The German Chemical Industry

Chris Schmidt - istockphoto The German Chemical Industry 12 June 2015 Dr. Thorsten Bug, Senior Manager Chemicals

Overview A. The Chemical Industry Globally B. The German Chemical Industry C. Chemical Innovation Made in Germany D. Opportunities for Chemicals Producers in Germany E. Chemical Parks: Plug & Play Main sources: Cefic: The European Chemical Industry Councel, Brussels, www.cefic.org Destatis: Statistisches Bundesamt (engl.: Federal Statistical Office), Wiesbaden, www.destatis.de VCI: Verband der chemischen Industrie (engl.: German Chemical Industry Association), Frankfurt/Main, www.vci.de www.gtai.com 2

Global Chemical Revenue With strong growth rates in the 10-years-period 2003-2013, the Asian Chemical Industry has more than doubled their share in global revenues. 35% 26% 20% 17% 52% 9% 5% NAFTA Europe 23% Japan 2% 1% Africa, Australia, and Middle East Asia 5% 5% Latin America Global revenues in percentage share 2003: EUR 1,326 billion Source: Cefic, Facts and Figures 2014. 2013: EUR 3,156 billion www.gtai.com 3

The Global Chemical Market Despite China s strong growth, Europe continues to be a relevant and growing market. Chemical Revenue 2003 Chemical Revenue 2013 EUR 1,326 bn EUR 3,156 bn EUR 464 bn (35%) +36% EUR 631 bn (20%) Europe Asia NAFTA Japan Other Source: Cefic, Facts and Figures 2014. www.gtai.com 4

EUR billion Global Chemical Revenue Germany is the world s fourth largest chemical market, being surpassed only by China, USA and Japan in terms of revenues. Chemical Revenues, 2013 1200 1000 800 600 400 200 0 Source: Cefic, Facts and Figures 2014. Total revenue globally 2013: EUR 3,156 billion. www.gtai.com 5

European Revenues With a share of more than 25% in 2013, the German chemical industry has consolidated it s leading role in Europe during the recent years. European ( EU-28) Chemical and Pharmaceutical Industry Revenues (2009 2013) Germany France Italy Netherlands 2013 2012 2011 UK Spain 2010 2009 Rest of EU-27 0 50 100 150 200 EUR billion Source: VCI 2013, Chemiewirtschaft in Zahlen 2014, Table 60. In order to compare revenue internationally, data devates from the previous Cefic data. www.gtai.com 6

Overview A. The Chemical Industry Globally B. The German Chemical Industry C. Chemical Innovation Made in Germany D. Opportunities for Chemicals Producers in Germany E. Chemical Parks: Plug & Play Main sources: Cefic: The European Chemical Industry Councel, Brussels, www.cefic.org Destatis: Statistisches Bundesamt (engl.: Federal Statistical Office), Wiesbaden, www.destatis.de VCI: Verband der chemischen Industrie (engl.: German Chemical Industry Association), Frankfurt/Main, www.vci.de www.gtai.com 7

Employees in thousand Revenues in EUR billion The History of the German Chemical Industry Within 50 years, revenues increased by a nominal 5.4 and a real 3.1 percent on average a year. This resulted in a 14-fold productivity increase. Chemical Industry Revenue and Employee Development in Germany 700 180 600 598 568 568 160 500 458 470 415 140 120 400 100 300 200 100 0 171 135 100 65 12 30 1960 1970 1980 1990 2000 2010 80 60 40 20 0 Revenue in EUR billion Number of employees in thousand Source: VCI, 2013. Details: 1960: without Saarland; from 1964 including west Berlin; 1970, 1995, and 2008 with new statistical classification. From 1991 as unified Germany. www.gtai.com 8

in % German Chemical Companies Structure The industry is dominated by small companies, whereas the lion s share of revenues are raised by large corporations. Number of Chemical and Pharmaceutical Companies, Employees and Revenues by Company Size, 2011 80 70 72 63 71 60 50 40 30 24 31 25 20 10 4 7 4 0 Number of companies Employees Revenues 1-49 employees 50-499 employees > 500 employees Source: VCI, Chemiewirtschaft in Zahlen 2013, Table 18. www.gtai.com 9

EUR billion Chemicals Exports Germany is the leading exporter of chemicals and pharmaceuticals in the world. Chemical and pharmaceutical Exports by Country, 2013 180 160 140 120 100 160 80 146 60 40 20 102 86 77 75 64 63 58 57 0 Source: VCI, Chemiewirtschaft in Zahlen 2014, Table 61. www.gtai.com 10

