German chemical industry: Strengthen itself and remain invincible in the competition

　Sales of the German chemical industry have stagnated, and major financial data indicate that a storm is coming.
The declining share of the European chemical industry in the global market is worrying.
However, the momentum of German investment remains high, indicating that its global competitiveness remains strong.
Surprisingly, basic chemicals continue to play an important role.
The chemical industry has one thing in common with many other industries, that is, it always feels much worse than it actually is.
Despite the uproar of Brexit, the sovereign debt crisis in the Eurozone, and the stagnation of digitalization and artificial intelligence, the momentum of global industrial development is still good.
Although, in the three years from 2015 to 2017, sales hovered around 3.
4 trillion euros, without significant growth.
In recent years, decisive developments in the following industrial sectors have not had any significant impact on the economic stability of the chemical industry: the implementation of the Seveso Directive III (2012) in EU member states; in 2017, the two major US chemical giants Dow The merger with DuPont, and the subsequent three-thirds of the world by product category in 2019; since 2015, M&A activity has increased significantly: Bayer (Germany) acquired Monsanto (US) for US$66 billion in 2018, and China National Chemical Corporation in 2017 Two M&A transactions involving the acquisition of Syngenta (Switzerland) for USD 100 million are particularly eye-catching; BASF has established a wholly-owned integrated base in Donghai Island, Guangdong Province, China, with an estimated total investment of USD 10 billion.
The red dragon is taking off.
Like BASF, many multinational chemical companies in major developed countries have expanded their business in China.
It is simply because despite the decline in China's economic growth rate, it is still significantly higher than in developed markets.
China's global market share increased from 6% in 1997 to 15% in 2007, and increased to 37% in 2017.
In contrast, the EU's global market share was almost cut in half during the same period, from 31% to 28%, and then to 16%.
Although this development seems worrying, due to the strong growth of the world market, EU sales have increased from 362 billion euros to 542 billion euros, an average annual growth rate of about 2%.
Taking into account the two major sales declines caused by the bursting of the bubble in 2001 and 2008, in a saturated market with integrated industrial structure, 2% growth is still healthy.
In comparison, the average annual growth rate in the United States over the same period was only 1% over the past 20 years, and that in Japan was -0.
5%.
　　The situation in the German chemical and pharmaceutical industry is similar.
From 2015 to 2017, sales were relatively stable at 200 billion euros, in line with global development.
However, due to the decline in operating profit and net income from 2017 to 2018, some German chemical companies (Table 1) announced that they will shift their focus to more cycle-related products, layoffs and strategic changes.
　　Despite the deterioration of some key financial data, the production of basic chemicals remained basically unchanged during the 15 years from 2000 to 2015 (Figure 1).
　　The German chemical industry is developing steadily, and investment in energy-intensive, or cost-intensive, production processes continues.
For example, the only remaining chlor-alkali electrolysis plant has switched from using mercury to a membrane process.
The new plant in Ibbenbüren was put into operation in 2018 (see Table 2, No.
45), and has an annual production capacity of 75,000 tons of chlorine.
The steam cracker situation has also remained stable.
Over the years, Europe is expected to have an excess production of 25%.
However, over the years, 13 steam crackers with a capacity of 5.
7 million tons in 8 regions of Germany are still in operation.
Since the closure of the Wilhelmshaven refinery in 2011, the capacity of the refinery has been reduced by only about 10%, and the current crude oil processing capacity is about 100 million tons.
　　Investment activities remain high　　In addition, recently announced active investment activities in chemical industry production facilities (Table 2).
Reports of capacity expansion in the fields of basic chemicals, engineering and high-performance plastics, specialty chemicals, and final products are often seen in the newspapers.
　　About one-third of the investment comes from basic chemicals.
The newly built three isocyanate TDI (Table 2, No.
33 and No.
35) and MDI (No.
12) plants have a total capacity of 800,000 tons, and each plant invests hundreds of millions of euros, which is particularly eye-catching.
The newly built acetylene plant in Ludwigshafen (No.
15) has an annual production capacity of 90,000 tons, and the investment scale is equivalent to the above.
This shows that Reppe Chemistry, which emerged in the 1930s, not only brought profits to the business, but also made considerable profits even in cost-sensitive periods.
Other high-profile investments in basic chemicals include the expansion of Höchst's methyl chloride (+30%, No.
8), Krefeld-Uerdingen's benzyl alcohol (+30 %, No.
14) and Gendorf's ethylene oxide (No.
11) production capacity.
　　Investment in basic chemicals is active, while specialty chemicals are focusing on expansion.
The relatively high investment per ton of production capacity for specialty chemicals is mainly due to the management of its complex technical processes.
For example, following the expansion in 2012, it is planned to increase the production of methanesulfonic acid in Ludwigshafen by another 65% by 2021 (No.
1).
Equally notable is the investment in the expansion of silica production sites in Rheinfelden (No.
7) and Worms (No.
9), which can not be underestimated, reaching several thousand.
Ten thousand euros.
　　The market segment for high-performance plastics is the smallest.
Marl (No.
2)'s new polyamide 12 plant is Evonik's largest investment in Germany so far, with an amount of up to 400 million euros.
　　The final product segment is undergoing a series of investments to expand production capacity.
From the perspective of the chemical profession, those products that are usually no longer chemically transformed are generally sold to customer industrial companies with a brand name.
For example, this segment includes compounds based on polyamide and polybutylene terephthalate (Nos.
17 and 30) or insulating materials (No.
21).
The production capacity of mature products such as methyl cellulose (No.
13) and vitamin A (+1500 tons, No.
6) is also expanding.
　　Investment in basic chemicals continues　　The listed investments only involve projects that have already been announced.
These projects clearly show that the economic growth since 2009 has led to a sharp and continuous increase in investment activities in several chemical market segments in Germany.
Contrary to many predictions, investment in basic chemicals continues.
The motivation behind these investments is to ensure the global competitiveness of the factories, so the integration of the latest technology is indispensable for every investment.
　　In addition to cost-effective production, the presence of strong customer industries such as the automotive industry is also a decisive factor for many investments.
In addition, the moderate increase in wages in recent years and the high loyalty of employees have created a good environment for production.
The last strike in the German chemical industry was in 1971.
In addition, labor market reforms (titled "Agenda 2010") came into effect in the mid-2000s, providing companies with greater flexibility.
Thanks to these and other factors, the German chemical industry has consolidated its leading position in the European market.