Firm foundations for the 'basic building blocks'
15 Jan 2000
'There will be a continuing high demand for basic chemicals in this country and in Europe. They have got to come from somewhere,' commented Chemical Industries Association director-general Elliot Finer at last month's publication of the CIA's annual investment intentions survey (see p5).
What this year's survey clearly shows is that, despite the refocusing of leading companies such as ICI on 'the more expensive molecules' as Finer put it, over half of the total investments planned for the next two years will be on basic or petrochemical projects.
Specialities and pharmaceuticals combined are showing their growth potential with 44 per cent of project capital expenditure, but the 'basic building block' chemistries are more than holding their own, as evidenced this month by BP Chemicals announcement of its £500million, five-year polyolefins expansion plans for Grangemouth.
Elsewhere around the world, major players are still holding to the belief that a fully integrated approach to chemicals is a better bet than merely concentrating on one end or other of the product chain. BASF's latest results (see p5) would seem to suggest that getting the balance right can pay handsome dividends. Although over 60 per cent of earnings came from non-cyclical sectors, basic chemicals were the 'champion earner', according to BASF chairman Jurgen Strube, with returns on assets of over 40 per cent. So, rather than leave basic chemicals production to others, BASF is expanding its 'Verbund' or integration policy. With Fina, for example, it's planning an ethylene cracker in Texas that will be closely integrated with a refinery to supply basic chemicals to BASF's US plants in Freeport and Geismar.
Although the CIA survey predicts a 3.1 per cent decline in capital expenditure overall through to 2000, it records 1997 as the best year for capital investment since 1991. Indeed, at almost £7.8billion, this year's forecast spending programme through to 2000 is some 3.5 per cent higher in real terms than capital expenditure over the previous three years of 1995-1997.
In the short term at least, this augurs well for the UK process plant and equipment supply industry whose order books traditionally lag major capital project announcements by a year or so. And it makes next month's triennial Eurochem exhibition in Birmingham particularly timely.
Much of this issue is given over to Eurochem, with previews of many of the exhibits, supported by some 'scene setting' articles on issues of a broader interest to the process community such as benchmarking, for example.
We also preview Eurochem's sister event, ET 98, which should have a direct appeal to process engineers with an interest in environmental protection and are there any who don't?
