Future Perspectives of Chemical Logistics in Europe by realtuff29

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									Future Perspectives of
Chemical Logistics
in Europe

Dr. Werner Prätorius
President Petrochemicals


CEFIC Workshop “Best Practices in Logistics”
Brussels, November 23, 2004
 Outline




                           I.           Contributions of the Chemical Industry

                           II. Changing Industry Dynamics

                           III. Consequences for Europe



CEFIC-Workshop Best Practices in Logistics, Brussels 11/23/04                    2
                                                                Chemistry
                                                                 makes it
                                                                possible !




CEFIC-Workshop Best Practices in Logistics, Brussels 11/23/04                3
 How long will Europe continue to lead ?


                       World Sales in Chemicals                                            Evolution of the Shares
                         2002=1.841 billion €                                            on World Sales in Chemicals
                        Others                                               35%
           Latin America 5%
                    5%                                          EU-15                                                  EU-15
                                                                             30%
         Japan                                                   29%
          10%
                                                                             25%
                                                                                                                            US
                                                                             20%
                                                                                                           Asia excl. Japan

 Asia excl.                                                      Rest of     15%
  Japan                                                          Europe 6%                                              Japan
    19%
                                                                             10%
                                                US 26%                             '90 '91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01

 (*) rest of Europe= Switzerland, Norway, Central & Eastern Europe, Turkey
Source: Cefic 2004                                                                            Middle East < 2%
CEFIC-Workshop Best Practices in Logistics, Brussels 11/23/04                                                                        4
 The Chemical Industry and
 the European Economy


             A globally competitive chemical industry is the key for
             competitive local downstream industries.

            A prosperous local manufacturing industry is the basis for…
             Sufficient employment
             Adequate high-quality products for the mature European market
             Sustainable growth for the entire European economy


     Challenge for the European Industry
          To maintain its competitiveness in a changing environment

CEFIC-Workshop Best Practices in Logistics, Brussels 11/23/04                 5
 Outline




                           I.           Contributions of the Chemical Industry

                           II. Changing Industry Dynamics

                           III. Consequences for Europe



CEFIC-Workshop Best Practices in Logistics, Brussels 11/23/04                    6
 The Ethylene Value Chain
 An Example for Changing Industry Dynamics

           NAPHTHA
            Ethane
             LPG                                                                        Polyethylene




                                                                                                          Asia: Emerging Demand Center
                                                                  Ethylene Dichloride   PVC

                                                       Ethylene   Ethylene Oxide        Ethylene Glycol
                                                                                        EO-Amine


                                                                  Ethylbenzene          (Poly-)Styrene

                                                      Propylene

                                                      Butenes

  Middle East: FromBenzene/
                    raw material to base chemicals supplier
                   Aromatics
CEFIC-Workshop Best Practices in Logistics, Brussels 11/23/04                                                                            7
  Trends in Global Trade:
  European Industry under Two-Sided Pressure


                                                         ?
                                                                Europe

                      Nafta
                                                                         Middle
                                                                         East
                                                                                     Asia


                                                                ?



                                                   Feedstock and Petrochemicals
                                                   Labor Intensive Products and Finished Goods
CEFIC-Workshop Best Practices in Logistics, Brussels 11/23/04                                    8
 Outline




                           I.           Contributions of the Chemical Industry

                           II. Changing Industry Dynamics

                           III. Consequences for Europe



CEFIC-Workshop Best Practices in Logistics, Brussels 11/23/04                    9
 Europe in the “Cost Squeeze”



                                        Emerging regions, particularly Asia,
                                         capitalize on cheap labor

                                                                ... and Europe ?

                                                          Raw material regions, particularly Middle East,
                                                            capitalize on cheap feedstock
                                                                                           Business
  Urgent Need for
  Value & Efficiency Enhancements !                                                            Profit

CEFIC-Workshop Best Practices in Logistics, Brussels 11/23/04
                                                                                   Logistics            Production
                                                                                                                 10
 Value & Efficiency Enhancement in
 Chemicals Business

              Horizontal Cooperation:
              • Shared investments, e.g. to use “Economy of Scale”, infrastructure
              • Swap arrangements, e.g. to reduce cost & increase reliability of supply
              • ….
               Vertical Cooperation:
               Focus on high value products
               • Integrated production by use of existing industry network
               • End-user driven innovation, e.g. in materials
               • Vendor managed inventory
               • ….                                              Lots of opportunities !
CEFIC-Workshop Best Practices in Logistics, Brussels 11/23/04                             11
 Value & Efficiency Enhancement in
 Chemical Production

