Capital & R&I Spending


Petrochemicals is the largest investor in the EU27 chemicals sector

Capital spending in the EU27 chemical industry broken downby sub-sectors (€ billion)

FactsandFigures2022_ch6_1_Capital spending in the EU27 chemical industry (2018)_without titels

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 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 2002 to 2020. EU27 chemicals investment reached the value of €20.3 billion in 2020 – 22% above 2002’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 increasing substantially from 2004 to 2008, followed by up and down trend during the years 2009-2020. Capital intensity values reached 16.0% in 2020. This is slightly below the long-term average intensity over the years between 2002 and 2019 at 17.4%.

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.

EU27 capital spending decreased for the second time in row since 2018

Capital spending in the EU27 chemical industry

FactsandFigures2022_ch6_2_Capital spending in the EU27 chemical industry_without titels

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 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 European Union has been increasing. EU27 chemicals investment reached the value of €21.5 billion in 2019 – the highest level of capital spending since 2001.

In relative terms, the ratio of capital spending to added value, or capital intensity, of the chemical industry in the EU27 area has been increasing substantially from 2004 to 2010, followed by less significant changes during the years 2011-2019. Capital intensity values reached 16.5% in 2019. This is slightly below the long-term average intensity over the years between 2001 and 2018 at 17.6%.

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 dominates world chemicals investment

Capital spending by region

FactsandFigures2022_ch6_3_Capital spending in the chemicals industry by region- 2020 vs 2010_without titels

In absolute values, the level of world investment in the chemical sector was 57% higher in 2020 compared to 10 years ago (€192.9 billion vs €122.9 billion).

Between 2010 and 2020, global investment grew 4.6% per annum on average. This is below Chinese investment growth of 6.1% during the same period.

China is outpacing other economies in the world such as Europe, India, Japan, South Korea and Latin America. With less than 3.0% growth, the EU27 area is still lagging behind the main regions in the world.

In 2020, China contributed 48% of global investment, up from 42% in 2010. Europe (EU27 + rest of Europe) came second, accounting for 15.9% of global investment the same year. NAFTA still ranks third, contributing 13.7% of global investment in 2020.

Investments in Asia have increased by 60 % this last decade while Capex increase reached 28% in the EU27 and more than doubled in NAFTA.

High capital intensity in the EU27 chemical sector

Capital intensityin the EU27 chemical industry broken down by sub-sectors (2018)

FactsandFigures2022_ch6_4_Capital intensity by the EU27 chemical industry (2018)_without titels

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.

The analysis shows capital intensity is equal to 17.7% in the EU27 chemicals business.  Among the largest chemicals sectors, capital intensities in petrochemicals and plastics are significantly above the EU27’s level.

EU27 capital intensity far below China and India economies

Capital spending (% added value), 2020 vs 2010

FactsandFigures2022_ch6_5_Chemical capital spending (% of added value), 2020 vs 2010_without titels

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 2020, capital spending accounted for about 30% of added value in China.

In India, nearly 20% of added value is attributable to capital spending. Rest of Europe showed an intensity value of 26.4%.  With 16.0%, the EU27 area is still behind the emerging-producing regions in Rest of Asia (23.8%), but ahead of Latin America (9.6%), Japan (12.6%) and NAFTA (13.0%)

Capital spending in the EU27 chemical industry grew by 2.5% per annum on average in ten years (2010-2020). Added value grew at a similar rate during the same period (2.3%)

Capital spending intensity is a key factor affecting competitiveness. It is an indicator of loss of attractiveness as well 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 300 new chemical industry projects announced in the USA. Together, these projects represent more than $200 billion in new capital investment in the USA. More than half of the investment has already been completed or is currently under construction.

