(CHEManager Europe 6/2012)    Decreasing Market Share
In a demonstration of its inherent resilience, the European chemicals sector registered a solid recovery in 2010 after the 2009 economic crisis. Chemicals sales of the EU-27 countries in 2010 reached €491 billion after €420 billion in 2009, according to Cefic, the European Chemical Industry Council (Fig. 1). The rest of Europe (Switzerland, Norway and other Central & Eastern Europe countries) added another €87 billion in 2010. For 2011, no official sales numbers are available yet, but given the confirmed production growth of 1.1 % and price increases for most chemicals, it is likely that EU chemicals sales have jumped over the €500 billion mark again.

Emerging Competitors
However, this position is under increasing pressure from fast growing economies, mainly in Asia and the Middle East. In global terms, the percentage of chemicals manufactured in Europe has decreased from 36 % in 1991 to 21 % in 2010, although output still rose by 17 % in value terms (Fig. 1). With continued uncertainty characterizing both the global and European economic outlook, there is little doubt that industry will continue to find itself under pressure. Asia and the Middle East will become the epicenter for the global chemicals industry - by 2010 Asian chemical production had equaled that of Europe and the Americas, and China's share of world chemical sales had increased from 6.4 % in 2000 to 24.4 % a decade later (Fig. 2).

Declining Capital Spending
Investing in the chemical sector is investing in the future as industry efforts are increasingly directed towards developing specialty products and services that help customers to reach sustainability goals. The ratio of capital spending to sales of Western Europe's chemicals industry, including pharmaceuticals, has been declining for over a decade and stood at 4.8 % in 2010, down from 7.5 % in 1998 (Fig. 3). Industry statistics show that the Asia-Pacific region accounted for nearly 73 % of global capital spending on chemicals in 2010, against 38.6 % in 2000. That high level is set to continue fuelled by the region's ongoing development coupled with rising domestic demand.

Bridging the R&D Gap
The European chemical industry must build on its strengths in innovation, quality and sustainability to ensure a healthy market demand for its products is maintained. Horizon 2020, the European Commission's €80 billion package for research and innovation funding that will run from 2014 to 2020 is welcomed by industry. As a research-intensive business, the chemical industry has an essential role to play in enabling achievement of the Commission's EU 2020 target of investing 3 % of public and private GDP in R&D. It's a challenging task: In Europe as well as in Japan and the U.S. R&D intensity levels are declining (Fig. 4) as other parts of the world - most notably India and China - continue to strengthen their capabilities.