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The German Chemical Industry in 2030 A summary of the VCI Prognos study
Study commissioned by: Chemie Wirtschaftsförderungsgesellschaft mbHStudy conducted by: Prognos AGFinancial support from: Evonik Industries AG, Verband der Chemischen Industrie e. V.Collaborators: BASF SE, Bayer MaterialScience AG, BP Refining & Petrochemicals GmbH, Clariant Produkte (Deutschland) GmbH, Evonik Industries AG, Henkel AG & Co. KGaA, Lanxess Deutschland GmbH
2
Foreword 5
Summary 6
Global changes over the next 20 years 7
Global economy remains on course for growth 9
Growth prospects for Germany 11
Trends in the chemical industry to 2030 12
Efficiency on the rise in the German chemical industry 14
Research budgets to double by 2030 15
Labour shortage looms 16
The future can be shaped 17
Selected data 18
Table of contents
3
4
Ongoing globalisation is leading to a number of dramatic and extremely dynamic upheavals in the global economy. That makes it all the more important to identify and assess the associated opportunities and risks as early as possible. This applies equally to individuals, governments, companies and entire business sectors. Against this backdrop, the German Chemical Industry Association (VCI) presents a study that forecasts the development of the chemical industry in Germany over the next 20 years.
The study, titled “The German Chemical Industry in 2030”, is meant to provide VCI member companies with orientation in a changing world. We also intend to use the results of the study to initiate a political and societal dialogue about the future of Germany – a dialogue that addresses issues beyond those that affect the chemical industry. This is particularly important because politicians in Berlin and Brussels will soon be making decisions with a farreaching impact. The questions they must answer include: What can be done to further advance European integration? How can deficitridden
budgets be consolidated? What can be done to promote structural transformation, push forward the energy transition in Germany, and shape industrial policy in a way that ensures sustainable growth? The political decisions taken in these and other areas will have an impact on the overall economy and the competitiveness of German industry. In other words, the chemical industry will also be affected. The purpose of the VCI study is thus to provide wellfounded arguments and figures that will encourage discussion about the issues involved.
Our project partner for the analysis was Prognos, a renowned economic research institute. Together with experts from VCI member companies, our regional and sector associations, European chemical industry organisations, our customer industries, and the Federation of Germany Industries (BDI), Prognos has produced a credible longterm forecast for the global economy. The study also addresses projected developments in Germany and Europe, structural transformation in industry, and the develop ment of specific segments of the chemical industry.
Various scenarios were created on the basis of different assumptions regarding the future of key drivers in the chemical sector. The summary presented here focuses on the basic scenario, which is based on the factors we believe are most likely to influence the development of the chemical industry.
Dr. Klaus Engel
President of the German Chemical Industry Association (VCI)
Focus on the future
Foreword
5
The demand for consumer goods is increasing due to growth in the global population – one of today’s mega- trends. This development is particularly noticeable in Asia and Latin America. Here, manufacturers of consumer goods – customers of the chemical industry – are moving into emerging markets and thus shifting international growth sectors away from Europe. This phenomenon is intensifying competition and driving up demand for raw materials and energy. The chemical industry is playing a key role in the associated economic developments world-wide.
The German chemical industry can benefit from this situation as well. However, in order to remain globally com-petitive, it will need to become more innovative and more productive over the next 20 years. Resources must also be used more efficiently. In other words, by producing innova - tive and high-quality products, companies will still be able to penetrate new markets in the future. Thanks to the sector’s production network (Verbund), the German economy’s strong industrial core, and networked value creation chains, Germany will post solid growth between now and 2030. Nevertheless, the population decline in Germany and the resulting reduction in workforce numbers will weaken this growth, as will the high budget deficits in many European countries.
Economic policies will therefore greatly influence future developments. As far as the chemical industry is concerned, the government should become active to counteract the labour shortage brought about by a declining population. In addition, the education system should be improved. Germany should also make an effort to attract skilled professionals who wish to live and work here. In general, govern ment support for research, better training, and greater public acceptance of technological advancements would go a long way toward improving Germany’s innova tion potential. At the same time, politically based decisions regarding research funding or a focus on one sector at the expense of another inhibits growth potential. It makes much more sense to simply take measures that strengthen Ger-many as an industrial location overall. The energy transition (Energiewende) in Germany must continue in a cost-efficient manner. However, as long as energy prices in Germany remain internationally uncompetitive, measures aimed at reducing the financial burden on energy-intensive production operations will have to be maintained. Other wise value chains could be disrupted. If climate and environ mental targets adequately take into account what is tech nically and economically feasible, there is no reason why Germany and Europe cannot continue to play a leading role in climate protection, while also remaining an attrac tive industrial location.
Regardless of the challenges facing the chemical industry, high priority should be given to stabilising the common currency and finance sector in Europe as well as promoting economic and fiscal union. When it comes to foreign and trade policy, German industry needs to operate in an envi-ronment of fair global competition and open international markets. Moreover, rigorous debt reduction efforts must continue if optimal conditions for economic growth are to be maintained over the next 20 years.
Summary
Methodology
The VCI Prognos study takes into account not only the megatrends that are already discernable but also the impact of current political decisions on future developments. With these central assumptions as a basis, the authors of the study used the Prognos model to generate a consistent and quantifiable scenario of future developments in different countries and economic sectors. Their scenario included an analysis of the interactions between these individual nations and specific sectors.
Specialists from the chemical sector utilised the results obtained with the model to forecast developments in their industry. The study also marked the first time that a modelsupported overall economic forecast was supplemented by predicted developments in the chemical industry. The results were discussed extensively in many workshops with experts from chemical companies, customer industries, and representatives from various industry associations.
An analysis of the various factors relevant to the chemical industry resulted in the creation of the most likely basic scenario. The following three alternative scenarios were also elaborated in order to evaluate the robustness of the developments:
Weak global growth: The coming decades will be marked by ongoing sluggish global economic growth.
Disrupted value chains: The energy transition will result in a further increase in electricity prices and temporary power disruptions. Measures aimed at reducing the financial burden on energyintensive industries will be discontinued.
Innovationfriendly environment: The expansion of research funding, improved training and a work force with better qualifications will generate additional innovation potential in the German economy.
