BUSINESS
UNCERTAIN FUTURE National Petrochemical & Refiners Association meeting deals with critical issues in 2002
U.S. industry when he followed Al-Sayyari on the podium. "We are losing competitive advantage in the U.S. and are doing it fairly quickly," he said. Copley explained that chemical prices in Asia are falling with respect to those in the U.S. As a result, exports from the U.S. are decreasing while imports are increasing. "We lost competitive leadership because we are still operating old, smaller units," he said. "These plants are structurally uncompetitive in the world market, and they need to be shut down." He predicted more closures and bankruptcies in the chemical industry Copley scolded the chemical industry for directing too much of its R&D resources toward process improvement rather than product innovation. He said such spending addresses unit cost but increases oversupply, thereby keeping prices—and profits—down. "Innovation is the only sensible place to put free cash," he said, proposing that the industry focus on addressingunmet needs in the marketplace.
ALEXANDER H. TULL0, C&EN NORTHEAST NEWS BUREAU
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This situation, Al-Sayyari noted, will take it, the National Petrochemical & time to improve. 'As the global economy Refiners Association's Interna- begins to recover, petrochemical capacity tional Petrochemical Conference, will need to be worked off, and that process held every spring in San Antonio, might take several years," he said. probably conjures up boozy memories of a It was against this backdrop that Al-SayTexas-sized cocktail reception, given for yari laid out Sabic's two-pronged strategy thousands on opening night, and agalaxy of which will build on Saudi Arabia's feedstock parties and hospitality suites for showing and central location for export as the comas many delegates as possible a good time. pany expands internationally and is potenBut this year's conference, held late last tially privatized upon Saudi Arabia's entry month, had a decidedly more sober am- into the World Trade Organization. "We biance as the industry confronted its fu- aim not just to ship our products to every ture. Delegates gave talks on issues such region in the world, but to manufacture our as the possible decline of the petrochem- products in many of those same regions," ical industry in North America, the po- he added. ''With a series of acquisitions and tential use of chemical plants as weapons some new plants, we will also aim to locate of mass destruction, and the dismal pub- new manufacturing facilities closer to our lic perception of the chemical industry customers." Last week, after NPRA, Sabic Nasser Al-Sayyari, president of the ba- agreed to buy DSM's petrochemical busisic chemicals group at Saudi Basic Indus- ness for more than $1.8 billion (see story tries Corp. (Sabic), opened the conference page 8). with his grim diagnosis of the industry's Al-Sayyari said another part of Sabic's present condition (C&EN, March 18, page strategy is to develop its own technology 21). 'As we all know, 2001 was perhaps the instead of licensing it. "Now that our inmost difficult year our industry has ever ternal research resources are maturing, we faced," he said. "Overcapacity in many re- also have the capacity to develop our own gions, combined with a global economic new technologies when we need to." downturn and weak demand, has reduced Graham L. Copley, senior research anprices and profitability to their lowest lev- alyst at the investment firm Sanford C. els in recent memory" Bernstein & Co., pulled no punches at the OR THOSE WHO HAVE ATTENDED
WHEN ASKED LATER about the harsh tone ofhis talk, he remarked, 'Anythingyou can do to discourage these guys from building stuff is a good thing." But it's uncertain whether attendees will take his words to heart, although many agreed with him. Concern about the sustainability of an economic upturn has put "enormous pressure on the industry to keep costs low and become more efficient," said Earnest W Deavenportjr., former chairman and chief executive officer of Eastman Chemical, at a session he led on supply chain issues. He believes improvement can be made through collaboration, information sharing, and process visibility across the entire chain, from acquiring raw materials to delivering to the end user. To support his case, Deavenport cited figures from the research firm Gartner. "Information sharing among supply chain partners will accelerate revenue growth by as much as 20% within three years," he said. "I don't know about you, but we could use that 20%." Information sharing was also an important theme in talks centering on terrorism and security Robert M. Gates, former Central Intelligence Agency director, talked about the changing face of terrorism. He said the new terrorists, whose aim is to kill as many people as possible, should worry
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chemical makers. "Industries that play a critical role in the economy and use toxic or explosive substances present opportu nities for terrorists," he said. Gates outlined steps to improve chem ical industry security He said the industry should identify facets ofits businesses that if attacked or sabotaged would have the most impact. THE INDUSTRY should also establish con tact with the government, which is un prepared to deal with the security chal lenge on its own. T h e industry must develop worst-case scenarios and present them to Director of Homeland Security Tom Ridge or other officials. Russell Crockett, vice president of Re sponsible Care and engineering at Lyondell Chemical, reported that the industry has made progress in changing the way it thinks about security since Sept. 11,2001. "We must ask ourselves if we are doing everything reasonable to make our facili ties and neighbors secure," he said. In fact, the chemical industry security plan that Crockett shared with delegates detailed many of the steps Gates discussed, namely identifying vulnerabilities and par ticipating in public policy Fran Keeth, president and CEO of Shell Chemical, talked about the problems that the chemical industry's image has caused; she spoke at the Chemical Heritage Foun dation forum. "Oil and gas and petro chemicals are considered sunset industries, with heavy layoffs during the past several years," she said. "The industry is not at tractive to young graduates." She noted that the chemical industry has trouble holding onto professional em ployees, who cost as much as $250,000 to hire and train.
