BLOG: Why European chemicals can emerge a winner from this crisis


SINGAPORE (ICIS)–Click here to see the latest blog post on Asian Chemical Connections by John Richardson.

For chemical companies with the right strategies, the opportunities to build new sustainable business models are enormous. Future winners will earn huge amounts of money while doing the right thing for humanity and our natural environment.

Cynics, or perhaps more generously skeptics, argue that this is just another bearish cycle and that, like previous bearish cycles, everything will return to the old normal. But that certainly can’t be a typical slowdown.

The new, lower-growth, more self-sufficient China tells us so, as does the splintering of global supply chains – the result of geopolitical volatility and growing pressure on sustainability.

We must also take into account the threats to the demand for chemicals in developing countries due to the impact of climate change as well as the shift from envy to “experiments” among a young middle class of increasingly concerned about the environment.

Companies such as BASF, Linde, Shell. Dow Chemical and SABIC are leading the way in Europe by developing e-crackers and green hydrogen.

And the regulatory framework in Europe encourages innovation:

  • The EU is strongly committed to reducing carbon through its carbon trading system. A carbon border adjustment mechanism could potentially apply to imports of chemicals and polymers. And, of course, oil, gas and chemical producers are facing pressure from investors globally to decarbonize.
  • The European plastics recycling industry is growing rapidly, again due to EU regulations, as well as commitments from brand owners reacting to public pressure. The EU27 could set a mandatory target of 55% recycled content for single-use packaging by 2030.

The European chemical industry can occupy a position very to the right of a new global green cost curve that I see emerging over the next 5-10 years.

Service delivery will replace volume growth as the main profit driver, certainly in Europe and hopefully in other regions as well. Profit growth centered on service delivery will involve minimizing carbon emissions and reducing the consumption of virgin plastics.

Idealistic? Pie in the sky? No, it’s quite handy. What other choices do we have given the threats to our natural environment? The chemical industry can and should be part of the solution rather than part of the problem.

Editor’s Note: This blog post is an opinion piece. The opinions expressed are those of the author and do not necessarily represent those of CIHI.

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