Summary
6
Global changes over the next 20 years
Predictions are often overtaken by improbable events whose impact is extreme – things like natural disasters, wars, or technological breakthroughs. Forecasting the future wouldn’t be much of a problem if such extreme events didn’t occur. After all, megatrends and long-term developments do enable us to make statements about the world of tomorrow.
GLOBAL POPULATION GROWTH WILL CONTINUE According to the UN, the global population will rise
from 7 billion today to 8.3 billion in 20 years time. The demographic processes that occur during this time will vary from region to region. Population growth will be dynamic in the developing countries and emerging mar-kets, where 7 billion people – or 85 per cent of the global population – will be living by 2030. The share of people living in the industrialised countries will, on the other hand, decrease. The population in the USA is rising rapidly due to immigration, but the other industrialised nations are only experiencing a slight growth in population. Germany and Japan will actually have fewer citizens in the future than they do today.
Increasing life expectancy will result in an aging global population. There are 760 million people over the age of
60 worldwide today – and this number will nearly double by 2030. Most of the aging population will live in the indus-trialised nations, although China will also have a significant number of elderly citizens. While the share of older people will barely rise in the developing countries and emerging markets.
Global population growth will be a key driver of eco- nomic expansion worldwide in the coming years, as global demand for food, goods, and services will continue to rise as a result. The global workforce will also grow, although the simultaneous aging of the population will limit this in-crease. In other words, significant productivity gains and increased industrial production will be required to meet the higher demand.
More people will live and consume goods in the emerging markets. These people will also be available for the labour market. The industrialised countries will benefit from this development. In particular, they will be able to increase exports to these regions and import a higher number of intermediates. At the same time, migration from emerging markets will offset the anticipated labour shortage in the industrialised countries.
GLOBAL POPULATION WILL RISE – LIFE EXPECTANCY WILL INCREASE
Life expectancy, and thus the share of people over 65, will increase in all countries. The population will decline in Japan, Russia, Poland and Germany. Source: United Nations (2010)
38.9
1,379.0
70.4
70.5
17.6
79.3
37.6
49.2
49.9
121.2
11.6
10.8
50.1
47.7
19.4
1,524.9
232.8
87.7
367.8
136.3
Absolute population numbers for 2030 (in millions)
Change in population 2011–2030 (per year in per cent)
Ag
ing
po
pul
atio
n
Population will risePopulation will decline
Fast
Slow 64.6
127.3
Global changes
7
TECHNOLOGY AND KNOWLEDGE ON THE RISE WORLDWIDE Technological progress and increasing knowledge will
be other important key drivers of global economic develop - ment. Innovations will spread more quickly and promote global economic growth. Technological developments will continually increase during the next 20 years. This will not only lead to a rise in labour productivity and resource efficiency but also improve the quality of goods and services. The industrialised countries, especially the USA, Japan, and Germany, will remain the engines of innovation for the global economy. However, some emerging markets such as China will also play an important role.
Education will become a key factor when it comes to choosing production locations. Germany will continue to offer very good higher education opportunities at its technical colleges and universities, while company training programs will teach the skills required by future qualified staff. The proportion of people participating in an education in Germany during the period under review will increase. In other words, the percentage of people completing a higher education will rise and the share of dropouts will decline. Employees will also become more aware of the importance of lifelong learning. Additional potential will be generated by the greater integration of women and older people into the labour market. A moderate level of migration to Germany by skilled professionals will further boost the country’s eco-nomic performance in the coming years.
SCARCE RESOURCES WILL PRESENT A CHALLENGE TO THE WORLD ECONOMY
Resources such as land, water, fossil fuels, minerals, and energy are not infinite. Global economic growth and the rise in the world’s population will make resources more scarce relative to demand over the next 20 years. The exploi-tation of new deposits (shale gas, deep sea drilling, …) will do little to change the situation. Prices for energy and raw materials will continue to increase due to rising exploration costs and greater resource consumption.
The increasing cost of important raw materials will restrict global economic growth. Only countries rich in raw materials will benefit from this development and grow dynamically. The purchasing power of other countries will decrease. The rising cost of raw material imports will espe-cially hurt countries with a negative balance of trade.
At the same time, higher raw material prices will pro-mote resource-efficient production and the development of products that help to conserve resources. In many places, this development will be reinforced by government policies. As a result, resource efficiency will improve around the globe during the next 20 years.
ENVIRONMENTAL AND CLIMATE PROTECTION WILL BECOME INCREASINGLY IMPORTANT
Environmental standards in the industrialised nations will be more stringent in the future, and climate protection policies there will be more ambitious than in emerging markets. Germany and Europe will continue to lead the
way when it comes to climate protection. The emission trading system, energy taxes, and the promotion of energy from renewable sources will cause energy prices to rise more rapidly in Europe than in other regions. Price increases will be particularly high in Germany due to measures associated with the country’s energy transition. This will benefit countries with lower environmental and climate standards. The basic forecast assumes that the current policies in Germany and Europe will not become more restrictive. This also includes the exceptions that have been granted to energyintensive industries.
Climate and environmental protection will create incen- tives for sustainable manufacturing processes and the pro-duction of “green goods.” This will accelerate growth in some sectors. As an engine of innovation for climate and environ- mental protection, the chemical industry will benefit from this development. The share of intermediates from the chemical industry will increase (e.g. building insulation, lightweight material concepts and electric drive systems required by the automotive sector).
DEBTRIDDEN COUNTRIES WILL CONSOLIDATE THEIR BUDGETS A relatively significant portion of the growth achieved
over the last few decades was financed through private and government debt. In view of the high level of debt among governments and private households, this type of growth cannot be expected to continue. The basic forecast assumes that the debt-ridden EU nations will in principal continue their budget consolidation efforts. The USA will also begin consolidating its budget in 2013, although less rigorously than in Europe. The need to consolidate will inhibit economic growth in the industrialised countries and limit their financial and economic freedom of action. Over-all, it can be expected that consolidation plans will be im-plemented in the affected countries only gradually so that political stability can be maintained.
