With the global economic recovery, promoting the global demand for chemicals, the European chemical industry has been growing at the fastest speed in recent years.
But the recovery of the industry, which has been sluggish in recent years, is still not enough to make it return to the production level before the 2008 financial crisis.
It’s also unlikely to last long. In fact, production growth is expected to slow to 2% last year, compared with 3% in 2017, according to the European Council for the chemical industry (Cefic), the leading European chemical trade association based in Brussels.
To some extent, this reflects the slowdown of economic growth in Europe as a whole. The European chemical industry has a wide range of customers, from construction, automobile, aerospace to agriculture and health care products, which are vulnerable to changes in GDP growth rate.
Economic growth in the euro zone, including most Western European countries, is expected to slow to 2.1% from 2.4% in 2017 and 1.9% in 2018, with data for next year showing that earlier this year, the Paris based think tank, the organization for economic cooperation and development (OECD), was set to slow down.
After 2.5% growth in 2017, Germany is expected to grow by 2.3% and 1.9% in 2018 and 2019, respectively. Growth is also expected to slow in France and Italy, while the slowdown in the UK is expected to continue into 2018, the OECD said.
Long term prospects
However, the growth of European chemical industry is also hindered by long-term potential factors. Since the turn of the century, these problems have led to the loss of global competitiveness in some sectors of the industry, especially in the commodity sector. Compared with its competitors in North America, the Middle East and parts of Asia, China has higher investment costs in energy, raw materials and capital.
As a result, in some key areas of the European chemical market, more and more sales are dominated by low-cost imports. In some product categories, most of the chemicals are supplied by Asian producers.
Europe’s share of total global chemical production has declined rapidly, from about a third in the mid-1990s to 15% in 2016.
As world chemical production expands and European production continues to stagnate, this decline is almost certain to continue over the next decade. According to Cefic, between 2006 and 2016, the average increase in chemical production in the EU was – 0.04%, compared with 12% in China.
The need for restructuring
At present, the industry is in the transition period, facing severe challenges, enterprises need to fundamentally restructure business.
At present, the petrochemical industry is facing the threat of major restructuring. Its products provide most of the components and derivatives for tens of thousands of chemicals in the European market, which makes it play a vital role not only in the chemical industry itself, but also in the European economy.
The company’s lack of investment is mainly due to its dependence on refineries for raw materials. But these are by-products or by-products of the main automotive fuels (mainly gasoline and diesel) produced by refineries. Demand for automotive fuel in Europe has been falling due to improved fuel efficiency, concerns about urban air pollution and accelerated sales of electric vehicles.
Analysts believe that Europe’s demand for automotive fossil fuels has peaked, ahead of the rest of the world. The only sources of growth in fuel demand will be heavy trucks and airliners.
Refining capacity in Europe has been steadily declining – by as much as two-thirds in the past 30 years. In 2005-2015, refining capacity was cut by a third in France, a quarter in the UK and Italy, and about 15% in Germany.
Transfer to renewable energy
Nevertheless, although the overall investment in the petrochemical industry is no longer a priority for the chemical industry, it is investing in the preparation for the future, which will rely more on renewable energy and other sources of low-carbon raw materials.
A feature of this new era will be circular economy, in which as many materials and chemicals as possible are recycled. In order to simplify the introduction of circular economy, the EU has revised the existing waste recovery legislation and is formulating new regulations.
