Catalyst

by Harrie Camps, Program Manager Reach/Sabic Europe

It is important to focus on the broader opportunities created by the European Union’s (EU) registration, evaluation and authorisation of chemicals (Reach) program, rather than linger on its challenges, and this is what we have been doing at Sabic. We believe that the EU chemical industry only stands to benefit from a single regulatory system for new and existing chemicals. Reach will encourage our industry to innovate, either by replacing potentially harmful substances with suitable alternatives, or by dramatically reducing the risk posed by the use of these chemicals.

Because Reach mandates that all chemical substances in the EU be comprehensively documented, knowledge and expertise regarding these substances will increase, for the benefit of society as a whole. And since the legislation also covers chemicals that are imported into the EU, Reach will have a positive impact on the wider global market.

Taking a Pragmatic Approach  

At Sabic, we fully endorse the Reach objectives. As a responsible manufacturer and importer of chemicals, we care for the health and safety of people and the environment, and compliance with Reach is merely a logical step in the process. Yet we also see Reach as a serious business topic and as such, we have been pragmatic in our approach to the new regulations. We have assembled a professional corporate Program Management Office (PMO) to centrally guide the timely delivery of high-quality dossiers for all our products. Although independent from business and Safety, Health and Environment functions, the PMO aims to cover both needs. To help our team achieve on-time registration, we recently signed a four-year strategic partnership with TNO, a highly respected scientific research institute. With the right people and processes in place, we feel we are well placed to meet the necessary goals outlined by Reach.

As with any new legislation, it is important that companies take the right approach to ensure that they are in the best position to implement the changes, minimize the impact on the business and to keep ahead of the competition. By working with a third-party, such as TNO, who have the expertise and knowledge to help shape the approach, companies can put themselves into the best possible position to react to the changes.

Sharing is the Key to Success 

To help lessen the burden of animal testing the Reach regulation mandates that all producers and importers of a chemical substance should work together by sharing toxicology data and jointly submitting dossiers. Beyond its humane spirit this requirement also offers a clear financial benefit to producers as the expense of testing can be shared among groups of substance producers.

Sabic has already joined pre-consortia groups of producers established by the European Chemical Industry Council (Cefic) through its sector groups and will be openly sharing Reach-related knowledge and best practices with others-and the sharing doesn’t need to stop there.

At conferences and via industry networks, companies have the opportunity to discuss and compare relevant work processes with each other. In addition, Sabic is committed to using other forms of communication, such as our website and newsletters to share information on the progress of the substance registration process with customers and other stakeholders alike.

But why is sharing so important? The scope of the Reach legislation is so complex–and its impact so large–that cooperation is the surest way to produce the best results. By working together, the industry and authorities will increase their knowledge and expertise regarding chemical substances, and contribute to a healthier future for our children and our planet.

Discussions at the Gulf Petrochemicals and Chemicals Association (GPCA; Dubai) second annual forum, held this week in Dubai, illustrate that it is no longer accurate to tag the Mideast as an emerging or developing region, at least when it comes to petrochemicals.
Mideast operations now define the world-scale standard in ethylene and derivatives, and the region is set to dominate petchem world trade. Mideast polyethylene (PE) exports will more than triple between 2006 and 2012, to 8.8 million m.t./year, says Volker Trautz, CEO of Basell. In polypropylene (PP), the region will shift from an importer in 2006 to a net exporter of 4.4 million m.t. by 2012.
Global petchem markets and margins have remained strong for the past few years, aided by healthy global demand and tight supply as a result of Mideast capacity delays. Basell has lowered its internal 2008-09 PP and PE capacity estimates due to project construction delays across the Mideast, but has raised its 2011 estimates by more than 5 million m.t./year compared with its 2006 forecast as delayed and newly announced capacity comes online. “Today’s situation should not lead to complacency,” Trautz says. “We are facing [an even larger] surge from the Mideast but it will occur later.

The Second Annual Gulf Petrochemicals and Chemicals Association (GPCA) Forum has attracted more than 750 delegates, a big increase on the 450 delegates who attended the first meeting, says GPCA chairman Mohamed Al-Mady, who is also vice chairman and CEO of Saudi Basic Industries Corp. (SABIC). “I am proud of the progress GPCA has made in its short history,” Al-Mady said in his opening remarks to the forum in Dubai today.
Al-Mady, also in his opening address, expressed concern about rising project construction costs in the Middle East. “This, I believe, is of great concern as capital costs for new projects have gone through the roof,” he says. “It makes it difficult to achieve acceptable financial targets when capital costs have risen so much. I believe this will lead to some project delays and probably some cancellations over the next few years. In time, this bubble will deflate, as it is not sustainable at present levels,” Al-Mady says.
The petrochemicals and chemicals sector is approaching a period of overbuilding accompanied be weaker markets. “Our industry has experienced these periods of overcapacity and slow growth numerous times in the past and has worked through them successfully and emerged stronger,” Al-Mady says. “I am certain we will do so once more.”

The rapidly emerging petrochemical industries of China, India, and the Middle East are on course to become the world’s biggest in terms of overall capacity, Mukesh D. Ambani, chairman and managing director of Reliance Industries told attendees in Wednesday’s opening keynote speech at the second Annual Gulf Petrochemicals and Chemicals Association (GPCA) Forum in Dubai. The feedstock-rich Middle East, and rapidly growing Chinese and Indian economies “are bound to lead the petrochemical industry.” The three regions can together form “a new silk route,” heralding “a new age” in the petrochemical sector, Ambani told GPCA delegates. “It is a change of profound significance for the industry,” Ambani says.

Private equity buyers have conducted about 80% of the M&A in the distribution sector in the last year, Marc Fermont of DistriConsult told attendees at the National Association of Chemical Distributors’ (Arlington, VA) annual meeting, held this week at Fajardo, P.R. There are both positive and negative implications of this change, he says. These include the creation of some “dynamic” companies, like Azelis, as well as an emphasis on a “buy and build” strategy rather than organic growth, Fermont says. There is also likely to be pressure on private equity-owned distributors to reduce their inventory levels and increase customer prices, he adds. While the entire distribution sector remains vast with many small- to mid-size firms, some argue that the major global players are the force to be reckoned with, the ones that ultimately shape the industry. The fact that private equity firms are in the driver’s seat at most of the major distribution firms has raised at least one pressing question: Is this necessarily a bad thing? What do you think?