CRUDE OIL WILL BECOME MORE EXPENSIVEInternational crude oil price in US$ per barrel (real prices), per cent change per year
The demand for oil will increase significantly between now and 2030. New oil fields will have to be exploited if this demand is to be met. Oil exploration and production will become more expensive, resulting in higher oil prices. The increase will be slowed somewhat by resource efficiency gains in many industrialised countries. Source: IEA “current policies scenario”
200
150
100
50
0
135+3 %
0 %
+20 %
1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030
Global changes
8
The volume of world trade will not expand as dynamically in the next 20 years as it has in recent decades, a period in which the entry of the former Eastern Bloc states and China into the global trade system had a huge positive impact. The importance of international trade as a driver of global economic growth will therefore decline. Despite less favourable overall conditions, the global economy will expand by approximately 3 per cent annually during the forecast period; in other words, economic growth will be as dynamic as it was before the crisis.
WINNERS AND LOSERS Varying rates of growth will alter the global economic
landscape over the next 20 years. China’s share of the gross world product will rise to 17 per cent by 2030, and Brazil’s importance will also increase due to its wealth of raw materials and favourable demographic development. India’s global market share will rise as well. The increasing significance of the emerging markets will come primarily at the expense of Western Europe and Japan. The United States, on the other hand, will maintain its leading position in the global economy until 2030.
China will probably experience a gradual decline in economic growth during the forecast period, as the country’s growth model will reach its limits. China’s aging population will also increasingly dampen the country’s economic ex-pansion. In addition, declining demand in the industrialised nations, rising wages in China, increasing environmental problems, saturation tendencies in capacity expansion, and a real appreciation of the renminbi will all contribute to a slowdown of export-driven growth in the Middle Kingdom. Nevertheless, China’s importance as a consumer market will increase as its growth paradigm shifts from exports toward domestic demand.
Whereas most of the industrialised nations will experi-ence declining rates of growth, the USA will regain its for-mer economic power in the long term, and the dollar will remain the world’s lead currency. This, in turn, will enable a high level of capital imports into the USA. The American population will also grow, and at the same time the U.S. economy will profit from favourable energy prices (e.g. shale gas) and the country’s high level of technological innovation.
Global economy remains on course for growth
GLOBAL ECONOMY TO EXPAND DYNAMICALLYGlobal economic growth in per cent per year, 2011–2030; regional share of gross world product in per cent
The global economy will grow at a rate of 3 per cent annually between now and 2030. Whereas the emerging markets, especially China, will gain global market share, the share of gross world product accounted for by the industrialised countries will decline by 11 percentage points.
2011 2030
17.2%
15.3%
67.5%
78.5%
12.4%9.1%
China
Emerging markets and developing countries
Industrialised countries
+3 %
Global economy
9
NATIONAL RANKINGS – EUROPE WILL FALL BEHINDGross domestic product in billions of euros; 2005 prices; growth in per cent per year
2011 2030Ranking
2011Ranking
20302011–2030
in per cent per yearUSA 10,730 17,991 1 1 2.8 %China 3,398 11,299 3 2 6.5 %Japan 3,668 4,649 2 3 1.3 %India 1,098 3,766 8 4 6.7 %Germany 2,442 3,117 4 5 1.3 %UK 1,880 2,649 5 6 1.8 %France 1,811 2,543 6 7 1.8 %Brazil 930 1,906 11 8 3.9 %Italy 1,423 1,783 7 9 1.2 %Canada 990 1,652 9 10 2.7 %South Korea 859 1,555 12 11 3.2 %Mexico 778 1,326 14 12 2.8 %Spain 950 1,311 10 13 1.7 %Australia 721 1,253 15 14 3.0 %Russia 778 1,147 13 15 2.1 %
Europe will become less important to the global economy in the next 20 years. Growth in this region will be relatively low. However, China, India, Brazil, South Korea and Mexico will move up in the national rankings.
Japan and several European countries, including Germany and Italy, will be forced to deal with low rates of economic growth in the future. The sluggish economic growth in Western Europe will be caused by the low rate of population growth, an already noticeably aging popula-tion and the effects of budget consolidation. Stronger economic expansion will also be inhibited over the medium term by national problems such as the financial and real estate bubble in the United Kingdom and the ongoing difficulties in the Spanish and Portuguese construction industries.
INDUSTRIALISATION CONTINUES AROUND THE GLOBE The demand structures in global markets will change
over the next 20 years. Demand in the emerging markets will be driven mostly by population growth and more prosperity. The changes in demand in the industrialised nations will result from new requirements associated with increasing energy efficiency, consumers’ growing environ-mental awareness, the use of energy from renewable sources and an aging population. New consumer groups’ participation in global consumption and the changed demand structures will necessitate additional expansion of industrial capacity. Industrial value creation will increase more rapidly at the global level in the period until 2030 than it did in the past, and this growth will even exceed that of the overall economy.
The global structure of economic sectors will remain largely the same. Consumer-oriented industries such as those that manufacture rubber and plastic goods or textiles and clothing will be able to slightly accelerate their growth in the coming decades. Dynamic world economic growth will largely be a result of China’s share of production, which is already substantial and continues to increase. The mechanical engineering and automotive industries will expand by as much as 4 per cent annually between now and 2030. The lowest growth rates will be recorded by the paper, printing and food industries; the highest growth rates will be posted by the electrical/electronics and chemical sectors. The expansion of global chemical production will result from the dynamic economic deve-lopment of the emerging markets as well as the increasing use of products that have a high chemical content.
The international division of labour will increase further. Value chains will become more international. In particular, the interconnections between Asian economies will continue to increase. These countries will experience dynamic industrial growth. Many nations have learned from the economic crisis that a core industrial sector is an essential component of a national economy. In this regard, North America and Europe will maintain industrial activity and revitalise industry more successfully than they have over the last few decades. The industrialised countries will increasingly focus on high-quality products, and this approach will slow down the shift of value creation toward Asia and Latin America. Nevertheless, the shift of industrial
growth centres toward the emerging markets will continue between now and 2030, but at a significant slower pace than during the past decade.
