Despite looming threats of a double-dip recession across much of Europe in the wake of the euro crisis, there is a renewed optimism among sites, particularly in northern Europe, that the advantages of locating plants in chemical sites and clusters will bring in considerable amounts of investment over the next several years.
“There is no shrinking of demand for chemicals; nor are there any major structural deficiencies to deal with,” he continues. “Europe is continuing to make lots of cars and other sophisticated products which need lots of chemicals.”The current state of the European economy, dominated by the debt-ridden eurozone, does not appear to be deterring a revival of interest in building new plants or production expansions in the region. “Europe is still the world’s largest chemicals market, so it remains a big attraction to investors.”
- Fred du Plessis, president of the European Chemical Site Promotion Platform (ECSPP), based at The Hague in the Netherlands, which represents most of the leading chemical manufacturing locations in the region.
Furthermore, the high level of integration in the sites and clusters – making them among the most cost-effective in the world – will continue to ensure that Europe continues to play a significant role in global chemical industry.
“Europe has the most integrated chemical complexes in the world,”
says du Plessis.
“Over the years it has developed an advantage in the global chemicals market based on the efficiency and cost-competitiveness of its sites, despite its feedstock weaknesses.”
There is a lot of collaboration between the estimated 70 – 80 sites in Europe, around 30 of which are major ones with petrochemical and commodity production capacities. However, competition between sites has intensified during the economic downturn, which is putting pressure on those in peripheral locations.
In a report on the future of the European chemical industry, management consultancy KPMG warned that by 2015, 14 of the 43 crackers in the region could become uneconomic, which could put the future of their sites in doubt. It says the chemical industry must “ruthlessly identify which chemical clusters will remain competitive on the global stages and to focus resources and investment to ensure their long-term survival.”
CONSTRUCTION PICKS UP
Meanwhile, many sites appear to be doing enough to attract a steady flow of interest among investors after two years of virtual inactivity in the building of new or expanded facilities. During this time, in most sites about the only construction activity was on projects for which much of the engineering design work had taken place before the 2008 financial debacle. “For two years the number of new projects on our site was more or less zero,” says Martin Naundorf, head of site development at InfraLeuna, the company managing the Leuna site in eastern Germany. “Then some studies of proposals for projects started to be made in 2010 and some of these were realised in 2011, mainly for expansions, which showed the commitment of existing customers to the site. Now we are dealing with plans for new projects, one of which could be worth more than €1bn [$1.3bn] if it went ahead.”
While some sites are reporting levels of investment equal to those prior to 2008, a few are claiming that they are even higher than a five years ago. At the three ChemPark sites in Germany at Leverkusen, Dormagen and Krefeld-Uerdingen, investments last year amounted to over €450m, higher than the total in 2007, according to Currenta, the site management company.
Bayer MaterialScience (BMS) began building a €35m plant for polyurethane raw materials at Leverkusen in January. BMS is planning to construct a €150m toluene di-isocyanate (TDI) facility at Dormagen, where Kemira is planning to make water-treatment chemicals from hydrochloride feedstock at the site. At Krefeld-Uerdingen, Lanxess is building a new formalin plant. Currenta has been concentrating on promoting the cost advantages, logistical efficiencies and synergies between the chemical outputs of plants on its sites.
“The value added per square meter of production area [on the sites] is unmatched worldwide [as a result of] the logistics chains and process flows, which are the result of decades of know-how,”
says Dirk Wintersehl, Currenta’s marketing manager.
“Being one of the biggest chemical sites in Europe, we can offer our clients onsite attractive prices due to economies of scale,” he adds. The present strategy being followed by many sites is to ensure that companies investing in their locations have little else to do except concentrate on the construction and bringing on stream of their new facilities. “The concept behind our chemical park allows companies from abroad to focus on their core skills, whether they are in production, logistics or service provision,”
says Pierre Kramer, head of site development at InfraServ Knapsack, the company running Chemical Industrial Park (Chemiepark) Knapsack in North Rhine-Westphalia, Germany.
“We often explain to companies from Asia, for example, that they can come, rent the land and only invest in the land and connect their plant to the grid,” he continues. “All the rest is there – rail and road connections, a container terminal, industrial waste water treatment, trained people, a training academy on site, energy supply, plant services, planning permission management, fire service and analytical laboratories.”
