Performance and popularity

The past few years have been tough for the chemical industry, and it's been a long time since there has been any source of post-Christmas cheer in the Chemical Industries Association's Business Outlook Conference. This year, however, was almost an exception, with the regular economic forecast showing a strong growth increase for the UK's largest process sector.

David Thomas of Oxford Economic Forecasting said that chemicals output in the UK, including pharmaceuticals, is set to grow by 3.6% in 2004, well ahead of last year's 0.7% increase. UK growth is set to outstrip that of Europe as a whole, with EU chemicals output set to grow by 3.4%.

Despite this, the issue of the perception of the industry, to government, the public and to young people, is threatening to cost the industry financially and in terms of personnel. There is deep concern about the prospect of new legislation, such as the REACH proposals. Worse, it seems that the industry is having real difficulty in retaining its staff, and even in enthusing them about its achievements.

The prospects are beginning to look brighter for the chemicals sector, although it is somewhat impeded by the general state of the world economy, David Thomas said.

The public sector deficits in the US, UK, Eurozone and Japan mean that governments cannot pump-prime national economies, which tends to hold back industrial performance. For example, in the UK, government spending on infrastructure and health boosts the chemical sectors supplying the construction and pharmaceutical industries. Spain has also benefited from this effect, with government spending on housing programmes also boosting construction-related production.

Basic chemicals are set to be a growth sector in the UK for the next few years. Production grew by 5.4% last year, following a dip in 2002, and will increase by 3.6% this year and 1.7% in 2005, said Thomas. Germany, France and Italy all saw production decline in 2003, but will have recovered by 2005, he added, and Western Europe as a whole will see a 1% increase in production this year, with 2.8% growth next year. The US and Japan will also see growth in the next two years.

The European situation is set to be complicated by the accession of ten countries to the EU in May. 'There will only be a small increase in demand,' Thomas predicted, 'but Europe will be a different entity - it won't be the OECD-type Europe we know.' Sourcing will become more important, because the chemical assets in the accession states - the Czech Republic, Estonia, Cyprus, Latvia, Lithuania, Hungary, Malta, Poland, Slovenia and Slovakia - is different from the Western countries. 'Prevention and reduction of pollution is likely to be more of a issue,' he said. 'At the moment, we class Eastern Europe as a developing region.'

Trade with other regions is also likely to be a factor. 'The US will tend to want to import from Asia, but export to Europe,' he said. The build-up of petrochemicals capacity in the Middle East will have an effect. 'All the oil- and gas-producing nations are looking to add value to their natural resources, with Iran leading the field,' he said. 'Much of the output from these plants is likely to go to East Asia, which mops up a source of demand for European production.'

In pharmaceuticals, globalisation is making performance harder to predict, Thomas said. 'You have to consider where products are sourced; will the companies launch their products on time, or will they delay by months; and where and when generics will be made and launched.' However, he predicted a 5.9% rise in drugs production in the UK this year, ahead of last year's 4.3% growth, but falling back to 3.5% next year. Western Europe as a whole will see growth of 4.5% this year and 3.4% next.

For many of the delegates at the conference, however, there is a worry that all the improvements in performance and production will count for nothing if the industry cannot improve its standing. The poor image of the industry, and its seeming inability to cast this off, has its effects in the casting of legislation and regulations, the attitude of young people and their willingness, as they get older and leave colleges and universities, to work for its companies.

Sven Royall, Shell Chemicals' vice president for strategy, portfolio and sustainable development, said that the sparkle had gone out of the industry. 'Petrochemicals once had the capacity to excite,' he said. 'We made the building blocks of the future. We were the growth industry. I don't think we have that anymore - and that should concern all of us.'

As the Middle Eastern oil producers realise, chemicals are the only way of making money from hydrocarbons apart from using them as fuel. Shell, Royall said, is concerned with finding new ways to make chemicals, and in the process to reduce the impact on the environment, so providing new products and improving performance. One example is the development of a process to make 1,3-propanediol, a constiuent of a new polymer, polytrimethylene terephthalate (PTT), known as Corterra polymer.

'Corterra is a high performance fibre material for textile and carpet applications, which has a substantially smaller environmental footprint compared to the polyamides it replaces,' Royall explained.

The industry might be facing an uphill battle, however. It might be thought that chemical companies would be able to spread their message among their own employees, at least, but research presented by the CIA's Young Person of the Year, Chris Lockett, suggests that it's failing even here. A MORI survey of the Young Persons' Network showed that 46% of 674 respondents aged 16-30 disagreed with the statement 'Criticism and negative publicity about the chemical industry is generally unfounded'; and 47% did not agree that 'The chemical industry deserves to be trusted'.

The survey also found that there were definite differences between workers in different areas of the industry. Technical staff chose to work in the industry, and were largely satisfied in their work; staff in support functions tended to 'fall' into their jobs. Workers with PhDs, Bachelors or Masters degrees tended to be significantly more satisfied with their work than those with NVQs, HNDs or A levels. Levels of satisfaction with pay levels fell sharply in the first five years of service, from 62% satisfied in the first year to 39% after five years.

Lockett, a performance analyst from BP Group Technology, believes this shows that the industry could well have a problem retaining its staff. The industry is neither well-known, with few students recognising the names of the chemical majors; nor well-liked, with less than a third of chemistry students from 159 European colleges and universities seeing chemical companies as their ideal employer.

The situation is far from hopeless, however. There are factors which the industry can and should play on, Lockett said. The single most attractive feature of a potential employer for graduates is that they can offer an international career, with 'students no longer bounded by geography'. And many graduates say that they want to contribute to building a world that society all wants. 'This could be our trump card,' he said, 'as long as we play it correctly.'