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Ineos chairman warns that Europe's chemical industry could disappear within a decade
12:10 PM MST | March 7, 2014 | Natasha Alperowicz
Jim Ratcliffe, chairman of Ineos, says that much of the European chemical industry could close within the next decade. In today's open letter to José Manuel Barroso, president of the European Commission, Ratcliffe says he is deeply concerned about the future of the European chemical industry and its 1 million direct and 5 million indirect jobs. "Sadly, I predict that much of it will face closure within the next 10 years," Ratcliffe says. Chemicals could go the same way as the European textile industry, which disappeared in the 1980s.
“Worldwide, the chemicals sector has revenues of $4.3 trillion. That’s bigger than the GDP of Germany and considerably bigger than the automotive sector, at $2.6 trillion. In Europe, chemicals and automotives share top billing, with $1 trillion each. Economically speaking, chemicals is one of Europe’s jewels in the crown,” Ratcliffe says.
“Strategically and economically, no large economy should abandon its chemical industry … [but] Europe seems agnostic about the fate of European chemicals. The European textile industry was wiped out because it could not compete with Asian labor rates. 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, technology alone will not save it.”
Energy, in the form of gas, in Europe is three times higher than in the Unites States today, whilst electricity is 50% higher. There are no cheap feedstocks in Europe. USA and Middle East feedstocks costs are in another league. Shale gas in the United States has transformed both its competitiveness and its confidence. There are $71 billion worth of announced petrochemical expansions on the back of shale gas flowing into chemicals. This is predicted to grow to over $100 billion. In contrast Europe announces closure after closure.
In the Middle East, they continue to build in Abu Dhabi, in Qatar, in Saudi and now we can add Iran with another 6 million tons of ethylene capacity rejoining planet earth.
“In the UK we have seen 22 chemical plant closures since 2009 and no new builds. And then we have China. ... The Chinese are building relentlessly. 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. Remember they are set to become the world’s largest economy by 2020.
So, in the face of this competitive onslaught, does Brussels, or the countries of Europe themselves, have a master plan? What defences do they have in mind? 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.
Ineos, one of the world’s largest chemical companies, profits in Europe have halved in the last three years. Profits in the USA have tripled. BASF, the world’s largest chemical company, for the first time ever has announced a strategic cutback in European investment citing stagnant markets, expensive energy and expensive labor.
It’s not looking good for Europe, we are rabbits caught in the headlights, and we have got our trousers down. I encourage you to take urgent steps to protect Europe’s chemical industry. I believe this is an important topic of discussion and so I am making this letter available to the media.”