Topics covered in this website include companies, products, markets, history (some strategically fascinating, like the now closed CSR Chemicals), industry performance, the regulatory framework, contacts, policies and many more to help you understand the development and status of Australia's chemical industry.

The information is mostly free and we do our best to find the time to keep it current and accurate. 

Below are some observations about the commodity side of the chemical industry.

Compare this to a country like the Netherlands where chemical exports (that make up 18% of the country's exports) account for 8% of Dutch GDP and 80% of chemical production is exported compared with around 10 per cent in Australia. The Netherlands does not have our raw material base.

It is a diverse industry ranging from large-scale petrochemical complexes, that manufacture polymer chemicals by a process of synthesis, to small business that manufacture by simply mixing chemicals to produce pesticides, paints and nearly all pharmaceuticals. Raw materials too are variable, ranging from locally available hydrocarbons and minerals, to sophisticated chemicals. The common link is that they use and produce chemicals .

It is an industry that has changed in size and composition. Since the mid-1970s, employment, the number of manufacturers, the industry’s contribution to GDP and the number of synthesised chemicals has reduced by between one-third and one-half. While undergoing this contraction, the demand for chemicals in the home market has continued to grow by around 3 to 4 per cent per year with even faster growth in the nearby Asia/Pacific region. In this apparent contradiction of contraction in the face of growth in demand, Australia has adequate petroleum, coal and mineral resource endowments, some of which are exported to become raw material inputs for overseas chemical industries.

In the last few decades, Australia’s share of investment in the Asia/Pacific region has continued to decline suggesting the local availability of natural resources and low sovereign risk is not sufficient to attract adequate investment. Note for example the on-going failure to attract investment in WA despite extensive (and in our opinion) misguided endeavours by the state's government. A petrochemical project in the north-west of Western Australia, the fifth chloralkali venture under review in Australia, has not progressed beyond a preliminary feasibility study. State and federal government agencies continue to promote over-the-horizon projects.

It is relevant to note that since the mid-1970s import tariffs, that ranged to 60 per cent, have been phased down to a maximum of 5 per cent in 1992. Industry through the 90's  predicted a “collapse” in the face of government intentions to reduce protectionism, implying these more recent changes in the industry have been promoted by a reversal of the government’s protectionist policies. More recent endeavours by older sectors of industry is aimed at dumping protection. The industry continues to signal insecurity about its future. 

Its potential

There is potential for growth. Australia today has a foreign trade deficit in chemicals of A$7 billion per year as it imports three-times more by value than it exports. This suggests potential for growth for the domestic chemical industry if it can establish a competitive advantage in the market. As an example, Australia is the world’s largest importer of caustic soda derived from salt, petroleum gas and energy that are significant exports from Australia. Other raw materials are sometimes only partially processed in Australia to the end product chemical, such as ilmenite and rutile, while other chemicals in which Australia should have a comparative advantage based on traditional factor cost considerations, such as energy-intensive urea, are often largely imported.

The World Bank has assessed per capita wealth for some countries. While Australia has the highest natural resource wealth per capita in the world (1995), its personal wealth is one of the lowest. It points to the enormous potential if the country can begin to add value to its natural endowment and not just support removalist industries (mining).

Press on image to see full scale.

Remember, adding value to resources, involves and produces "chemicals".

To Australia’s north are very successful chemical industries operating in countries without relevant natural resources. The changing industry profile, growing markets, and adequate raw materials, suggests Australia’s chemical industry can continue to evolve and grow with a substantial contribution to Australia’s GDP and trade balance.

Broadly therefore, investment in Australia's commodity chemical (ie. bulk chemicals such as plastic resins, caustic soda and soda ash) industry has moved from high-cost, often small-scale activities with limited international competitive advantage, to those which have some edge. That edge might come from access to competitive raw materials such as the titanium pigment producers using ilmenite and using nearby phosphate mineral and natural gas as WMC's new phosphate fertiliser project in Queensland, Precious Metals of Australia's vanadium pentoxide project or freight savings as producers of sodium cyanide for the gold industry and ammonium nitrate for use as explosive. Much of this transition has been occurring in the past decade, and with the exception of WMC's ammonium phosphate project, largely oriented to the home market. New more outward-oriented projects are under review. Notable is Plenty River's proposed ammonia and urea fertiliser project and the Dow/Shell venture in chloralkali chemicals for the Burrup Peninsula in the NW of Western Australia. That change to large-scale projects is not assured as distance to markets, high construction costs and lack of supporting infrastructure weighs against some of the advantages provided by access to competitive natural gas or minerals.

The following was said at the last Summit.

With largely depreciated assets, these facilities can continue operation until a decision for significant investment is required. At that point the overwhelming economic reality of import from world-scale manufacturing operations may likely cause closure of the local operation.

Mr Noel Williams, Business Development Manager, Asia Pacific. Dow Chemical (Australia) Ltd

The question is what is required, and what could be the role of Australia governments in this process to achieve international competitiveness in the chemical industry? In this context it is useful to note that the Federal government has no specific policy for the chemical industry while some State governments practice facilitation forms of assistance in response to investment proposals. Any policies or practices are not specifically aimed at the chemical industry. In our opinion, government has been inept in promoting the chemical sector even undertaking initiatives that have undermined its long term development and influenced by foreign companies and their representatives in Australia. 

Given the vast resource base of Australia, it could be 40-60 per cent larger (to around 2 per cent of the economy - arguably a conservative estimate). In perspective, this could represent directly a further 25 000 jobs and a substantial reduction in the trade deficit in chemicals. The indirect economic benefits are large.

Press on the above graph to see a brief chronology of its development.

Click on graph to see full size

 (Detailed graphs)
Employment

Reduced protectionism has promoted efficiency improvement measures with job losses at older centres and product range rationalisation. In 1997-98 the chemical industries employed just 45 165 persons - in the 1970s it employed 70 000, 60 per cent more!

Basic chemical synthesis activities employed 13 000 (down 25 per cent from 20 000 in 1971-72) and chemical formulating 32 000 (down 25 per cent from 40 000 in 1971-72).

However, in the three years to end 1998, exports have failed to keep up with the growth in imports with the trade deficit increasing 50 per cent from A$5 billion to A$7.5billion by end 1998. As shown in the graphs, most industry sectors have shown a trend of exports failing to keep up with imports (with the export/import ratio actually falling for the first time during 1998). Only the colourants sector (largely titanium dioxide pigment) has maintained its position and even the pharmaceutical industry is failing to maintain its track record. On a state basis, only Western Australia has held its export to import ratio while previously strongly performing Queensland, has shown the greatest decline.

Chemicals account for 20 per cent of Australia's current account deficit (of which one-half is by the state of New South Wales - that state was in the 40's to 60's the heart of Australia's chemical industry!). Read the history.

It is interesting to note, that Victoria and New South Wales, not only account for three-quarters of that deficit - they are under-performing - despite being the original and key chemical manufacturing centres in Australia.

And are things improving?

Press on graph to see full size.

A state by state comparison (five digit resolution available on request) .

Other key manufacturers include..

There is today an Agenda on Chemicals.

State Governments assume an influential role through facilitation measures that include the provision of land and related infrastructure.

With import tariff cut to a maximum of 5 per cent, the governments now have a vital role to promote Australia being internationally competitive.

For more detailed information about government agencies.

Industry sets international standards as expressed by the adoption of Responsible Care by members of the chemicals industry association, PACIA (the Plastics and Chemical Industry Association, that should become the .......Importers Association).

For more detailed information.