You may also care also to view the following.
|The ACTED paper presented at the First Australian Chemicals Summit (August 1998 and update).|
|Industry performance (more industry information including of trade)|
|Opinions (a collage of feedback to our site. The Industry section perhaps the more relevant.|
|Why is Australia failing to attract investment (just two export-oriented firms in last decade).|
Example of exports for 1999 by State. ( Contact us for imports by State.)
What are Australia's top ten exports for 1999
What are Australia's top ten imports for 1999.
|What and who?||There are some 400 files and 4000 linkages in the Chemlink, Chemicals Australia
website. Chemlink is a consultancy
company specialising in chemicals and energy in a network of
specialists. More information is provided
on our corporate profile.
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.
Rise and fall and.....?
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.
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.
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
|New South Wales|
About two-thirds of the A$18bn chemical industry produces chemicals by the physical blending of chemicals
Press on the above graph to see it as a bar chart
The synthesis section, is foreign-owned, one-third or less of world-scale and three decades old.
The following graph prepared by ACTED shows the operating cost penalties of small scale manufacture.
Since 1982, the significance of sectors of the chemical industry have changed substantially with contraction of the commodity chemical sector, notably in polymers. A significant influence has been the reduction of import tariffs that favoured those producing commodity chemicals such as synthetic resins.
The following pie graph identifies Australia's Industry associations by industry sector. Press on graph to see full size.
Based on Australia's resource base, the synthesisers could increase their significance from the present one-third to 40 per cent of the chemical industry.
It is relevant to note the dramatic changes that have occurred in the last decade with the removal of import tariffs. With many closures, there have been significant shifts in ownership. Even Botany, the centre of Australia's petrochemical industry owned by ICI, now Orica, is soon to be predominantly owned by the US Exxon/Mobil and Huntsman Corporation.
The industry may be described in many ways.
One way to look at it is by origin which sometimes provides an outlook for the future. See our industry section for more information.
New investments including expansions with titanium dioxide pigment, sodium cyanide, ammonia and ammonium nitrate and ammonium phosphate fertiliser. One of the most exciting potential investments is an integrated petrochemical project for Western Australia. This US$1.2bn project could seed the development of a new industry in the region. ACTED believes it has less than one in ten chance of success but the government will have to provide some concessions recognising those offered by regions that compete for investment. The project would provide significant benefits to Australia. Other large-scale projects under assessment are ammonia-based including Plenty River Corporation in the Pilbara, BHP Petroleum's/Incitec's Southern Fertiliser in Victoria, and Queensland Fertilizer Assets Limited at Pickanjinnie near Roma Queensland. Anaconda, a nickel producer, may become a phosphate fertiliser manufacturer.
Australia is a major importer of caustic soda (1Mtpa!), VCM (240 000 tonnes pa), silicones (A$100m pa), PET resin (60 000 tonnes) etc. We make no comment on their competitiveness however.
the 1940s, Australia's chemical industry has been dominated by Orica
ICI Australia). Its key manufacturing centre at Botany, New South Wales
is now focussed on polyethylene. With Orica establishing a minority interest
in a joint venture in polyethylene with the only other producer Kemcor,
it has nearly sold out of Botany. This jv is called Qenos. In 1998, Orica announced the sale of
its Botany-based surfactant business to Huntsman Corporation of the
US. Orica has significant interest in the ammonia,
ammonium nitrate and the explosives business which now represent more than
one-half its business. Other activities by the
company include the production of PVC resin from imported VCM which it
now seeks to sell, surface coatings (paints) and sodium cyanide.
Other key manufacturers include..
The protection underpinned ICI Australia who established and dominated the Australian chemical industry for half a century has become an international explosives company as Orica. Given its underperformance in Australia, (see our ammonia and explosives report) its ultimate purchase by a company such as Sasol of South Africa (that has interest in expanding the explosives business) is possible in our opinion.
Qenos will almost certainly assume full control over the JV, and could be taken over by a company such as Huntsman Corporation that has already purchased Monsanto Australia (Chemplex as it was) and the surfactant business at Botany.
The PVC industry has consolidated around the Laverton North production as Australian Vinyls.
Australia will remain a Stage 1 development nation (commodity chemicals vulnerable to the vagaries of exchange rates and energy and other factor costs). (Our presentation to the House of Representative Inquiry may be of interest).
We will provide a detailed analysis later (some quick thoughts).
the Federal Government reduced import tariffs,
its key influence on current industry is via anti-dumping
legislation and taxation. It maintains
research and development tax concessions (125 per cent reduction from assessable
income) and export assistance.
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.
the manufacture, distribution, use and disposal of chemicals.
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).
ACTED Consultants ABN 71 007 034 022. Publications 1997. All contents
Copyright © 1997. All rights reserved.
Information in this document is subject to change without notice.
Products and companies referred to are trademarks or registered trademarks of their respective companies or mark holders. URL: www.chemlink.com.au/