Global industry forum charts challenges, woes Circumstances have changed a lot for the chemical industry in the past few years. As Francis BazUe, president of the Société de Chimie Industrielle and president of Elf Atochem, put it when he opened SCI's 3rd Forum of the World Chemical Industry in Paris recently, "Four years ago, at the time of the 2nd Forum of the World Chemical Industry, there were very different circumstances." Since then, a worldwide recession has brought much of the chemical industry into poor profitability and overcapacity. The collapse of the communist bloc has devastated producers and markets in Eastern Europe; and the hold of the industry in the U.S., Western Europe, and Japan has been weakened by the growing power of industry in other regions, including Southeast Asia and the Middle East. The result is an industry becoming ever more global. And that globalization has led to increases in the number of joint ventures, alliances, and swaps of assets and businesses as well as acquisitions, as companies reorganize to focus on core businesses and core competencies. For Jacques Puechal, chairman of Elf Atochem and current president of the European Chemical Industry Council (CEFIC), the changes have been dramatic. "Four years ago, in 1989, all our faces were very happy. But now, Europe faces a period of low economic growth, high unemployment, and rising nationalism." One of the most important ways to "restructure," he added, is for each company to concentrate on its main businesses. A case in point involves producers of polymethyl methacrylate, as Rohm & Haas and Elf Aquitaine establish a joint venture, and ICI swaps assets with Du Pont and BASF. "We will see more of this in the next year throughout the world chemical industry." Underpinning that refocusing, according to Yoshikazu Ito, chairman of Toray Industries, will be strong basic research. "The chemical industry of the future must have global thinking, fusing Western and Eastern cultures," he said. "And the driving force behind change is basic research," as the industry moves from a mass-productive, mass-consumptive, and mass-wasteful structure to one more human- and Earth-friendly. For example, problems of the environment are worldwide. "We must adopt a collective
approach on solving those problems," he added. Even the Saudis are eager to become more global. According to Ibrahim A. Ibn Salamah, vice chairman and managing director of Saudi Basic Industries Corp. (SABIC), the company was created to spearhead industrialization in Saudi Arabia, and to further develop, on a profitable commercial basis, the country's human and natural resources. That is what SABIC has done in its decade of existence, Salamah said, and will continue to do. But there are also some diversification targets the company has set—"product areas where we can be important global ' leaders, and products with increased added value, obtained through substantial R&D investment. We will be reaping income from brain power, not just from hydrocarbons." Although Salamah noted that now is not a propitious time to expand into other geographic regions, "in the future, our intention is to be a global producer." Global was one of the more frequently heard words at the forum. For example, Paul Schindler, chairman of ICI Asia-Pacific, pointed out that the AsiaPacific region now accounts for more than a quarter of the world's chemical sales, up from 18% in 1974. The percentage is expected to reach 30% by the end of this decade. Moreover, he said, "One cannot stress too much the future importance of China to the West. Over the next 10 years, Hong Kong and Taiwan will have a crucial role to play in China's emergence as a world superpower." But, he noted, "one must not venture there unless one is master of one's own market—and nerves." There is no unique answer on how to proceed in China. "You need some support—probably from the provincial authorities. But for major investments, you would need the muscle of Beijing." Meanwhile, Mexico's chemical industry expects to experience a boom from the North American Free Trade Agreement. But it is doing well already, reported José de Jesus Valdez Simancas, president of the petrochemicals division of Alfa Corp. in Mexico and president of the Mexican Association of the Chemical Industry. On the other hand, the industry in
South America still faces some major problems, said Eduardo E. Gouvêa Vieira, president of Brazil's Ipiranga Quimica. He predicted that the performance of the petrochemical industry would continue to suffer because slow, if any, growth in gross domestic product characterizes the economies of Brazil, Argentina, Chile, Colombia, and Venezuela. In all those countries except Venezuela, he said, deindustrialization is occurring at a serious rate. "This is particularly worrisome with respect to the per capita income levels of Latin America, where manufacturing should be the driver and not the anchor of growth." One means of coping with the changing capacity and supply picture is through "adapting companies' management and structure to changing needs of customers, through alliances and joint ventures," said Giorgio Porta, chairman of Italy's EniChem. "But in addition to traditional alliances, we will have new ones—for example, with universities, local governments, user companies, and private associations." As he sees it, "new and expanding partnerships will be required where the combined working groups will form true subcompanies within the main company." Management will need new skills: an ability to identify the most suitable partners, a considerable opening toward external contacts, and rapid decision-making on the opening and closing of a relationship. According to Dow Chemical chairman Frank P. Popoff, who chaired the forum, two main conclusions could be drawn from the two-day conference, which emphasized that the need to manage is totally consistent around the world, although the variables to manage may be very different. His first conclusion: "We are all well advised to build consistent with demand, even just slightly behind it." And the second: "Proactivity is the only way to go. We must be proactive on our own behalf, in terms of capacities, alliances, and so on, asking managers to deal with such basics as volumes, prices, costs, and expenses; and on the behalf of external issues, regarding competition, [to deal with] trade, environment, education, corporate credibility. "It's not arrogant to say the world needs us, but the world's appreciation of that fact is less than total." Patricia Layman MAY 10,1993 C&EN 13
