European chemical industry is facing major challenges

 

Outlook 2030 outlines the main emerging challenges, analyzes the current positioning, and emphasizes how the European chemical industry can stay ahead.

 

Attracted by Asian economic growth and market opportunities, Europe's value chain is moving eastward day by day, and the European chemical industry is facing major challenges. A more competitive new environment is taking shape, and state-owned enterprises and emerging chemical giants are rising. Fragile economic conditions require managing volatility in a competitive environment in which trade flows are gradually changing direction. Understanding what these challenges mean and, more importantly, determining the right strategic choice to flourish in this new competitive environment is the top agenda of each chemical enterprise executive.

 

Since the mid-1980s, the global chemical industry has grown at an annual rate of 7%, reaching 2.4 trillion euros in 2010. Over the past 25 years, most of the growth has been driven by Asia. Today, Asia accounts for almost half of global chemical sales. If the current trend continues, the global chemical market is expected to grow by an average of 3% in the next 20 years, mainly driven by major players in Asia and the Middle East. Asian players have home advantage and are expected to occupy two-thirds of the market share by 2030.

 

Meanwhile, economic growth in Europe is expected to remain modest at 1%. In fact, we expect that by 2030, the European chemical industry will lose more than 30% of jobs due to slow growth and increased productivity.

 

Over the past 25 years, most of the growth has been driven by Asia. Today, Asia accounts for almost half of global chemical sales.

 

Considering the stable, slow and linear development of European chemical industry to some extent, the "ruler strategy" is likely to be applicable in the next 20 years. This strategy denies the emergence of destructive market events and believes that the chemical industry will continue to follow the trend in recent years to a great extent. This is due to the dominance of strong changes in the global economy, long asset life, lack of major chemical revolution, and continuous innovation in mature fields such as biotechnology and fuel cells. If the ruler's strategy is correct, by 2030, Asia's chemical production will exceed that of North American Free Trade Agreement (NAFTA) countries and Europe.

 

The customer industry will continue to shift to Asia, end the dominant position of the western demand model, and create a multipolar competitive environment with different needs. The change in the direction of trade flows between the Middle East Asia region and Europe will also contribute to the absolute dominance of Eastern countries.

 

Now is the time for participants to prepare - defend their own markets, develop growth platforms based on innovation and better value capture, participate more strongly in Asian growth markets, and build the skills and scale required for competition.

 

We expect the ruler strategy to be implemented in the next 20 years. Evidence can be seen everywhere, from the transfer of global economic power and chemical attention to basic needs, to the possibility of major chemical breakthroughs, the slow pace of innovation in Europe, and the limited number of life cycle transitions from now to 2030.

 

The main trend of the global economy is that the growth of Asia is driven by the accelerating integration of global regional economy and society. More than half of the world's population (labor and consumers) - nearly 4 billion people - live in Asia. In addition, more and more people from all over the world enter big cities to accumulate wealth and consumption; Asia has the fastest urbanization, especially China.

 

The improvement of consumers' purchasing power will make people can afford more chemicals, which will promote the demand for chemicals throughout Asia. Therefore, with the shift of the global economy to the East, at least half of the world's top ten chemical enterprises will be Asian or Middle East enterprises.

 

From a manufacturing perspective, the long-term existence of the chemical industry means that capacity is unlikely to change suddenly. Chemicals are mainly used for basic needs, such as construction, clothing and agriculture. Special products such as batteries and nanotechnology will greatly change specific value chains, but will not change the overall demand situation, because the total amount of these products is small compared with the increased overall consumption in Asia.

 

In addition, the chemical market will not be shaken by revolutionary discoveries, such as the emergence of new molecular species. On the contrary, with the technological leap in customer industries such as biotechnology and fuel cells, progress in specialty chemicals and applications is expected.