INDUSTRIAL PRODUCTION WILL RISE BY 4 PER CENT ANNUALLY BETWEEN NOW AND 2030Global growth in various sectors in per cent per year;China’s contribution to growth, 2011–2030
Industrialisation continues. Global industrial production will expand somewhat more rapidly than the overall economy. China’s contribution to growth will be high in most sectors. China will account for more than 80 per cent of growth in the textile industry.
0 % 1 % 2 % 3 % 4 % 5 % 6 %
Electrical engineering +5.1 60
Chemicals +4.5 61
Rubber andplastic goods +4.5 59
Textile/clothingindustries +4.4 81
Metals +4.3 68
Manufacturing +4.0 54
Mechanical engineering +3.9 57
Automotive +3.5 34
Glass and ceramics +3.3 43
Paper andprinting industries +2.9 56
Food +2.7 26
China’s share
INDUSTRIAL PRODUCTION – GROWTH DISPARITIES WILL CONTINUEChanges in real industrial production according to region/nation in per cent per year
In the future as well, most of the new industrial production capacity will be created primarily in the dynamically growing emerging markets. However, the growth rates for the forecast period will gradually decline as industrialisation increases.
World
IndustrialisedcountriesEmerging
markets
USA
Japan
EU
Germany
China
Rest of Asia
Latin America
Eastern Europe
0 % 2 % 4 % 6 % 8 % 10 % 12 %
2011–20302000–2008
Global economy
10
Germany‘s economy is currently very stable and in a better position than many other eurozone economies. However, it will grow by a mere 1.3 per cent a year over the period to 2030. During this time, the contribution made by export trade to German GDP will fall from today‘s level. This is because of the high share of German export trade currently accounted for by Europe. Although the world economy as a whole is forecasted to grow dynamically between now and 2030, growth in Europe will be weaker than it has been over the last decade. Exports will, however, still make up 34 per cent of future growth in Germany and thereby remain a major pillar of growth in this country. At the same time, there will also be additional stimulus from domestic demand, with private consumption set to make a bigger contribution to growth – partly due to an increase in real wages of 1.4 per cent per year. The share of annual economic growth due to private domestic consumption will increase to 42 per cent by 2030. Ongoing consolidation efforts mean that any contribution to growth from govern-ment consumption will remain weak.
INDUSTRY TO RETAIN ITS PIVOTAL ROLE
The increasing effects of demographic change will con-tinue to slow the rate of growth in the German economy. One of the reasons why Germany‘s long-term growth pros-pects still remain comparatively good is its powerful indus-trial base. Germany will remain a preferred location for in-dustrial production not only for German companies but also, as a result of increasing European integration, for a growing number of companies from the rest of Europe. In the future, industry will continue to account for around 21 per cent of
value creation in the German economy. By comparison, this share will decline to 10 per cent in France in the period under review, whilst remaining at a relatively modest 14 per cent in the USA.
In contrast to many other countries, Germany will retain a successful mix of large, medium and small companies. Germany‘s strong industrial performance will be driven by certain key sectors of the economy, which will consolidate their powerful competitive position on world markets. These key sectors include the automotive, mechanical engineering, electrical engineering, chemicals and plastics industries. Together these sectors already account for approximately 65 per cent of industrial output in Germany, a share that is forecasted to rise to about 70 per cent by 2030. At an average of 1.8 per cent a year, growth in these key sectors will out-pace that posted by the rest of manufacturing industry.
Thanks to their high quality, products from German industry will remain in demand both at home and abroad.
Germany’s industrial companies will profit from, on the one hand, a growing demand from emerging markets and, on the other, a shift in demand that will arise from new trends such as the energy transition and a growing need for trans-port. German industry clearly profits from its highly integra-ted character. Not only does each sector benefit from the success of the others; the setup also promotes the joint development of complex solutions. Despite the increasingly international division of labour, many sectors of German industry will continue to source their intermediate inputs from home markets.
Growth prospects for Germany
EXPORTS AND CONSUMPTION – DRIVING THE GERMAN ECONOMYAnnual GDP growth in Germany, in per cent; contributions of individual factors, in per cent
Growth in the German economy will slow to 1.3 per cent a year over the period to 2030. The source of that growth will also change, with private consumption set to play an increased role, while the contribution made by exports will decline.
1995–2008 2011–2030
13.5 %
14.2 %
39.9 %
31.3 %
5.8 %14.6 %
34.2 %
42.0 %
+1.3 %
+1.6 %
Gross fixed capital formationBalance of trade
Government consumptionPrivate consumption
GERMAN INDUSTRY TO ENJOY CONTINUED SUCCESSAnnual growth in industrial output, in per cent; share of sectors, in per cent
German industry will remain highly integrated during the period under review. At 1.4 per cent, growth in industrial output will slightly outpace that posted by the economy as a whole. This will be largely due to the dynamic performance of key sectors (chemicals, automotive, electrical engineering, plastics, and mechanical engineering).
2011 2030
+1.4 %
65.2 %
20.1 %
14.7 %
70.5 %
17.1 %
12.4 %
Remaining industryMetals, paper, glassKey sectors
Prospects for growth
11
Global trends will greatly influence the development of the German chemical industry over the coming 20 years. Due to the industry‘s increasing international scope, it is no longer practicable to look at any one country in isolation.
CHINA TO DOMINATE THE GLOBAL CHEMICAL BUSINESS
Global demand for chemicals is forecasted to grow on average by 4.5 per cent a year over the period ending in 2030, thus exceeding the annual average over the last decade (3.9 per cent). This growth will be driven by two trends: on the one hand, increased demand from the emerging mar-kets – particularly in Asia – where population growth and increasing affluence among the middle classes are the key factors; on the other hand, rising demand for chemicals in the industrialised nations as well. In the latter case, the growth will essentially be due to a shift in demand toward innova-tive, higher-quality, more expensive chemicals. At the same time, certain sectors of business will consume greater amounts of chemicals. In the automotive industry, for example, the trend toward electrical vehicles and lightweight engineer-ing will boost demand for speciality chemicals.
Production will largely follow demand, i.e., companies will continue to set up new production facilities in regions where there is strong growth in demand. As a result of a massive growth of domestic demand for chemicals, China will increase its share of the industry‘s total production capacity worldwide. Production will also tend to increase in areas where raw materials and energy are cheap. The coming years will therefore see a growth in production capacity in regions rich in raw materials, such as the Middle East and Brazil. The increasingly important role played by the emerging markets will equally impact all the industria-lised countries, although the latter will remain an important location for production. The US chemical industry will profit increasingly from shale gas exploration and dynamic growth in its domestic market.
