Last year INEOS began warning that Europe’s petrochemical industry was facing huge challenges from outside and within. Since then, little has changed to help Europe compete with America, the Middle East and China. As it stands Europe is now one of the most expensive places in the world to make petrochemicals. That has to change, Europe’s politicians must wake up to this competitive onslaught before it’s too late, says INEOS chairman Jim Ratcliffe.
Europe is dithering. But it cannot afford to, not if it wants to retain a competitive chemical industry, says INEOS chairman Jim Ratcliffe.
“It’s not looking good for Europe but Europe seems agnostic about the fate of European chemicals,” he says. “I can see green taxes, I can see no shale gas, I can see closure of nuclear, I can see manufacturing being driven away. I can see the competition authorities in Brussels blissfully unaware of the tsunami of imported product heading this way and standing blindly in the way of sensible restructuring.”
In an open letter to EU Commission President José Manual Barroso, Jim calls on him to take urgent steps to protect Europe’s chemical industry.
“Strategically, and economically, no large economy should abandon its chemical industry,” he says.
INEOS’ profits in Europe have halved in the past three years while its profits in the USA have tripled. And BASF, the world’s largest chemical company, has announced – for the first time ever – a strategic cutback in European investment, citing stagnant markets, expensive energy and expensive labour.
“Energy, in the form of gas, in Europe is three times higher than the USA today, whilst electricity is 50% higher,” says Jim. “There are no cheap feedstocks in Europe. USA and Middle East feedstocks costs are in another league.”
He said shale gas in America had transformed its competitiveness and its confidence.
“There are $71 billion worth of announced petrochemical expansions on the back of shale gas flowing into chemicals,” he said. “And that is predicted to grow to over $100 billion. In contrast Europe announces closure after closure.”
In the UK alone, 22 chemical plants have closed since 2009.
Chemicals depend upon competitive energy and feedstock costs. Whilst intensely technical as an industry, and one of the reasons historically that Europe has been so successful, Jim says technology alone will not save it, and warns that the industry could be wiped out within a decade.
“The European textile industry was wiped out because it could not compete with Asian labour rates,” he said. “Chemicals could go the same way. It could well be another European dinosaur.”
The chemical industry in Europe currently employs one million people directly and five million others indirectly.
“In Europe, chemicals and automotives share top billing with $1 trillion revenues each,” he said. “Economically speaking, the chemical industry is one of Europe’s jewels in the crown.”
In his letter, Jim also highlighted the very real threat from China, which is set to become the world’s largest economy by 2020.
“The Chinese are building relentlessly,” he said. “Whilst in recent history, they have soaked up all the world’s surplus chemicals, they will soon be self sufficient. And beyond that they will start to reverse the flow.”