Growth and Competitiveness
EU27 CHEMICALS OUTPUT, far BELOW THE PREVIOUS YEAR’S LEVEL
EU27 chemical industry production
Chemicals output declined whereas other manufacturing continued to grow. In the EU27 area, chemicals production declined more than 6% in 2022 compared to 2021. Data shows a significant impact on chemicals production in most EU countries. On average, output in the EU27 manufacturing sector is significantly high compared to 2021, due to sectors such as machinery and equipment and pharmaceuticals.
However, the energy crisis continues to impact deeply the chemical sector in Europe and its trade activity. Chemicals trade balance moved from a trade surplus of €36 billion in 2021 to a significant deficit in the first half of 2022. The decoupling between manufacturing and chemicals is now evident.
A lot of challenges lie ahead as the EU27 chemical sector is supposed to undergo a ‘double twin transition’ to meet the European Green Deal goals, which includes going climate-neutral, circular, digital, while anticipating the reform of the EU chemicals regulatory framework as announced by the Chemicals Strategy for Sustainability.
EU27 capacity utilisation below its long-term average
EU27 chemical capacity utilisation rate
The dramatic decline in capacity utilisation at the beginning of 2020 stems from the spill-over effects of Covid-19 crisis, where both production and capacity utilisation dropped substantially during the first half of 2020.
According to Business Survey data of the European Commission, capacity utilisation in the EU27 chemical sector reached the value of 76.4% in the third quarter of 2022, down from 83.2% reached in the same quarter of last year.
Capacity utilisation was 6.4% below the long-term average (81.6%, 1995-2019).
Europe at a competitive disadvantage compared to the USA and the Middle East
Ethylene cash cost of regional steam crackers
The chemical industry is energy intensive. Against a stiff global competition, increases in energy costs in Europe might impact competitiveness. Globally, ethylene is the highest volume building block in the chemical industry. It is the basic feedstock to produce plastics, detergents and coatings, amongst many other materials.
Energy costs are the Achilles’ heel of European industry, especially compared to the United States. The cost difference between the USA and Europe diminished significantly from 2014 to 2017. Making ethylene in Europe was 2.7 times more expensive than in the USA in 2014. Since then, the situation gradually improved until 2017 (2.2 times in 2015, 1.8 times in 2016, and 1.6 times in 2017).
In 2021, ethylene cash cost in Europe was 60% above the previous years’ level. Data on the first half of 2022 shows a significant increase of the ethylene cash cost in Europe compared to 2021 (679 vs 1070).
The global picture for 2021 carried a clear message: Europe still has a competitive disadvantage compared to the USA and the Middle East. Europe generated the highest ethylene cash cost in 2021.
Key emerging economies grow faster than the EU27 and US
Average chemicals production growth per annum (2011-2021)
During the 11-year period from 2011 to 2021, the EU27 chemical industry had a very weak growth rate (0.4%). Production in China grew from 2011 to 2021, attaining 7.3% average annual growth. China is outpacing other emerging economies such as Russia (4.7%), South Korea (2.5%), and India (2.5%).
Emerging economies are outperforming industrial countries in chemicals production. They pushed up the average growth rate of world chemicals production during the 2010-2020-time period. The European Union is lagging behind the main regions in Asia.
The shift of manufacturing to Asia and associated higher chemicals output growth, an ageing population in Europe and the shift of petrochemicals production to resource-rich countries are a few examples. They all point to a declining share of the Europe-based chemical industry in global sales. In absolute terms, the industry may continue to grow, but only at a slower pace.
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Profile – Trade Development – Our Contribution To EU27 Industry – Energy Consumption – Capital & R&I Spending – Environmental Performance