Sites within clusters, which comprise groups of separate sites, have tended to enjoy more competitive advantages because of a multiplicity of chemical plants and owners, ranging from feedstock and commodity producers to fine and technologically advanced specialty chemical businesses.
Some clusters are centred around a production center for basic feedstock supplies, including some in Eastern Europe and eastern Germany, such as Leuna, which are served by oil pipelines and refineries.
In Western Europe, the biggest clusters tend to be located in and around ports such as Rotterdam, Antwerp, Le Havre and Teesside.
“If you are going to make yourself more attractive to foreign investors, you have to expand your services, utilities and transport facilities and being in a cluster helps you to do that,”
says Sietse Wiersma, inward investment manager at NV Nom, the foreign direct investment agency for the Northern Netherlands, which looks after investment into two chemical clusters at Delfzijl and Emmen.
Training and R&D support facilities are now key areas in which sites and clusters have been seeking to extend their range of services, even during a period of economic downturn. Across much of Europe there are shortages of skills for the running of chemical plants and their ancillary facilities. An increasing number of sites provide qualified personnel for their customers through on-site or local training academies.
At Chemiepark Knapsack, the Rhein-Erft Akademie provides vocational on-the-job training for chemical, technical and commercial jobs, courses for industrial foremen and for administrative and marketing staff, and teaching for BA and MA degrees.
“We have one of the most important institutions for vocational training in Germany located on site,” says Kramer.
Currenta has its own business unit for education, which covers subjects including regulatory affairs and European Union legislation such as Reach.
“The Reach team offers all kinds of consulting and analytical services related to the EU regulation,”
“Our environment experts are in contact with public authorities and are specialised in modern cleaning and recycling technologies and environmental law.”
At the Chemelot site in the Southern Netherlands, which comprises an industrial park and a campus, an education center is being set up in collaboration with neighboring education institutions, including Maastricht and Zuyd universities. Maastricht University has a science program under which students can take degree courses with practical modules at the Chemelot campus. Sites are now much more active in exploiting the benefits of research collaborations with local universities and research institutes. At the Wilton site on Teesside in the UK, the government-funded Centre for Process Innovation (CPI) has its national R&D center for process development. Companies, universities and research institutes can test new process technologies with a wide range of the center’s production equipment.
“It has helped to make Wilton the UK’s main location for process development, which can be a major attraction for investors in the site,”
says Patrick Pogue, business development manager for the UK arm of Sembcorp UK, which owns and runs the Wilton site. At Leuna, a consortium of companies is developing a technology originating from the local Merseburg University for the gasification of lignite, of which there are large reserves in the region.
“This has the potential to be a very large project costing over €1bn, which initially will produce fuels but in the longer term chemicals, such as aromatics,”
“A lot of the R&D backup available at sites and clusters is being concentrated on technologies for low-carbon processes and products, particularly those derived from renewables and biomass.”
Chemical sites in the Northern Netherlands are part of a regional strategy of establishing the framework for a bio-based economy in which local farmers would become suppliers of raw materials for the chemical and other sectors. At Chemelot, in the south of the country, Maastricht University, together with RWTH Aachen University, is establishing a research institute for bio-based materials which will research the use of plants as a source of materials for green chemistry.
Over the last few years, around 50% of investment in the Teesside-based cluster in the northeast of England comprises projects with low-carbon processes or products.
“We are seeing that low-carbon technologies and projects are making up a high proportion of the £8bn in live projects we are dealing with at the moment,”
says Stan Higgins, chief executive of the Teesside-based North East Process Industry Cluster (NEPIC), which represents around 500 companies with about 40,000 employees, most of them in the chemical and related sectors.
“Our objective is to bring low-carbon processes and products into the main parts of the existing supply chain,”
Europe already has a reputation across the world as being a center for the development of green chemistry. This is being exploited by its chemical sites in their efforts to bring in new investment. In the longer term there could be a broad spectrum of chemical feedstocks from renewable resources available at the region’s sites, which could play a key role in differentiating the position of the region in the global chemical market.
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