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)

27% of EU27 chemicals investment is attributable to the petrochemicals business. With €5.8 billion, petrochemicals are the largest investor in the EU27 chemical sector, followed by plastics and “other inorganics chemicals”.

On the global scene, the European petrochemicals industry is in challenging times. All regions are expanding their petrochemical production bases. These investments are usually not intended as stand-alone plants, but as an initial step to generate huge chemical and, subsequently, manufacturing hubs.

It was the first time in many years that Europe has seen capital investment announcements in petrochemicals of this size. In general terms, the strength of the EU27 petrochemical industry is the high integration of crackers in the chemical value chain in Europe. One of the key challenges facing the petrochemicals business is the EU Commission-led Green New Deal for Europe and the discussion to fully decarbonise the EU economy by 2050.

Gross investment in tangible goods is defined as investment during the reference period in all tangible goods. Included are new and existing tangible capital goods, whether bought from third parties or produced for own use (i.e. capitalised production of tangible capital goods),and having a useful life of more than one year, including non-produced tangible goods such as land. Investments in intangible and financial assets are excluded (see Eurostat code, V15110).

EU27 capital spending reaches the highest level since 2001

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 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

In absolute values, the level of world investment in the chemical sector was 2.3 times higher in 2019 compared to 10 years ago (€202.3 billion vs €89.8 billion).

Between 2009 and 2019, global investment grew 8.5% per annum on average. This is below Chinese investment growth of 12.9% during the same period.

China is outpacing other economies in the world such as India (10.8%); North America (8.9%), South Korea (7.2%), and Latin America (3.3%). With less than 3.0% growth, the EU27 area is still lagging behind the main regions in the world.

In 2019, China contributed 45% of global investment, up from 30% in 2009. NAFTA still ranks second, contributing 16.8% of global investment in 2019. Europe (EU27 + rest of Europe) came third, accounting for 15.3% of global investment the same year.

Fertilizers has the highest capital intensity in the EU27 chemical sector

Capital intensity* in the EU27 chemical industry broken down by sub-sectors

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 16.6% in the EU27 chemicals business.  The highest capital intensity is attributable to fertilizers followed by other inorganics chemicals and industrial gases. The lowest intensity values are attributable to “paints and inks”.

EU27 capital intensity below key emerging economies

Capital spending (% added value), 2009 vs 2019

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 2018, capital spending accounted for nearly one third of added value in China (30.1%).

In India, more than a fourth of added value is attributable to capital spending (23.3%). Rest of Europe and NAFTA showed an intensity value of 23.2% and 15.5% respectively. With 15.2%, the EU27 area is still behind the emerging-producing regions in Rest of Asia (21.0%), but slightly ahead of Latin America, Japan and South Korea

Capital spending in the EU27 chemical industry grew by less than 3.0% per annum on average in ten years (2009-2019). By contrast, added value grew quicker at 5.7% during the same period.

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

EU27 share of global chemicals investment

Developments over the last 20 years indicate that the European Union position has weakened. In 1999, the EU27 reported capital spending of €21.5 billion, making up 10.6% of global chemicals investment. In 1999, the EU27 was the largest chemicals investor, dominating the chemicals world ranking at that time.

EU27 chemical spending has been growing modestly from €18.5 billion in 1999 to €21.5 billion in 2019. By contrast, global investment reported an impressive increase from €68.3 billion in 1999 to €202.3 billion in 2018. Therefore, the EU27 investment market share lost about 61% of its original value in 20 years, down from 27.1% in 1999 to 10.6% in 2019.

Significant decline in share of chemicals capital spending for the EU27

Chemicals capital spending by country, 2009 vs 2019 (% of total)

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

  • World capital spending reported the value of €202.3 billion in 2019, up from €89.8 billion in 2009. Investment around the world grew at 8.5% per annum on average over the past 10 years. It showed a very encouraging trend: chemicals companies around the world have more than doubled their investment in ten years.
  • The EU27 investment market share went down from 18.2% in 2009 to 10.6% in 2019. Japan reported a less dramatic decline, from 8.0% to 3.4% 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, all main countries reported a decline in global market share in 10 years. The EU27 area and Japan 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 2019 for 45.2% of global investment, far above the 30.2% reported in 2009. NAFTA and India reported positive results, but less spectacular compared to China.

EU27 R&I spending reaches the highest level since 2001

R&I spending in the EU27 chemical industry

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 2001 to 2019. In 2019, R&I spending reached €9.3 billion, the highest since 2001.

Concerning chemical intensity, the analysis shows that R&I spending in the EU27 chemical business grew at an average of 1.7% per annum between 2001 and 2019. Added value reported similar growth during the same period at 2.3%. As a result, R&I intensity (spending as a percentage of added value) registered a value at 7.2% in 2019.

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

R&I spending by region

Global R&I spending in the chemical sector reached €46.1 billion in 2019, from €25.9 billion in 2009. On a global basis, R&I spending was 78% higher in 2019 compared to ten years ago.

Between 2009 and 2019, global R&I grew about 5.9%. This is far below Chinese R&I growth of 16.6% during the same period. China is by far outpacing the other economies in the world. R&I spending in China was 4.7 times higher in 2019 compared to 2009.

The EU27 area is still the second largest investor in the world. It accounted in 2019 for 20.3% 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, 2009 vs 2019 (% of total)

In 2019, China contributed 32.1% of global investment, up from 12.1% in 2009. R&I spending in the EU27 area grew at an average rate of 2.7% from 2009 to 2019.

The European Union ranks second, contributing 20.3% of global investment in 2019. The USA ranks third, representing 18.5% of global investment in 2019.

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 27.7% in 2009 to 20.3% in 2019. A less spectacular result for the USA: 23.2% in 2009 to 18.5% in 2019. Japan reported a more dramatic decline from 22.4% in 2009 to 14.8% in 2019.

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