GERMAN CHEMICAL INDUSTRY WILL DEFEND ITS POSITION ON THE GLOBAL MARKET
German output of chemicals is forecasted to grow by 1.8 per cent a year to 2030, thereby outperforming German industry and the overall economy. While this will not match the strong global growth in the chemical sector as a whole, Germany will remain one of the world‘s major chemical producers.
Germany‘s chemical industry will continue to benefit from strong growth in global demand. German chemical exports will grow on average by 2.6 per cent a year to 2030. As a result, the export dependence of the German chemical industry will grow significantly over the period under review. In 2011 around 52 per cent of total output was destined for export. This share will rise to 60 per cent by 2030. Today‘s major customers are all European countries, including France, Italy and Belgium. However, exports to China are forecasted to rise so strongly that it will become the second-largest customer outside of Europe for German chemicals by 2030.
The strong competitive position of German industry and the degree of integrated production within the chemical sector is being reflected by demand of intermediate goods. The volume of chemical intermediates sourced abroad conti-nues to rise. This is particularly due to the increased pres-sure to import chemical feedstocks and Germany’s lack of appreciable reserves of raw materials. Despite this devel-opment, domestic production will still make up 64 per cent of intermediates in 2030.
DEMAND FOR CHEMICALS FROM AUTOMOTIVE, PLASTIC AND ELECTRICAL SECTORS TO RISE
The increasing importance of the export trade is not the only change worthy of note when it comes to applications associated with the chemicals produced in Germany. The importance of private consumption for the chemical industry will decline as a result of a decrease in domestic population. Just under 13 per cent of chemicals produced in Germany
Trends in the chemical industry to 2030
CHEMICALS PRODUCTION TO MIGRATE TO CHINABreakdown of global chemicals production by country and region, in per cent
As a result of massive growth in domestic demand for chemicals, China will increase its share of the industry‘s total production capacity worldwide. Industrialised countries will be the most affected by this development.
3,4
2,8
0,53,8 2,1
21,1
47,1
7,4
13,7
7,0USAChinaJapanDeutschlandWest-EuropaOst-EuropaRest AsienLateinamerikaGolfregionSonstige
15.0
29.0
11.0
24.4
5.6
15.0
12.1
47.1
7.4
16.5
3.4
13.4
4,8 2,5
15
29
11
20,6
5,6
3,8
0,67,1USA
2011
ChinaJapanDeutschlandWest-EuropaOst-EuropaRest AsienLateinamerikaGolfregionSonstige
2011
2030
JapanGermany
China
Rest of EuropeRest of the world
USA
2030
JapanGermany
China
Rest of EuropeRest of the world
USA
3,4
2,8
0,53,8 2,1
21,1
47,1
7,4
13,7
7,0USAChinaJapanDeutschlandWest-EuropaOst-EuropaRest AsienLateinamerikaGolfregionSonstige
15.0
29.0
11.0
24.4
5.6
15.0
12.1
47.1
7.4
16.5
3.4
13.4
4,8 2,5
15
29
11
20,6
5,6
3,8
0,67,1USA
2011
ChinaJapanDeutschlandWest-EuropaOst-EuropaRest AsienLateinamerikaGolfregionSonstige
2011
2030
JapanGermany
China
Rest of EuropeRest of the world
USA
2030
JapanGermany
China
Rest of EuropeRest of the world
USA
The chemical industry
12
today are destined for private households. However, this figure is forecasted to fall to a mere eight per cent by 2030. Then, as now, the lion‘s share of demand will stem from industry.
As value chains increase in length and the degree of integration within the chemical industry grows, so too does the level of demand for its own intermediates. In 2011 the German chemical industry itself accounted for some 24 per cent of domestic demand, a share that is forecasted to rise to 29 per cent by 2030. This increasing integration of different segments of the chemical industry is a trend specific to Germany and constitutes a key competitive advantage. In the period to 2030 Germany will remain one of the few countries to retain strong expertise in the fields of basic and speciality chemicals. This will facilitate close collabora-tion between different industry segments – a trend that is brought forward thanks to the development of chemical parks. These parks are important because they make it possible for different companies to cooperate and exploit synergies.
Aside from the chemical industry itself, other major consumers of chemical products include the plastics and automotive industries. A growing use of electronic compo-nents and polymer-based parts in vehicle construction will boost the demand for chemicals in these sectors. The con-sumption of chemicals will also increase in areas such as construction, where there is a growing demand for insula-tion materials, and electrical engineering, which will see a greater use of fuel cells and solar cells. At the same time, the emergence of new applications in the fields of climate and environmental protection will also generate new demand. Germany‘s plans to increase its share of electricity generated from renewable sources imply an increased use of high-grade chemicals, which will be needed, for example, to manufacture wind-power plants and photovoltaic modules.
A GREATER ROLE FOR SPECIALITY CHEMICALS The German chemical industry of today is broadly
diver sified. Basic chemicals account for some 37 per cent of production output. At 43 per cent, speciality chemicals – including paints, crop protection products, special plastics and consumer chemicals – make up the largest share of German chemical production. Pharmaceuticals account for the remaining 20 per cent.
In the future, the German chemical industry will be charac terised by increasing specialization. Basic chemicals will play a less important role due to a decline in competi-tiveness. The reasons for this development include not only rising costs for raw materials and energy but also the creation of new production facilities in emerging markets. By comparison, the production of high-grade speciality chemicals based on intensive research will increase as a share of total output. The advanced know-how of the German chemical industry will safeguard its competitive edge in the speciality chemicals sector.
In other words, future growth in the German chemical industry will be primarily value-driven, whereas volume-based growth will occur largely in the emerging markets. Despite this structural shift, the German chemical industry will remain diversified in 2030 and continue to be represen-ted at all levels of production.
