Capital & R&I Spending
EU27 capital spending increased significantly in 2021
Capital spending in the EU27 chemical industry
Capital investment is a key factor in securing the future development of the chemical industry. In many cases, major equipment or plant renewals require long-term planning. Such investments are not only related to the improvement of productivity or the introduction of new products but are also due to the need to comply with regulations or reduce operating costs.
The chart illustrates that investment (in absolute figures) in the EU27 area has been globally increasing from 2003 to 2021. EU27 chemicals investment reached the value of €26.5 billion in 2021, e.i: 68% above 2003’s level.
In relative terms, the ratio of capital spending to added value, or capital intensity, of the chemical industry in the EU27 area has been globally increasing from 2003 to 2021. Capital intensity values reached 18.7% in 2021, e.i:4% above 2003’s level.
The European chemical industry continues to believe in the future. It needs to maintain investment in its existing infrastructure and in new production facilities to ensure the chemical sector has a viable and vibrant future.
China leads the global chemicals investment
Capital spending by region (2021 vs 2011)
In absolute values, the level of world investment in the chemical sector was 62% higher in 2020 compared to 10 years ago (€139.3 billion vs €225.3 billion). Investments in China nearly doubled (€55.4 bn vs €109.0 bn) this last decade while Capex increase reached 38% in the EU27 and 73% in NAFTA during the same period.
In terms of growth, global investment grew 4.9% per annum on average between 2011 and 2021. This is below China investment growth of 7.0% during the same period. China is outpacing other economies in the world such as Europe, NAFTA, South Korea and India. With 3.3% growth, the EU27 area is still lagging behind the main regions in the world.
In terms of market share, China contributed 48% of global investment in 2021, up from 40% in 2011. Europe (EU27 + rest of Europe) came second, accounting for about 16% of global investment the same year. NAFTA still ranks third, contributing 12% of global investment in 2021.
High capital intensity in the EU27 chemical sector
Capital intensity in the EU27 chemical industry broken down by sub-sectors (2020)
Data analysis compares capital spending in the EU27 chemicals business broken down by sub-sector. The metric used in the analysis is capital intensity, meaning capital spending expressed as percentage of added value.
In 2020, capital intensity was equal to 19.0% in the EU27 chemicals business. Among the largest chemical sectors, capital intensity in basic inorganics sectors (industrial gases, fertilisers, other inorganics), petrochemicals and polymers are significantly above the EU27’s level.
EU27 CAPITAL INTENSITY BELOW CHINA AND INDIA ECONOMIES
Capital spending (% of added value, 2021 vs 2011)
Capital spending intensity (spending as a percentage of added value) in China and India is far higher than in the rest of the world. In 2021, capital spending accounted for 31% of added value in China.
In India, nearly 25% of added value is attributable to capital spending. Rest of Europe showed an intensity value of 18.1%. With 18.7%, the EU27 area is still behind the emerging-producing regions in Rest of Asia (20.5%), but ahead of Latin America (12.6%), NAFTA (11.7%) and Japan (9.8%).
Capital spending intensity is a key factor affecting competitiveness. It is an indicator of loss of attractiveness as well as a driver of future competitiveness: the more investment the more competitive the region becomes and vice versa. For example, since 2010, there have been more than 350 new chemical industry projects announced in the USA. Together, these projects represent more than $211 billion in new capital investment in the USA. More than two-thirds of the investment has already been completed or is currently under construction.
EU27 loses more than 50% of its original market share during 20-year period
EU27 share of global chemicals investment
The European chemical industry is willing to improve its overall sustainable performance and identified the need for disruptive technologies as well as for further improvement of existing technologies. Supporting these investments in research and innovation (R&I) is essential.
Developments over the last 20 years indicate that the European Union position has weakened. In 2021, the EU27 reported capital spending of €26.5 billion, making up 11.8% of global chemicals investment. In 2001, and with 27.2%, the EU27 was the largest chemicals investor, dominating the chemicals world ranking at that time.
Global investment reported an impressive increase from €64.1 billion in 2001 to €225.3 billion in 2021. Therefore, the EU27 investment market share lost 56.8% of its original value in 20 years (27.2% vs 11.8%).
Decreasing share of chemicals capital spending for the EU27
Chemicals capital spending by country, 2011 vs 2021
A look at global capital spending in the chemicals business shows the following:
- World capital spending reported the value of €225.3 billion in 2021, up from €139.3 billion in 2011. Investment around the world has growing at 4.9% per annum on average over the past 10 years. It shows a very encouraging trend: chemicals companies around the world have increased their investment by more than 60% in ten years.
- The EU27 investment market share went down from 13.7% in 2011 to 11.8% in 2021. Japan reported a significant decline from 5.1% to 2.7% during the same period. The rest of Europe accounted for 4.1% in 2021, below the 5.3% reported in 2011.
- Apart from China and NAFTA, most countries reported a decline in global market share in 10 years. Japan (-2.4%) and the EU27 area (-2.0%) experienced the most significant decline in their world share during the same period.
- Strong development in China drove the significant increase in global investment in the chemicals business. China accounted in 2021 for 48.4% of global investment, above the 31.8% reported in 2011. NAFTA reported positive results, but less spectacular compared to China.
EU27 R&I spending reaches the highest level in 2021
R&I spending in the EU27 chemical industry
Investments in R&I are a key element in securing the future of the chemical industry and needed to maintain or increase its strong contribution to solving societal challenges. Indeed, the chemical industry is an enabler of innovation in numerous downstream value chains through its products and technologies.
Spending on R&I in the EU27 chemical industry was valued at an average annual level of €7.8 billion between 2003 to 2021. In 2021, R&I spending reached €9.9 billion, the highest since ever.
Concerning chemical intensity, the analysis shows that R&I spending in the EU27 chemical business grew at an average of 2.2% per annum between 2003 and 2021. Added value reported slightly higher growth during the same period at 2.7%. As a result, R&I intensity (spending as a percentage of added value) registered a value at 7.0% in 2021.
EU27 is the second largest R&I investor in the world
R&I spending in the chemicals industry by region (2021 vs 2011)
Global R&I spending in the chemical sector reached €48.3 billion in 2021, up from €31.9 billion in 2011. On a global basis, R&I spending was 51% higher in 2021 compared to ten years ago.
Between 2011 and 2021, global R&I grew by an average annual rate of 4.2% (CAGR). This is far below Chinese R&I growth of 9.6% during the same period. China is by far outpacing the other economies in the world. R&I spending in China was 2.5 times higher in 2021 compared to 2011.
The EU27 area is still the second largest investor in the world. It accounted in 2021 for 20.5% of global chemicals R&I spending.
Decreasing share of chemicals R&I spending for the EU27, USA and Japan
Chemicals R&I spending by country, 2011 vs 2021
In 2021, China contributed 30.4% of global investment, up from 18.4% in 2011. The European Union ranked second, contributing 20.5% of global investment in 2021. The USA ranked third, representing 16.3% of global investment in 2021, while Japan ranked fourth, accounting for 15.7%.
The results show a decreasing share of chemicals R&I spending for industrial regions. The EU27 area, the USA and Japan reported a decline of their market share over the past 10 years.
The EU27 share of global R&I spending went down from 22.6% in 2011 to 20.5% in 2021. A more spectacular result for the USA: 21.1% in 2011 to 16.3% in 2021. Japan reported a decline from 21.0% in 2011 to 15.7% in 2021.