Fine Chemicals Gain Clout in Europe

It has taken time, persuasion, and a lot of work by companies in the business, but specialty chemicals--and fine chemicals in particular--are now officially a part of the power base at the European Chemical Industry Council (CEFIC).

Although these two actions may seem trivial, they represent a considerable shift in thinking in an association long dominated by commodity chemicals.

At least that's the way many companies within the fine chemicals and specialized organics fields see the move. Fine chemicals and specialty organics play an increasingly important role in the chemical industries of the various countries in Europe. The lion's share of the Irish chemical industry, for example, is fine chemicals, and these sectors account for a large portion of the industries in Italy and the U.K.

Hence the need to pull together a group representing this sector of the industry. Chaired by Peter Nagler, president of Degussa's exclusive synthesis and catalysts unit, the steering committee of the newly formed EFCG met in November to set out a direction for the group. The others on the seven-person steering committee are senior executives drawn from small, medium, and large companies throughout Europe. Their motivation is simple: to improve the identity and international competitiveness of the European fine chemicals industry.

The steering group met a second time last month in London, and an official launch of EFCG is planned for the middle of this year, with an initial target of a minimum of 100 members.

Ironically, it took the looming presence of REACH--the regulatory program developed by the European Commission to register, evaluate, and authorize chemicals--to make the chemical industry realize just how important specialty and fine chemicals are, says Tony Scott, manager of EFCG. As the implications of the proposed REACH legislation sank in, it became clear that the heaviest regulatory and cost burden would fall upon producers in these sectors.

"There was a realization, along with the development of REACH, that there is something called fine chemicals and specialties," Scott observes--a considerable acknowledgment given the historic concentration of CEFIC on what he calls "the big boy stuff" of petrochemicals, plastics, and chlorine. Now, he adds, "CEFIC has recognized the significance of the fine chemicals sector and is putting resources to it."

Until recently, Scott was the manager of the Specialized Organic Chemicals Sector Association (SOCSA) in the U.K., part of the U.K.'s Chemical Industries Association, a post he held since shortly after it was established in 1993. SOCSA--roughly equivalent to the U.S.'s Synthetic Organic Chemical Manufacturers Association--aims to help improve the competitiveness of the U.K. specialty organics industry.

"It was easy to innovate within a company like ICI," Scott says, recalling his earlier job at the British chemicals giant. "For small companies, it is much more difficult. There are no corporate strategic planning departments. Companies are fighting fires just to fill the order books."

With his experience in the sector in the U.K., he was asked to take on formation of a pan-European counterpart at CEFIC. "The political timing wasn't right to form a group like this five years ago," Scott says, "but now there is a mandate to do something."

Scott points out that fine chemicals have traditionally been just one part of much wider national chemical industry associations. But now, he adds, the group's founding members "think it is time the European fine chemicals industry stood up for itself." For example, EFCG intends to give higher visibility to the importance of the fine chemicals industry to the economy of Europe, as well as the importance of innovation to future prosperity and the importance of securing a level playing field for the regulation and sale of fine chemicals products.

One of the underlying challenges, he says, is to ensure that the strategic importance of fine chemicals in the supply chain is better understood and recognized by European regulators. "This view has been reinforced by our input to the discussions of REACH," Scott points out. "What we tried to do was minimize the impact on intermediates. Intermediates are not exposed to the general public, so why should they be at the top of the list?" That argument carried enough persuasive force that the category of intermediates was broadly exempted from the published REACH proposal.

Public understanding is crucial for the industry, Scott argues. "Our vision is to make sure society understands what we're all about. To find new ways to grow in Europe, we must get the regulatory environment right. Now, it's definitely against us. We're not the smokestack stuff: Our footprint is smaller," he says. "But we can create jobs and wealth." The new group is targeting at least 400 fine chemicals producers as potential members over the next five to 10 years.

Part of the work of the new group, he notes, will be in encouraging an evolution of the sector's current business model. The fine chemicals industry "can't just be contract manufacturing companies waiting for customers to ring doorbells. It must find niche technologies and new markets, and must be more flexible," he says. "Only in this way will we be able to stay ahead of the Chinese and Indian industries."

There is also the question of money and funding. As Scott points out, "One of the negatives from REACH is that there will be an extra cost, which will detract from innovation. So we want to persuade the European Commission to earmark some research and innovation money for fine chemicals and specialty chemicals companies. The commission wants us to innovate to produce new and safer molecules," he says.

"Our suggestion to them is help us or give us some financial credit, to innovate faster. I don't know if we can do it, but we have to find some way to help companies innovate faster, better. If we cannot, companies die and the jobs go. But if we can," he adds, "then we can sustain the fine chemicals industry in Europe. Otherwise, it will move offshore."

At EFCG's second steering group meeting in early February, the agenda concentrated on facilitating innovation, obtaining access to funds, collaborative programs, and intellectual property rights, Scott reports.

What the group is working to do is "put flesh on the bones," as Scott describes it, making decisions on what areas to work on, and on where and how to pull together data and dialogue for employees; the financial sector, including venture capitalists; and the public. "We still have to create a budget and get the money in," he says. "It is early days yet" in the life of EFCG.