Competitiveness: Slack demand along with high energy and raw material prices made it a difficult year
A lackluster economy wasn’t the only problem for European chemical makers this year. Geopolitical forces and high prices for energy and raw materials also conspired to hold back the industry in 2014.
Europe’s economy continued the crawl that it began after the recession in 2008. Likewise, the Continent’s chemical sector saw anemic growth as it struggled with low demand and high costs, according to CEFIC, Europe’s main chemical trade association.
A study for CEFIC in November by British advisory firm Oxford Economics said Europe’s share of the global chemical market has shrunk from 32% in 1993 to 17% in 2013. The study advised a new energy policy and a hike in government R&D investment.
Concern over high energy and raw material prices prompted 14 of Europe’s largest chemical and other energy-intensive companies to write a letter to José Manuel Barroso, president of the European Commission, calling on the European Union to overhaul the region’s energy and climate policies.
Instead of waiting for government policy relief, several chemical firms with European ethylene operations said they would import ethane from the U.S. beginning in 2016 to feed ethylene crackers. By the end of the year, plummeting oil prices promised some relief to the European industry, though no one could say for how long.
The political confrontation between Western Europe and Russia after the latter’s annexation of Crimea from Ukraine in March put more pressure on the Continent to look to the U.S. and other producers for energy. Russia supplies about one-third of Europe’s natural gas.
As the confrontation over Russian ambitions in Eastern Europe intensified in the fall, Ukraine fertilizer maker Ostchem closed its plants in the eastern part of that country.
Ongoing slow demand forced a consolidation among European vinyl makers. A French court approved the sale of Kem One, the bankrupt former Arkema vinyls business, for $14 million to a pair of private investors. Also, Mexichem bought German polyvinyl chloride maker Vestolit for $290 million, and Westlake Chemical paid $665 million for Germany-based Vinnolit.