Euro11bn REACH burdens EU chemical makers

London – European chemical manufacturers group Cefic has posted an uncertain outlook for the sector, with output expected to contract by 1.5% in 2012 and then to grow next year by just 1% – the sluggish recovery due in part to regulatory burdens.

Noting recent European Central Bank moves, slowing export demand, including from China and India, Giorgio Squinzi, who has just completed his two-year term as Cefic president, said “it remains to be seen” whether there will be enough impetus for growth.

The Mapei Group chief executive went on to note that the EU now represents 20% of global chemical production compared to 36% about 20 years ago.

As well as growth in output from emerging markets, Squinzi linked the decline to EU environmental and energy policy and the burden of regulation.

Meanwhile, Cefic has estimated that the first phase of REACH has cost the industry over Euro2 billion to date - well above the regulator’s estimates. Phase 2, will soon start to take effect, said Squinzi, forecasting that the total cost will be around Euro11 billion by 2015.

As the world’s “most expensive and complex chemicals legislation,” Squinzi said REACH was now impacting on theinnovation needed to secure a sustainable future. In a survey, he said, 63% of EU chemical companies believed that REACH was taking funds away from their R&D.

“We must stress the link between competitiveness and innovation if we are to keep our 1.2 million employees in jobs and to keep the chemical industry based in Europe; making the necessary technology breakthroughs,” said Squinzi.

“Will the EU create sustainable innovation or will it be somewhere else?” he continued. “Innovation is the engine for our sustainability journey and some [EU] policies help us, others not.”

In his first address as new Cefic president BASF chairman Dr Kurt Bock said a lack of consistent EU energy and industrial policies that put the EU sector at a disadvantage with other chemical-producing regions.

Cefic, he added, believes that EU policies must foster more innovation occurring in Europe. The new Industrial Policy and Horizon 2020, he said, are examples that go in the right direction to support member companies within the 29,000-member industry organisation.

“The EU’s progress in sustainability depends on innovation and a strong and competitive economy, which can be achieved with the right framework, set up with the help of EU policies,” concluded Bock.