FROST & SULLIVAN PUBLISHES MANAGEMENT REPORT ON CHEMICALS INDUSTRY IN EUROPE

Business Wire, April 30, 1995

London, 1994....--(BUSINESS WIRE)--The European chemicals industry appears to be besieged with an ever increasing number of threats and many observers have forecast continuing gloom and despondency for all sectors of the industry.

During the last decade, markets for chemicals have developed faster in East Asia, South America and the Middle East than they have in Europe and the US. Although the opportunities for the chemical industry in the European Union are clear, new producers have also appeared in the developing regions.

However, the major share of world production of chemicals remains in the hands of European and American companies.

According to a new strategic report by international market research publisher Frost & Sullivan, analysing the European chemical industry structure and characteristics, the most important strength of the European chemicals industry is its high integration, both vertically and horizontally. The industry comprises a large number of companies, most located relatively close to each other, that operate in all sectors of the world's chemical industry.

Competition and co-operation between the companies is strong, leading to efficient and orderly markets for almost all chemicals products.

A significant threat to the industry is the decline or loss of several export markets, particularly those for petrochemicals, plastics, detergents and some speciality chemicals.

These are the sectors that either are suffering from global over capacity problems or have established regional supply/demand balances.

According to Frost & Sullivan, the continuing growth of chemical manufacturers outside Europe should be of greater long term concern. The fibres industry has lead the way, with imports of cheaper- produced fibres from outside Europe now accounting for over 40 per cent of European consumption. It would be unsurprising to find that imports into Europe of some inorganic chemicals, plastics, fertilisers, detergents and other bulk chemicals are beginning to increase.

Although the chemicals industry in Europe is currently experiencing a number of severe problems, several opportunities are available for the future.

Frost & Sullivan reports: "The completion of the Uruguay round of GATT in December 1993 signals the start of a new era in world trade. General tariffs for chemical products are scheduled to be reduced progressively to between 5.5 and 6.5 per cent, which will provide significant opportunities for all trading countries, including those in Europe."

A major opportunity for West European chemical companies is provided by the relative inefficiencies of East European chemical producers.

Much of the latter is characterised by old plant that is uneconomic in comparison with West European plant, so opportunities exist to participate in modernising the more promising sectors.

The most likely form of this participation will be partnerships and joint ventures, with the Western companies supplying money, technology and management and the Eastern companies supplying raw materials, labour and access to growing markets.

Growth in Asia, particularly China and South East Asia, represents a third opportunity for European chemical companies. A large number of companies have invested in the region, again mainly through alliances and joint ventures with local companies.

The main sectors involved are petrochemicals, fibres, polymers, resins, detergents and some speciality chemicals.

Frost & Sullivan is an international high-technology research firm. All Frost & Sullivan reports are based on extensive interviews with marketing and technical experts from selected companies in each market segment. Primary research is validated by thorough analysis of available secondary research. Frost & Sullivan is the leading publisher worldwide of high-technology research reports.

Code: 3093-48 Publication Date: 1994 Price: $3800

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Kristina Menzefricke Amy Arnell Nadge Keryhuel

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