Trends in the chemical industry to 2030
CONCENTRATING ON SPECIALITY CHEMICALSAnnual growth in per cent of German chemical production; share of the industry segments, in per cent
The German chemical industry will focus increasingly on speciality chemicals. Nevertheless, integrated production will remain a feature of the German industry, with companies continuing to produce the required basic chemicals at chemical parks and modern integrated production facilities.
2011 2030
+1.8 %
19.5 %
43.3 %
37.2 %
19.5 %
46.7 %
33.8 %
Basic chemicalsSpeciality chemicalsPharmaceuticals
EXPORT SHARE RISING TO 60 PER CENTDestination of chemicals produced in Germany; share of production value in per cent
Over 50 per cent of the German chemical industry‘s output is already destined for export. By 2030 this share will rise to 60 per cent. Around 30 per cent are sold as intermediates to German industry. The remaining 10 per cent are destined for private consumption.
Export
Investment
0 % 10 % 20 % 30 % 40 % 50 % 60 % 70 %
Consumption
Intermediates
52.4
12.7
32.7
30.4
8.0
60.0
2.1
1.6
20302011
The chemical industry
13
The chemical industry is a heavy user of raw materials and energy. Chemical companies manufacture approximately 30,000 substances and nearly a million preparations from fossil, renewable and mineral raw materials. Many chemical processes require high temperatures and pressures. The products usually also have a higher energy content than their source materials. In other words, they store a large portion of the energy that was used to produce them. The sector currently spends approximately 8 billion euros per year for electricity and other energy sources (oil, natural gas, coal).
The companies in the chemical industry themselves have the greatest interest in efficient production, because of economic necessity and the integrated structure of pro-duction. They have been optimising their processes for decades. Since 1990, their energy consumption has fallen by one fifth, although output has risen by almost 60 per cent. Today, resource-efficient production is already the norm in most modern integrated production sites and chemical parks.
Rising costs for raw materials and energy and intense competition will remain important drivers of efficiency gains in the coming years. But there is only limited poten-tial for more optimisation in the processes used to make basic chemicals. Nonetheless, the raw materials efficiency of the German chemical industry will increase overall in the forecast period. Until 2030, the sector will further boost its energy efficiency, with an increase of only 8 per cent in absolute energy consumption despite growth of 40 per cent in output. That corresponds to an annual increase in
energy consumption of 0.4 per cent. Improvements in efficiency will result primarily from changes in the product mix. In the future there will be more emphasis on the pro-duction of high-value chemicals, whereas resource-intensive basic chemicals will grow more slowly than the chemical industry as a whole, and more and more preliminary products will be imported.
The alternative scenarios show that an absolute reduc-tion in the consumption of raw materials and energy can only be achieved through a reduction in output. However, such a reduction would mean not only forging ahead with a structural change in the chemical industry but also slowing down overall economic growth.
CHEMICAL INDUSTRY USES MORE RENEWABLE MATERIALS The raw materials mix of the German chemical industry
will shift in favour of renewables. Today, the German chemical industry uses slightly less than 19 million tonnes of fossil raw materials (petroleum products, natural gas and coal), 2.7 million tonnes of renewable raw materials and approxi-mately 20 million tonnes of mineral raw materials. Renewable raw materials are used in the production of plastics, fibres, detergents, cosmetics, paints and coatings, printing inks, adhesives, building materials, hydraulic fluids, lubricants and medicines. In the coming years the corresponding segments of the chemical industry will experience higher rates of growth than those devoted to basic organic chemicals and the standard polymers. By 2030 the chemical industry will use about 50 per cent more renewable raw materials than today. This estimate represents merely the lower limit, because the potential of bioplastics cannot be foretold reliably.
On the other hand, the issue of resource efficiency offers the German chemical industry market opportunities. As many of their products help customers save energy and raw materials, chemical companies are devoting more attention to these products. Among customers, features such as economical use, service life and recyclability play a key role in product life cycles. In product development, more importance will be attached to innovation and the degree to which customers can use the chemical industry‘s products to save energy. The chemical industry will increa-singly operate as a solution provider, and it will double its research investments in the fields of specialty chemicals by 2030.
Efficiency on the rise in the German chemical industry
INCREASING RESOURCE EFFICIENCYOutput and resource consumption of the German chemical industry through 2030, Index 2011=100, change with respect to 2011 in per cent
The German chemical industry will increase its raw material and energy efficiency in the forecast period. But since many processes are already optimised, the potential for efficiency gains is low. Absolute reductions in consumption can therefore only be achieved through less growth.
140
2010 2020 2030
130
120
110
100
90
+40 %
+15 %
+8 %
Output
Raw material consumption
Energy consumption
Efficient production
14
Efficiency on the rise in the German chemical industry
The chemical industry is one of the most innovative sectors of the German economy. Its innovations guarantee the suc-cess of the processing industries. The ideas and the applica-tion know-how of the chemical companies are often the starting points of further innovations in the downstream value chains.
The sector spent a total of 8.8 billion euros on research and development in 2011. In Germany the research intensity, or the ratio of R&D expenditures to the production value, is slightly less than 5.8 per cent. This is primarily due to the research-intensive pharmaceuticals segment. In the other segments of the chemical industry, the research intensity is currently about 3 per cent, which puts Germany in a leading international role.
Germany therefore has a good starting position with respect to the challenges of the future. Nonetheless, the competitive pressure on Germany as a centre of chemical research will increase. In some customer industries, pro-duction and research centres are shifting to Asia. Chemical research is likewise being drawn in this direction. For example, much of the global research for the electronics industry is already taking place in Asia. The same is true of the chemi-cal research for electronic applications. In Europe, on the other hand, the prospects for chemical research are being diminished in some fields by the regulatory environment. Green genetic engineering is one example of this. In the case of nanotechnology, scepticism is already noticeable. On the other hand, the strong collaborative relationship
between production and research in German industry does help matters. Since this collaboration will expand through 2030 in important sectors served by the chemical industry, such as automobile and machine production, chemical companies will need to engage in more research too.
In view of the global challenges, the German chemical industry will continue and expand its strategy of focusing on innovation. Since other industries will likewise devote more effort to innovation, Germany‘s innovative capacity will be strengthened overall in the forecast period. Another 9 billion euros will be added to the research budgets of the German chemical industry by 2030. That represents an annual growth rate of 4 per cent.