EU27 loses about 60% of its original market share during 20-year period

EU27 share of global chemicals investment

FactsandFigures2022_ch6_6_EU27 share of global chemicals investment_without titels

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. To support these investments in research and innovation (R&I) are essential. Investments via European innovation funding programmes as well as from the sector itself stimulating all relevant stakeholders. R&I is the driving factor to maintain competitiveness of the sector. Furthermore R&I will also enable the industry to provide solutions for challenges society is facing along the value chain of the products it is producing.

Developments over the last 20 years indicate that the European Union position has weakened. In 2000, the EU27 reported capital spending of €20.3 billion, making up 10.6% of global chemicals investment. In 2000, the EU27 was the largest chemicals investor, dominating the chemicals world ranking at that time.

EU27 chemical spending has been growing modestly from €17.8 billion in 2000 to €20.3 billion in 2020. By contrast, global investment reported an impressive increase from €70.2 billion in 2000 to €192.9 billion in 2020. Therefore, the EU27 investment market share lost 58.5% of its original value in 20 years, down from 25.4% in 2000 to 10.5% in 2020.

Significant decline in share of chemicals capital spending for the EU27

Chemicals capital spending by country, 2010 vs 2020

FactsandFigures2022_ch6_7_Chemicals capital spending by country, 2020 vs 2010_without titels

A look at global capital spending in the chemicals business shows the following:

  • World capital spending reported the value of €192.9 billion in 2020, up from €122.9 billion in 2010. Investment around the world grew at 4.6% per annum on average over the past 10 years. It showed a very encouraging trend: chemicals companies around the world have increased their investment by 57% in ten years.
  • The EU27 investment market share went down from 13.0% in 2010 to 10.5% in 2020. Japan reported a similar decline, from 5.8% to 3.2% during the same period. The rest of Europe accounted for 4.7% in 2019, below the 5.8% reported in 2009.
  • Apart from China, NAFTA and India, most countries reported a decline in global market share in 10 years. Japan (-2.6%) and the EU27 area (-2.4%) 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 2020 for 47.8% of global investment, above the 41.6% reported in 2010. NAFTA reported positive results, but less spectacular compared to China.

EU27 R&I spending reaches the highest level in 2020

R&I spending in the EU27 chemical industry

FactsandFigures2022_ch6_8_R&I spending by the EU27 chemical industry_without titels

Investments in R&I are key elements 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 €7.6 billion between 2002 to 2020. In 2020, R&I spending reached €9.4 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 1.9% per annum between 2002 and 2020. Added value reported similar growth during the same period at 2.0%. As a result, R&I intensity (spending as a percentage of added value) registered a value at 7.4% in 2020.

EU27 is the second largest R&I investor in the world

R&I spending by region

FactsandFigures2022_ch6_9_R&I spending in the chemicals industry by region_without titels

Global R&I spending in the chemical sector reached €47.7 billion in 2020, from €28.9 billion in 2010. On a global basis, R&I spending was 65% higher in 2020 compared to ten years ago.

Between 2010 and 2020, global R&I grew by average annual rate of 5.1% (CAGR). This is far below Chinese R&I growth of 12.6% during the same period. China is by far outpacing the other economies in the world. R&I spending in China was 3.3 times higher in 2020 compared to 2010.

The EU27 area is still the second largest investor in the world. It accounted in 2020 for 19.6% 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, 2010 vs 2020

FactsandFigures2022_ch6_10_Chemicals R&I spending by country of origin, 2020 vs 2010_without titels

In 2020, China contributed 29.4% of global investment, up from 14.7% in 2010. R&I spending in the EU27 area grew at an average rate of 2.9% from 2010 to 2020.

The European Union ranks second, contributing 19.6% of global investment in 2020. Japan ranks third, representing 17.1% of global investment in 2020, while the USA ranks fourth, accounting for 16.4%.

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 22.1% in 2010 to 19.6% in 2020. A more spectacular result for the USA: 22.5% in 2010 to 16.4% in 2020. Japan reported a decline from 22.1% in 2010 to 17.1% in 2020.

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