Cefic asks for action to help chemicals sector through the economic crisis

The European Chemical Industry Council, Cefic, has welcomed the European Economic Recovery Plan adopted by the European Council in December but urges that further measures are necessary to help the sector overcome the current economic crisis.

The economic crisis is affecting the chemicals sector in an unprecedented and profound manner, says Cefic. The downturn in production experienced in the last quarter of 2008 was much more severe than the predicted 0.6% decline in chemicals output (excluding pharmaceuticals) (see table 1). Some companies faced a drop in output volume of up to 60%. Particularly affected are base chemicals, polymers and specialty chemicals, due to collapsed demand from key downstream sectors such as construction and automotive.

Predictions are not expected to improve before the third quarter of 2009. Pharmaceuticals, however, have seen the least impact of all the chemical sectors with a 0.4% drop in production in the last quarter of 2008. The sector saw an overall rise of 2.9% for 2008, compared with 2007.

The scaling down of base chemical and polymer production can have a knock-on effect for the pharma sector, as by-products from up stream chemical processes are used to synthesise specialty chemicals for use in the pharma and life science sectors.

Another aspect of the crisis affecting many SMEs is a dramatic rise in risk insurance due to credit uncertainties. Many specialty chemical companies are being asked to pay upfront for supplies.

Cefic has requested short term measures that could be implemented through taxation, financial incentives or regulatory tools, that would directly or indirectly benefit the chemical industry. For example, to reduce pressure on working capital, it has called for accelerated repayment of VAT taxes, it wants tax credits for r&d and asks public authorities to respect payment deadlines to suppliers.

Cefic is also urging the European Commission and Member States to make environmental policy an integrated part of the European Economic Recovery Plan. Financial support or tax benefits for new, green technologies and production processes would reduce the financial burden for companies and accelerate environmental gains, it says.

Having faced the recent burdens of European regulations such as the chemical registration scheme REACH, and the Emissions Trading Scheme, the chemicals sector also requests no more initiatives are introduced that would lead to further regulatory burden. Given the huge cost that REACH entails, it is also calling for a significant reduction in the fees.

In the longer term, it wants the removal of EC distorting policies that prevent access to renewable resources and raw materials such as sugar, starch, bio-ethanol, tallow and palm oil. Such resource use could improve the competitiveness of the chemical industry, Cefic says.

Elimination of chemical import duties in the context of the Doha Round is another suggestion. It believes reduced chemical tariffs across all major producing regions, including China, India and Brazil, over a defined period would help all companies.

Finally, it wants EU and Member States to increase financial support for research projects in their pre-competitive stage to bring sustainable innovation to the market.