Germany accounts for 12.2 per cent of global research expenditure, which makes it one of the leading countries pursuing chemical research. The pressure from emerging markets, especially China, is increasing. In recent years China has expanded its share of global chemical research. In 2000 China accounted for 0.6 per cent of such research. Today its share is already 7 per cent. In 2030 it will be 15 per cent. By the end of the forecast period, China will have ousted Germany (10.4 per cent in 2030) from third place. The global competition in innovation is becoming more intense. It is therefore even more important to put a good framework in place to get Germany in shape as a centre of research for the coming decades. The base for innovations in chemistry is – more than in other sectors – science and research as well as highly trained personnel.
Research budgets to double by 2030
CHEMICAL RESEARCH IS BECOMING MORE GLOBALShare of global chemical research (without pharmaceuticals) in per cent
Chemical research is moving to the regions with high growth. China and the USA will increase their share of global chemical research, while Europe and Japan will account for a smaller portion. Despite devoting more effort and resources to innovation, the German chemical industry will also lose some ground.
2000 2002 2004 2006 2008 2010 2015 2020 2025 2030
40
35
30
25
20
15
10
5
0
China
EU without Germany
Germany
Japan
USA
Other countries
GERMAN CHEMICAL INDUSTRY INCREASES RESEARCH BUDGETSR&D expenditures as a percentage of production value
The German chemical industry will boost its research budgets in the forecast period. Research intensity is increasing. This is the only way to guarantee the longterm success of companies.
20
16
4
6
2
0
5.8 6.
2
17.6 18
.7
3.5 3.
7
2.2 2.3
Total Specialtychemicals
Pharma-ceuticals
Basic chemicals
2011
2030
Research budgets
15
Labour shortage looms
Demographic developments could put the brakes on economic growth in Germany in the coming years. A labour shortage is looming. A large share of the current work force will be retiring in the next ten years. If extensive measures aren’t taken to counteract this development, Germany may find itself facing a long-term labour shortage that would impact the industrial core of the country’s economy in particular.
In the basic scenario such counteractive steps will be taken, but implementing them requires in some cases huge changes in five areas. First of all, the percentage of the total population that is employed, especially women and older people, should be increased; that could increase labour force participation by as much as 3 percentage points. Secondly, more people have to be included in the training and educa-tion system, as this will increase the percentage of college and university graduates among the population and also close existing education gaps through the introduction of targeted education measures. The weekly working hours of part-time employees will also have to be increased slightly, professional advanced training programs must be expanded, and a net migration gain of 200,000 people per year in the workforce must be achieved. However, even if all of this is accomplished, Germany will still face a labour shortage. The workforce will decline by 2.9 million people between now and 2030, and the unemployment rate will fall to 3.7 per cent during the same period. Germany will therefore almost reach full employment, which means the negotiating posi-tion of employees will improve more in Germany than in other European countries.
The labour supply will only be sufficient if the German economy improves its productivity. German companies will need to manufacture more products with fewer em-ployees in the future. Whereas 40.4 million workers gener-ate Germany’s GDP today, that number will decrease to 37.5 million in 2030, when the workforce will generate a GDP that is 30 per cent higher. The chemical industry will also have to achieve higher output with fewer workers, which means it will need to raise its productivity. The industry could reduce its labour requirement by 50,000 workers by 2030 through techno logical advancements and the creation of more efficient structures, as well as by outsourcing certain units. This would correspond to an annual 0.6 per cent reduc tion of its labour requirement, which is much lower than the figure for the last decade. A tight labour market and the increasing demand for skilled workers will cause wages to rise faster than the rate of inflation. However, the substantial productivity gains will result in a slight decrease in unit labour costs between now and 2030, and this will safeguard the competitiveness of the German chemical industry.
The share of university graduates in the German chemical sector is currently 15.7 per cent. This figure will rise to 18 per cent by 2030, largely due to increasing specialisation in the sector and the resulting greater research intensity. The number of new students in the natural sciences today is very promising, which means there won’t be a significant lack of university graduates in the chemical industry in the future. Nonetheless, there will be fewer qualified applicants across all professional groups for available positions in the German chemical industry.
LABOUR SHORTAGE IN GERMANY
The German labour market will undergo a transformation in the coming years. Until now, jobs had to be created in order to reduce the unemployment rate, but in the future the labour pool will become smaller. The goal will therefore be to find suitable applicants for available jobs in an environment marked by higher labour force participation and significantly lower unemployment.
37.6
7.9
40.3
7.2
40.4
7.2
37.5
3.7
1995 20112008 2030
Unemployment rate in per cent
Working population in millions
Workforce
16
The future can be shaped
Decisions that are made today influence the growth op-portunities of tomorrow. As a result, the basic forecast not only predicts future developments on the basis of current trends, it also makes a variety of assumptions concerning the behaviour of companies, citizens and governments. Three alternative scenarios show how robust the predicted developments are.
On the global level, the study identified key levers for
ensuring the German chemical industry’s future success. It makes clear, for example, that government debt levels have to be gradually and carefully, but consistently, reduced in Europe and the USA. China ought to successfully boost private consumption, thus safeguarding its growth model over the long term. The governments of many countries should not give in to the temptation of implementing pro-tectionist measures in order to shield themselves against the global competition. Without these assumptions (the “weak global growth” scenario), the global economy would become a lot less dynamic in the coming decades, leading to a sustained period of economic weakness worldwide. Germany, as it is part of Europe and an export nation, would be particularly affected by protectionism and a global economic slowdown. The German chemical industry would be impacted because its most important growth market, China, would lose significant momentum. Having an intact global environment with open markets and solid growth is another important growth factor for the German chemical industry. The weak growth scenario would therefore have a disproportionate impact on the chemical sector.
Two other scenarios were simulated on the European and national levels to determine how different industrial policies could affect future developments. It was shown that pursuing a selective industrial policy while subjecting energy-intensive industries to excessive costs would damage industrial networks and hamper economic growth in general. Germany has the world’s most progressive energy, climate, and environmental policies because it has achieved a balance between desirable political targets and economically and technologically feasible goals. In the “disrupted value chains” scenario, Germany’s energy transition would lead to a further increase of energy prices and at least temporary disruptions of the energy supply. In addition, the scenario assumed that Germany would discontinue its measures for limiting the financial burden on industry and preserving its international competitiveness. As a result, energy-intensive sectors would feel the full weight of climate-policy related increases in energy prices (ecotax and the allocation of additional costs resulting from Germany’s Renewable Energy Act).
