The French chemical industry association Union des Industries Chimique (UIC) has called on the government to protect the country’s chemical industry from the threat of U.S. competition.
The US chemicals industry is at least twice as competitive than its French counterparts when it comes to gas-price differential, electricity and raw materials – the UIC-sponsored research, carried out by the company Carbone 4, has found.
This is why the UIC is calling on the French government to launch a gas strategy to protect domestic chemical producers from the impact of cheaper U.S. shale gas. The UIC estimates that the decline in French competitiveness and availability of cheaper US products could lead to the closure of 32 industrial sites with 10,000 job losses.
Low-priced feedstocks resulting from the abundance of cheap shale gas resulted in a renaissance of the chemical industry in the U.S. The Carbone 4 research has found that the shale gas boom is attracting investments worth $117 million into the U.S., with the new capacity threatening many facilities elsewhere in Europe. This investment drive is also partially fuelled by European chemical companies investing in the U.S. to capitalise on low natural gas prices.
Last month, Belgian chemical company Solvay opened its laboratory and production facility in North Dakota to serve oil and gas customers in the Bakken Shale Formation. In May, the German chemical company BASF announced that it is considering building a methane-to-propylene plant in the U.S. to capitalise on cheap American gas.
In a separate development, BASF also agreed to become a shareholder in a gas field in western Siberia in return for giving Russia’s Gazprom Argentinian gas assets held by its subsidary Wintershall.
Carbone 4 was appointed to study the impact of the gas-price difference on chemical producers in France and the US. The study assessed four value chains, namely ammonia, ethylene/polyethylene, chlor-alkali and polyamide 6.6.
The ethylene chain was identified as a major segment that is under threat from increasing US production. Ethylene is the main source for production of plastics and fibre market. In the past ethylene was usually produced from naphtha, but with cheap and plentiful natural gas, ethylene is now obtained cheaply from the cracking (dehydrogenetion) of ethane.
Because of the abundant and cheap supply of ethane, in the U.S., the unit cost of production of plastics resins is on par with Canada and only slightly over the Middle East. It is well below all the other consuming nations, including China, Western Europe, and Japan.
By 2017-18, the U.S. is expected to increase its ethylene volumes with an extra 11 million tons of ethylene, a third of current capacity.
In order to aid the ailing French chemical industry, the UIC has called for unification of the domestic gas market, lower transport costs and tax breaks for gas users, as well as greater access to LNG and development of renewable energy sources.
It has also urged the government to exploit the country’s shale gas resources. At present, France has a moratorium on fracking, forbidding the use of the controversial extraction method.
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