              Status quo
              • Mostly depreciated but “non-world scale” assets
              • Continuous strive for cost reduction during past 20 years

               Options
               • “Scrab & Build” to gain “world-scale” economics:
                         - frequently economically infeasible
                         - logistical and technical constraints
                         - business risk
               • Innovative technology to reduce cost and improve quality

                                                                 Limited leverage in production !
CEFIC-Workshop Best Practices in Logistics, Brussels 11/23/04                                    12
 Value & Efficiency Enhancement in
 Logistics for Chemicals: Status Quo
                                                                                           60                                   Source: Cefic
         Increasing Intra-EU trade




                                                                              % of Trade
                                                                                           40

                                                                                           20

         Comparably large haul lengths                                                     0
                                                                                                National          Intra-EU      Rest of world
         Avg. length in EU (km)                                 Road   Rail                                1993               2003
                Chemicals                                        114   386
                All freight                                      77    214
                                                                                                                                 U.S.: 19 % !
          Source: Prof. McKinnon, EPCA/Cefic Think Tank
                                                                                                                                   Rail
                                                                                                                                    7%
         Large share of road transportation:
                                                                                                Road                                  Inland
                - large impact of increasing congestion                                         88%                                  waterway
                - increasing cost due to:                                                                                               5%
                  environmental regulation, fuel and labor cost
                                                                                                                             Source: Eurostat


                                                     Significant leverage for improvement !
CEFIC-Workshop Best Practices in Logistics, Brussels 11/23/04                                                                                   13
 Value & Efficiency Enhancement in
 Logistics for Chemicals: Needs

                                                                                Preferred Mode of Transportation
        Adaptation
                                                                                         Road (“Drums”)

                                                        Number of Grades
                                      Price per Tonne


                                                                           Specialties       Road, Rail (“Containers”)
                                                                                                     Rail, Barge (“Bulk”)
                                                                                  Commodities
                                                                                                            Pipeline (“Just there”)
                                                                                              Utilities

         Integration                                                                             Typical Volume
         Close cooperation between “producer” and “logistics provider” to
           - Ensure reliable and flexible supply
           - Counterbalance short term demand fluctuations
           - Take advantage of feedstock price fluctuations
           -…
CEFIC-Workshop Best Practices in Logistics, Brussels 11/23/04                                                                    14
 Example:
 The Petrochemical Landscape in Europe
 Today: Disconnected Islands
                                                                • Small capacities
                                                                • Aged technology
                                                                • Low connectivity
                                                                • No buffering capabilities
                                                                  for short-term fluctuations




                                                                  Petrochemical Sites
                                                                  Existing Pipelines
CEFIC-Workshop Best Practices in Logistics, Brussels 11/23/04                                   15
Example:
Restructuring of the Petrochemical Landscape:
Integrated Production Network in Europe

                                                                • World-scale capacities
                                                                • Integrated production and
                                                                  logistics
                                                                  High connectivity
                                                                  Buffering systems
                                                                  Shared investments
                                                                   and operations
                                                                • Higher integration with
                                                                  refineries
              World-Scale Petrochemical Sites
              Pipelines
CEFIC-Workshop Best Practices in Logistics, Brussels 11/23/04                                 16
 Chemical Logistics in Europe
 Conclusions

         Logistics must be more than“physical movement”
         • Adapted to specific needs, e.g. appropriate mode, buffering, timing
         • Integrated into entire supply chain, e.g. VMI, trading
                                    Business


                                                                  Profit

                                                      Logistics            Production

       EPCA/Cefic Think Tank Initiative*:
       Supply Chain Excellence in the European Chemical Industry !
                                                                                        * funded by EPCA
CEFIC-Workshop Best Practices in Logistics, Brussels 11/23/04                                         17
 EPCA/Cefic Think Tank
 Proposed Next Steps

     A Road-Map for Action in the Chemicals Sector

                                          Appointment / election / selection of
                                                                                  Track 1 – Company Collaboration
                                            track „Champions‟ and teams




                                                                                   Track 2 – LSP Capabilities
              Review of
              think-tank
              proposals                                                           Track 3 – Network design &
              and broad
               adoption
                                                                                   Information Management,
                of the 5
                tracks
                                                                                   Track 4 – Skills, talent and training


                                                                                  Track 5 – Legislation, Compliance,
                                                                                           Safety, Security

CEFIC-Workshop Best Practices in Logistics, Brussels 11/23/04                                  Source: Prof. McKinnon, Logistics Research Center, Heriott-Watt University, Edinburgh   18

								
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