Although certain sectors, such as the photovoltaics industry and manufacturers of wind turbines, would benefit from extensive subsidies in this scenario, the situation would also cause energy-intensive production facilities to leave Germany. Value chains would be disrupted and the backbone of Germany’s industry would be damaged. In this scenario, the economic damage would total 440 billion euros by 2030. The chemical industry would also suffer considerably, because important customer industries would relocate and the sector would be less competitive in the global markets.
By contrast, the study showed that a non-bureaucratic, innovation-friendly environment would generate additional growth momentum. In the “innovation-friendly environ-ment” scenario, increased research funding and improved employee training would enable the German economy to exploit extra innovation potential. In addition, the scenario postulates a higher level of acceptance for new technologies and assumes that research projects would receive funding as a result of a competitive selection process rather than state planning. The scenario also assumes that Germany would attract larger numbers of highly skilled staff from abroad. This innovation-friendly environment could enable German businesses to generate additional growth poten-tial, result ing in substantial benefits for the economy as a whole.
POLITICAL DECISIONS WILL DETERMINE FUTURE DEVELOPMENTSCumulative profits and losses as a share of value added compared to the base scenario (in billions of euros and as a percentage of value added in 2011)
The future can be shaped. Real future developments will vary from the base scenario, depending on which political decisions are made. Weak global growth or a selective industrial policy that disrupts value chains would substantially weaken the chemical industry and the economy as a whole. An innovationfriendly environment, on the other hand, would improve the welfare of both.
500bn €
20bn €
440bn €
13bn €
11.4 %
6bn €
190bn €
7.9 %
Innovation-friendly
environment
Disruptedvaluechains
Weakglobalgrowth
Scenario
-20.7 %
-38.0 %
-18.0 %
-23.6 %
Economy as a wholeChemical industry
Setting the course for the future
17
German economy as a whole according to the basic scenario 2011 2030 Growth 2011–2030 in per cent per year
GDP (in billion €) 2,442 3,117 1.3 %Consumption (in billion €) 1,825 2,147 0.9 %Investment (in billion €) 437 535 1.1 %Exports (in billion €) 1,215 2,464 3.8 %Imports (in billion €) 1,057 2,076 3.6 %Population (in million) 81.6 79.3 - 0.1 %Employed persons (in million) 40.4 37.5 - 0.4 %Unemployment rate (in per cent) 7.2 3.7 -
German industrial production accor-ding to the basic scenario in billion € 2011 2030 Growth 2011–2030 in per cent per year
Manufacturing 1,498 1,947 1.4 %Automotive industry 354 494 1.8 %Glass, paper, metal, coke production 301 334 0.5 %Electrical engineering 214 306 1.9 %Mechanical engineering 184 257 1.8 %Chemical industry 154 216 1.8 %Food industry 125 136 0.5 %Rubber and plastic goods 71 99 1.8 %Textile/clothing/leather industry 24 18 - 1.3 %
German chemical industry according to the basic scenario 2011 2030 Growth 2011–2030 in per cent per year
Production (in billion €) 153.7 215.8 1.8 %Exports (in billion €) 80.1 130.1 2.6 %Imports (in billion €) 56.8 91.0 2.5 %Employment 445,784 394,569 - 0.6 %
German chemical industry according to the basic scenario Growth 2011–2030 in per cent per year
Production Exports Imports Domestic supply
Basic chemistry 1.3 % 1.6 % 2.0 % 1.5 %Inorganic basic materials 1.5 % 2.1 % 2.0 % 1.4 %Fertilizers 1.3 % 1.8 % 0.7 % 0.7 %Petrochemicals 0.4 % 0.0 % 4.0 % 1.4 %Organic intermediates 2.0 % 2.2 % 1.8 % 1.8 %Polymers, standard polymers - 0.1 % - 0.1 % 1.6 % 1.0 %
Specialty chemicals 2.2 % 2.6 % 1.7 % 1.6 %Polymers, engineering polymers 2.5 % 2.7 % 2.3 % 2.3 %Paints and coatings 1.9 % 2.4 % 1.1 % 1.1 %Pesticides and other plant protectants 1.7 % 2.3 % 0.7 % 0.7 %Consumer products 1.4 % 1.7 % 0.8 % 0.8 %Other specialities 2.7 % 3.3 % 1.7 % 1.7 %
Pharmaceuticals 1.8 % 3.8 % 6.1 % 1.8 %Chemistry as a whole 1.8 % 2.6 % 2.5 % 1.6 %
Growth 2011–2030 in per cent per year Basic scenarioScenario
„Weak global growth“
Scenario „Disrupted value
chains“
Scenario „Innovation-friendly
environment“
GDPGermany 1.3 % 0.8 % 0.9 % 1.5 %European Union 1.7 % 1.1 % 1.6 % 1.8 %World 3.0 % 2.0 % 3.0 % 3.1 %
ManufacturingGermany 1.4 % 0.8 % 1.1 % 1.7 %European Union 1.5 % 0.7 % 1.5 % 1.7 %World 4.0 % 2.7 % 4.0 % 4.2 %
ChemistryGermany 1.8 % 1.0 % 1.3 % 2.0 %European Union 1.9 % 0.9 % 1.8 % 2.1 %World 4.5 % 3.1 % 4.4 % 4.6 %
Selected data
Selected data
18
SOURCE GRAPHICS: Prognos AG and Verband der Chemischen Industrie e. V. (VCI), unless otherwise credited
19
Verband der Chemischen Industrie e. V. (VCI)German Chemical Industry Association
Mainzer Landstraße 5560329 Frankfurt, GermanyTel.: +49 69 2556-0Fax: +49 69 2556-1612
e-mail: [email protected]
Website: www.vci.de
Responsible Care The VCI supports the global Responsible Care Initiative.
STATUS: December 2012
