Europe

Steeled for Competition
Germany is an Attractive Chemical Production Location due to Innovative Capacity and Productivity
Germany is known for its rigorous environmental standards, its obsession with renewable energy, and high labor cost. Yet Germany’s
chemical industry continues to be number one in Europe by a large
margin and local companies export more chemicals than any other
European country, and even China. Here is why:©alexlmx - stock.adobe.com

The global chemicals market is in excellent shape. This is reflected primarily in the huge increase in global
sales from €1,622 billion to €3,534billion during the decade from 2005 to2015, equivalent to an average annual
growth rate of more than 8%. However the balance of power in the global industry has shifted. The chemical industry in China — with revenue“Germany has one of thehighest R&D intensity levels
in Europe.”of €1,409 billion and a global share ofabout 40% — was the biggest market
in 2015, followed by the US (€519 billion), Germany (€148 billion), and Japan (€136 billion) according to CEFIC.
The German Chemical Industry accounted for 28% of the €519 billion insales in the total European market in2015, thereby maintaining the lion’sshare of revenue — twice as much as
its nearest European counterpart. The
industry not only maintained its posi-

6revenue spent on R&D in 2015 making it the continent’s innovation hub.
As a result, the second-highest number of patents (18%) in the chemicalindustry at the European Patent Office originate from Germany.
This strength in innovation combined with productivity has helped
establish Germany as an attractive
chemical industry production location. In the latter respect, Germany’s
chemical companies were able to reduce their energy needs by 20% between 1990 and 2010 — with output
over the same period increasing byalmost 60%. As a result of these efforts, the production output of basic
chemicals — including ethylene, chlorine and ethylene oxide — has remained constant since 2000.

Germany’s Chemical Parks:
The Old Retainertion within Europe over the past fewyears, it actually improved it.

Growth-Driving Industries
One of the largest contributors to theindustry’s success in Germany is thepresence of strong client industries including the automotive sector with sales of more than €400 billion in 2016.
As a result of close collaboration between chemical suppliers and theirindustrial clients, and the global expansion of Germany’s industrial manufacturers, the chemical industry has
been able to expand into new markets
with them. This is reflected in the export numbers of the chemical industry. In 2015, Germany was the world’s
second largest exporter of chemicals— with a value of around €100 billion and global market share of 9.3%,
numbers surpassed only by the US.
Another
success
factorofGermany’s chemical industry is its
capacity for innovation. As the largest
chemicals market in Europe, Germany has one of the highest R&D intensity levels in Europe, with 2.8% ofCHEManager | Regions & Locations Guide

The traditional chemical production
sites — some of them more than a century old — have, through good strategic investment and production optimization, been integrated into a networkof highly integrated production sites:
Germany’s unique Chemical Parks.
The country’s chemical complexes
are served by excellent logistics networks — from road and rail to waterway and pipeline (see map on page 8).
Investments are constantly being
made to improve provision across theexisting logistics infrastructure.

Dr. Thorsten Bug,
Germany Tradeand Invest

With their ‘plug and play’ concept,
Germany’s chemical parks are able
to offer state-of-the-art conditions forinternational investors. Investors canchoose the services from a site operator that suits their business model
best. The new production site, developed sites and site security services are
all made available for the investor’score activities. Optional services suchas warehousing, logistics, and analytics can also be requested as needed. German Chemical Parks increase
cost effectiveness by splitting cost andoverhead — a benefit to both the site
operator/owner and investor.
Chemical parks offer a wide rangeof business models. Subject to theinvestor’s individual requirements,
land can be leased or purchased inorder to establish a production unit.
At the other end of the scale, a site
operator invests in and operates thenew plant for the investor on a custom or toll manufacturing basis. Investors are supported by a number
continue on Page 8 ▶

Fig.1: Top-5 chemical industry FDI destinations in Europe (2011–2015)

Europe◀ continued from Page 6tern European neighbors has been significantly reduced in the past decade.
Since 2006, wages in the European
Union have grown on average by 2.5%.

of investment planning and construc­tion services. The most sought-afterservice is for permit applications. Licensing procedures are completed
quickly and efficiently with the competent public authorities assisting in
the process from a very early stage.

