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European Chemical Industry Undergoing Major Transformation Due to Regulatory Changes and Market Consolidation

European Chemical Industry Undergoing Major Transformation Due to Regulatory Changes and Market Consolidation

Market Reports Press Release September 2014

European Chemical Industry Undergoing Major Transformation Due to Regulatory Changes and Market Consolidation

Regulatory changes set by the EU require reduction of mercury cell technology by December 2017, significantly impacting Europe’s chlor-alkali vinyls market

Sometimes, when it comes to technological or industrial innovation, change is needed but difficult, nonetheless. Such is the case for the European chlor-alkali/vinyls industry (CAV), which faces rapid consolidation as well as regulatory changes introduced by the European Union. These regulatory changes require chemical producers to either convert mercury cell-based chlorine plants to a more environmentally friendly membrane technology or shut down the technically obsolete plants altogether by December 2017.


The regulatory mandates, in addition to increased mergers and acquisitions in the European CAV marketplace, will likely lead to some closures of older plants and continued consolidation. However, the facilities that survive the transition stand to enjoy higher operating rates, increased market share and greater profitability, according to analysis from IHS Inc.


"The European chemical market is undergoing a major transformation due to a number of different factors, but the market continues to grow — that’s the good news," said Michael Smith, vice president at IHS Chemical. "With the recent regulatory changes and an accelerated consolidation, we expect that these market shifts will have a positive impact on the market in the long-term, but in the short-term, some chlor-alkali and vinyls producers will experience difficulty. The European industry is at a tipping point and we anticipate even more changes, but in general, the future looks brighter."


Henry Warren, senior principal analyst at IHS Chemical, will address the implications of these regulatory and other changes on the global, European and the Turkish chlor-alkali and polyvinyl chloride (PVC) markets at the ChemOrbis Turkey 3rd Annual Meeting in Istanbul on Tuesday, 9 September 2014. Remko Koster, director at IHS Chemical, will also present at the conference providing an outlook on the Middle East petrochemical industry and the market.


According to the Chlor-Alkali BREF document issued by the European Union, before 11 December 2017, the use of mercury cell technology in chlorine production must be shut down, which will affect roughly 20 percent of the total European capacity. This change will require several industry producers to undergo a major process conversion from mercury cell technology to membrane technology, which has fewer environmental risks than mercury, or close their obsolete facilities.


Western Europe will be the most impacted region due to this technological transformation, according to IHS, experiencing a reduction of an estimated 1.8 million metric tons (MMT) in chlorine capacity by 2018. Producers in Central Europe also will be impacted — experiencing an estimated 0.6 MMT in production capacity declines. As a result, these changes also will force the region’s producers to adapt rapidly or exit in the mid-term.


Besides the regulatory and technological changes being experienced by the industry, chlorine, caustic soda and PVC markets also will see slower new capacity growth going forward, according to IHS Chemical forecasts. However, at the same time, global construction is reviving and Europe is slowly turning the corner. Western Europe, Smith said, is expected to remain a net-exporter of PVC for the foreseeable future, while the Turkish PVC market will continue to experience robust domestic demand growth for the next five years.


"In spite of the many challenges facing the CAV industry, positive change is also coming Europe’s way," Smith said. "The European chlor-alkali/vinyls industry faces a flurry of merger and acquisition activity, bringing more international investment into the European market. As a result, IHS expects that Europe’s PVC business will continue to consolidate even further. Now could be the perfect time to acquire assets in Europe."


Europe’s two largest integrated CAV producers – INEOS and SolVin – recently joined forces to create an even more dominant market leader called Inovyn, which will be roughly two-and-one-half times larger than the next largest competitor in the region. Also, during the summer, Westlake Chemical, a U.S. producer, bought German-based Vinnolit, a well-established technology leader with substantial, exportable in-house expertise especially for paste PVC.


"A U.S.-based buyer like Westlake, which has a favorable cost structure and a desire to expand, could easily benefit from Vinnolit’s technology, experience and position in growing export markets," Smith said. "With that in mind, this type of investment or consolidation could serve as a model for improving Europe’s competitiveness in the export market going forward."


In a similar recent move, Mexican producer Mexichem bought the other German producer, Vestolit. Mexichem also owns the former PolyOne Specialty PVC assets in the U.S. With the Vestolit purchase, the company expands its presence in the specialty PVC market, in particular, and makes it a leader in specialty PVC resins, including paste PVC.


To help industry leaders stay current on developments and market changes in the CAV market, IHS offers chlor-alkali and PVC weekly news and pricing services that provide overviews of global and regional markets, including pricing and other industry relevant news.


The ChemOrbis Turkey 3rd Annual Meeting in Istanbul will be held at the Four Seasons Boshorpus Hotel, 9 September. A full agenda and additional information can be found here:

About IHS (

IHS (NYSE: IHS) is the leading source of information, insight and analytics in critical areas that shape today’s business landscape. Businesses and governments in more than 165 countries around the globe rely on the comprehensive content, expert independent analysis and flexible delivery methods of IHS to make high-impact decisions and develop strategies with speed and confidence. IHS has been in business since 1959 and became a publicly traded company on the New York Stock Exchange in 2005. Headquartered in Englewood, Colorado, USA, IHS is committed to sustainable, profitable growth and employs more than 8,000 people in 31 countries around the world.