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The head of Swiss chemicals producer Clariant said the company would expand capacity in China and warned of “more production shifting away from Europe” because of the continent’s higher energy and labour costs.
Chief executive Conrad Keijzer said Clariant was targeting 14 per cent of its sales coming from China by 2027, up from 10 per cent at present, and that the country would account for more than half of global growth for chemicals over the next five years.
The company has expanded two Chinese plants, which Keijzer said would allow Clariant to produce 70 per cent of the chemicals it sells in the country locally, up from about half.
“Most of the growth by and large is coming from China,” Keijzer told the Financial Times this month after opening a SFr180mn ($226mn) expansion to two factories in Huizhou, southern China.
“If we are static on it, then we’re long-term losing out,” he said. “It automatically means more production shifting away from Europe.”
European companies have struggled to compete against Chinese rivals in a range of commodity chemicals, leading to plant closures across the continent. The industry has also been rattled by surging gas prices after Russia’s full-scale invasion of Ukraine and a slowdown in European manufacturing.
Keijzer said Clariant’s China expansion was prompted by higher energy prices in Europe and rapid growth in Chinese demand for chemicals. While barriers to entry such as intellectual property rights have insulated the company’s speciality chemicals business, the move was also driven by rising competition from Chinese producers, he said.
Labour costs were another factor, Keijzer said, citing an annual outlay of €100,000, including tax and other expenses, for an operator at a German plant versus €10,000 in some parts of China.
The Muttenz-based company, which was spun off from Sandoz in the 1990s, produces speciality chemicals for industries ranging from cosmetics to agriculture in 68 plants around the world, nine of them in China. The company previously said it planned to cease production at its final Swiss site in Muttenz next year.
The price of natural gas, the primary fuel source for boilers and crackers used in plants, remains elevated compared with levels before Russia’s full-scale invasion of Ukraine in 2022, Keijzer said.
But he also blamed the EU’s carbon tax, “which was a great idea 10, 15 years ago when we thought the rest of the world would follow” but now made it difficult for producers to compete with global peers.
“The reality of it is that Europe has lost a part of its chemical industry because of the structurally higher gas prices,” Keijzer said.
Europe also exports a significantly larger portion of its chemicals than the US or China, but competing against Chinese companies, which have increased their own production, has become “much more difficult”, he said.
The consultancy Roland Berger in September said China’s “unimaginable” chemicals output could fully meet western demand in certain sectors with surplus.
UK chemicals producer Ineos this week said it was filing 10 anti-dumping cases against cheap imports into the EU, warning that “time is running out” to rescue the European sector.
Ivy Sun, who leads China chemicals research at Roland Berger, said European companies could only compete by localising production or innovating on specialist products, but many had been slow to do so.
“It’s a historical trend that is difficult to [turn back],” she said of the market shifting to China. “I can’t even name one European or US chemicals player who is performing very well on the market.”
Keijzer said any further retreat of chemicals production would have a knock-on effect in other sectors.
“If you have to import all your steel, if you have to import all your plastics, it will be very difficult to make a competitive electric vehicle in Europe,” he said. “This is not always understood by the European Commission.”