Europe’s Under-Fire Chemical Industry Sees a Way Out of This Mess

Caught in Putin’s cross-fire and a European gas crisis, there’s a growing chorus of people questioning the very viability of Europe’s chemical industry, especially as making the stuff is so much easier in raw-material rich areas like North America and the Middle East. But it’s not all doom and gloom at some of the oldest and most iconic names in the sector that have plied their trade in Europe for more than 100 years.

Christian Kullmann, the CEO of Evonik Industries, had a few things to say about the matter today when he routinely ran through his company’s quarterly earnings, which incidentally were fine considering, according to analysts.

The perils of Germany’s dependence on Russian gas laid bare in rationing and energy costs, Kullmann sees potential for those focused on specialty chemicals coming out of this with greener credentials, a much higher degree of energy efficiency, and with a slate of more future-proof sustainable products.

What it can’t do in cracking, Europe can do in innovation, he said.

“We are under pressure and that’s what is activating,” said Kullmann. “As of today, it’s a challenge but in the future, if we make the right decisions, we could come out better.”

It should be noted that, until the end of September at least, Kullmann is the current head of Germany’s leading chemical industry lobby, the Verband der Chemischen Industrie, or VCI. It’s his job to talk a good game even as coal-fired plants get to rumble on. But perhaps it would be churlish to ignore the fancy footwork of SOME in the industry and not try Kullmann’s pair of rose-tinted specs, at least for a second.

Analysts acknowledged Evonik’s efforts to substitute 40% of its natural gas needs at German sites, without curtailing production in a major way. The company’s costs are up by EU3 billion since 2020 and they will rise another EU300 million next year. This is a company that globally procures about 15 terawatt hours of natural gas annually. Yet Evonik has mitigated some of the impact via a series of measures, helping clip EU100 million off next year’s bill.

Luck played a part. Kullmann paid homage to a group of his engineers who, before all the troubles kicked off, had the foresight to design a new power plant that could operate on both LNG and LPG. Evonik actually manufactures LPG at its plant in Marl. It’s a byproduct that historically got shipped to a nearby BP cracker as a feedstock. That contract has now been redrawn: Evonik gets to keep its LPG and the accommodating BP sees a customer survive.

Kullmann’s optimism is shared by Heike van de Kerkhof, CEO of textile-chemical maker Archroma. A leader in the industry, the Swiss company just announced the acquisition of Huntsman’s rival Textile Effects business, a transaction that she feels will put the company on a stronger footing to innovate and address issues around sustainability. They will be a defining feature in the years to come. Over the years, Archroma has moved away from basic fabric treatments to focus on specialty pigments and other high-end applications.

“Europe brings an excellent heritage in innovation,” van de Kerkhof said in an interview with chemicalESG. “I can see that there might be a dip but longer term I think the chemical industry will recover. It’s harder if you are competing in commodities. We can compete with the Asian players right now and I don’t see that changing over time.”

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