Steeled for Competition

High-Quality Energy on Tap
A secure power supply is imperative
for profitable industrial plant operation. Chemical parks secure theirenergy through the provision of anumber of redundant supply lines.
Most chemical parks operate theirown on-site power plants in order
to secure supply. A continuous supply of steam and overall energy arealso key cost success factors. On-site
power plants utilize the high efficiencies found in combined cycle heat andpower (CHP) generation, thus further
optimizing energy production
The reliability of Germany’s electricity supply is very high by international standards. Unlike somecountries in Europe where major
blackouts are recurrent, power outages are definitely the exception inGermany, where grids lose just 14 minutes per year in interruptions.

motivation and days lost to industrial
action. According to the IMD World
Competitiveness Yearbook 2016, German employee motivation levels arevery high. This can be derived fromthe fact that Germans work more than“The last strike action in thechemical industry inGermany took place in 1971.”

German Workers:
Never Strike Out
One of the largest cost drivers in production processes is the cost of labor,
including critical cost aspects such as

their international peers (41.2 hours
per week) and lose less days per annum due to industrial action thanother market-determining European

Covestro Expands Capacity for Polyurethane Dispersions
Covestro has begun operations at anew production facility for aqueous
polyurethane dispersions (PUDs) at
its Dormagen site. Along with a current expansion of production in Barcelona, the company is thus boosting
its capacities in Europe significantly.
In order to meet global demand,
Covestro is also building a new facility in China, as well as planning toresume production in the United States and at the same time modernizing
and expanding facilities there.
According to Covestro, the newcapacity is primarily needed to satisfy rising demand from the coatings
and adhesives industry: manufacturers remain determined to replace solvent-based products with more sus­
tainable waterborne systems. (rk)Vinnolit Expands Gendorf Chlorine/VCM Capacity
German PVC producer Vinnolit hasannounced plans to expand capacities for chlorine and vinyl chloride
monomer (VCM) at its site in Gendorf. The company, which has beenpart of the US Westlake Group since
July 2014, will implement Thyssen-8

Krupp Uhde’s energy-efficient singleelement membrane technology at thechlorine plant, which currently has acapacity of 180,000 t/y. At the sametime, Vinnolit will expand VCM capacity in two steps through 2021.
(eb, rk)

CHEManager | Regions & Locations Guidenations. There were a total of 19 strikedays per thousand employees (equalto about 220,000 working days peryear in Germany) in the seven-year
period between 2009 and 2015 — exactly half of the European average.
The high level of workforce satisfaction is further illustrated by the factthat the last strike action in the chemical industry in Germany took placein 1971. This reflects the good cooperation between the IGBCE trade unionand companies in the sector.
Similar to the low strike numbers,
wage increases have been very moderate in Germany compared with othercountries in the EU. The overall labor
cost gap between Germany and its eas-

The presence of strong client industries, cost-efficient production, andsensible labor market reforms prior
to the financial crisis in 2008, whichgave corporations higher labor flexibility, have allowed the German chemical industry to consolidate its market-leading position within Europe.
This is best evidenced by a strong increase in foreign direct investment
in Germany (fig. 1, page 6). Much ofthis investment is in basic chemicals,
against public perception. The goalof these investments is to ensure theglobal competitiveness of the respective facilities, which is why so many of
the investments involve keeping technology up to date.
Amid global competition, production capacities with sensitive cost
structures will further migrate awayfrom industrial regions. However, because of its specific strengths, particularly in innovation, productivity, andresource efficiency, Germany, alongside the US and Japan, will continue
to be a highly attractive production location for the chemical industry.
Dr. Thorsten Bug, senior manager
Chemicals, Germany Trade & Invest(GTAI), Berlin, Germany
thorsten.bug@gtai.com
www.gtai.de

BASF Invests in Third Plant for Specialty Zeolites
BASF invests in a new production
plant for specialty zeolites at its Ludwigshafen, Germany, site. These specialty zeolites will be used to produce emissions catalysts for heavy
duty and light duty diesel vehicles.
Production is scheduled to begin in
2019. According to BASF the newplant will will double its global specialty zeolites production capacity.
“Our new specialty zeolites plant is acornerstone for our long-term growthstrategy for our mobile emissions catalysts business,” said Kenneth Lane,
president of BASF’s Catalysts division,
which operates the new plant. “Thisinvestment will allow us to strengthen
the reliable supply for our productionof leading-edge diesel emissions catalysts solutions for our customers in theheavy duty diesel, but also the light
duty diesel industry.” (rk)Evonik Opens New Membrane Production Facility
Evonik Industries has opened another membrane production facility at
its Austrian plant in Schörfling.
The new hollow fiber spinning plant predominantly produces
membrane modules for efficient ni-trogen generation and for processgases.
Nitrogen accounts for roughly 40%of the estimated global gas separation market, making it the secondlargest market after natural gas. (rk)