially when conducted at the same time as an effort to reduce carbon emissions and achieve Net Zero in less than 28 years.

All this has to happen when war is on its doorstep with Russia, which has limited access raw materialfuel and a major market of 144 million people.

As Paul Hodges, President of New Normal Consulting, said in a recent ICIS interview, “It seems almost certain that Europe is heading into recession due to the combination of a second COVID wave, higher energy prices (especially gas), continues supply chain disruptionRising inflation, and now the impact of the war in Ukraine – with the dominant German economy in the eye of the storm.”

We’re living through a watershed moment european chemical industry, an area of ​​the economy that has been stagnant for many years while seeing growth chemical production in North America, Asia and the Middle East due to regional economic benefits such as shale gas, low-wage domestic demand and cheap local oil.

How chemical companies The solution to these difficult problems in Europe remains to be seen, but european chemical industry Tomorrow’s place will be very different.


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