The chemistry sector is a cutting-edge field which happens to be really fruitful for the European Union. Indeed, the chemistry sector, in addition to the pharmaceutical and cosmetics sectors export 40% of their production to member countries of EU. However, the trend could be reversed as a result of new free-trade agreements with the United States.
New trading agreements
Beginning of 2014, the European commission launched negotiations aiming for the introduction of free-trade agreements applying exclusively to the chemistry sector, for instance to the trade of targeted materials such as polyethylene, polystyrene or urea. Such materials are made out of gas, which happen to be three to four times cheaper on the American continent. According to a sectoral GATT agreement undersigned in 1995, duties concerning the exchange of chemistry products with the US where taxed by 3 to 3.5%. A cancellation of those taxes could result in the relocation of European production sites to the US. Indeed, the American chemical industry was for some years struggling, but today the sector is back on the rails and invests a lot in new infrastructures. Therefore, economists expect the production’s volume to reach ten billion tons in the next coming years.
Shale gas: a precious competitive asset
The American chemical sector recovering is mainly due to the gas prices: the American continent possesses many gas operating sites which allowed the country to multiply its petrochemical production, and this at lower costs. Indeed, between 2008 and 2012, the gas prices fell by 55% because of the boom of shale gas, which is far cheaper than naphtha, a gas usually used in the European chemistry industry. Shale gas is not only used as a raw material but also as the main energy source to power up the manufactures, and therefore allowed American manufacturers to lower the production costs. Thus, an increase of 25% of the chemical industry is expected for the five coming years and should make of the US an attractive country for foreign and especially European investors.
However, no need to panic: half of the projects on the other side of the Atlantic are implemented by European companies such as BASF. Come manufacturers even think that the exchanges and the production is likely to be boosted thanks to these new agreements. In 2012, France already exported a production worth 3 billion Euros to the US; let’s hope that the exchanges won’t suffer from these new measures.