German Chemical Exports Almost 3/4 of total German chemical exports are delivered to other European countries. EU 27 (without Germany) European non-eu 59% 11% 10% 4% China 2% Japan NAFTA 2% 3% Latin America 9% ASEAN Rest of the world (ROW) Source: Destatis, 21 January 2014, Data for 2012. www.gtai.com 11

EUR billion Chemical Market Segmentation Fine and specialty as well as basic chemicals continue to constitute the backbone of the German chemical production market. Chemical Market Segmentation by Revenues between 2010 and 2012 50 40 30 20 10 0 Petrochemicals Fine & Speciality Chemicals Polymers Anorganic Basic Chemicals Detergents & Care Products 2010 2011 2012 2013 Source: Source: VCI, Chemiewirtschaft in Zahlen 2013, Table 15a. www.gtai.com 12

Thousand tons German Chemicals Production Despite the economic downturn in 2009, the Basic Chemicals output in Germany remained almost steady. Production Volumes of Basic Chemicals in Germany between 2000 and 2010 8.000 6.000 4.000 2.000 2000 2005 2010 0 Source: Destatis. Oxygen in million m 3 under normal conditions. www.gtai.com 13

The Corporate Landscape With operating margins in the double-digits almost all large German Chemical Companies show healthy profits. German chemical company performance for FY 2014, in EUR million Revenue Operating margin Net profit BASF 74,326 10% 5,155 Bayer 42,239 13% 3,426 Henkel 16,428 14% 1,662 Evonik 12,917 10% 568 Merck 11,501 16% 1,165 Lanxess 8,006 3% 47 Wacker 4,826 9% 195 Altana 1,952 14% 179 Source: respective annual company reports. The financial year corresponds with the calendar year. Operating margin: operating income (EBIT) in relation to revenues. www.gtai.com 14

Chemical Cluster in Gemany Cluster foster cooperation and increase innovative potential of companies and R&D institutions. Chemical Cluster offers added value to their members: Networking platform for R&D institutes, companies, authorities within the region Strategic alliances with international chemical sites in Europe, Asia and the US strengthen the cluster members global competitiveness Source: Germany Trade and Invest, 2014. www.gtai.com 15

Overview A. The Chemical Industry Globally B. The German Chemical Industry C. Chemical Innovation Made in Germany D. Opportunities for Chemicals Producers in Germany E. Chemical Parks: Plug & Play www.gtai.com 16

Research and Development Japan, Germany, and the US are leading in chemical R&D spending and patent registration. Chemical Patents and R&D Spending Intensity 2012 2.8 4.0 25% 1.6 17% EU 1.6 <5% 0.8 20% Germany China USA 1.3 Japan <5% South Korea share of chemical patents R&D spending intensity in % of annual sales Source: Cefic, Facts and Figures 2013; Statistisches Bundesamt, VCI, Stiferverband für die deutsche Wissenschaft 2013 www.gtai.com 17

Basic research Applied research Germany s Innovation Strategy Diversified research landscape with multiple funding levels secure the innovation hub in Europe. R&D Expenditure (in EUR billion, 2012) and Type of Research by Actor companies / industrial research 50.3 Universities Government research institutions (federal and state level) 1.2 3.7 1.2 WGL 1.9 FhG non-university R&D institutions MPG Max Planck Society 1.7 MPG HGF 14.4 HGF Helmholtz Association WGL Leibniz Association FhG Fraunhofer Gesellschaft Public funding Private funding Note: All figures in EUR billion; Source: Federal Ministry of Education and Research 2010, Federal Statistical Office 2014. www.gtai.com 18

EUR billion Germany s Private R&D Spending Despite the economic crisis in 2009, the German Chemical Industry continuously invested in R&D. Selection of private R&D Expenditure by Sector between 2006 and 2013 60 50 11 Electrical engineering 40 30 20 11 11 20 20 10 10 8 23 22 23 9 10 26 26 28 Automotive & Aerospace Mechanical engineering 10 0 5 5 5 5 5 5 6 6 9 8 8 9 8 9 10 11 2006 2007 2008 2009 2010 2011 2012 2013 Chemical & Pharma Source: VCI, 2013, Chemiewirtschaft in Zahlen 2014, Table 48. www.gtai.com 19

Chemical University Education and Research Plenty of excellent universities secure highly qualified academic stuff. Kiel Chemical education and research at: Bremen Hamburg Schwerin 49 Universities offering Postgraduate programs in classical chemistry Berlin Hanover Magdeburg Potsdam Düsseldorf Erfurt Dresden Wiesbaden Mainz Saarbrücken Stuttgart Munich Source: German Rector s Conference, Federal Institute for Vocational Education and Training, 2013; GTAI 10/2013 www.gtai.com 20

Chemical Non-University Research Well-known application-oriented research organizations guarantee both, new products and technology development. Kiel 35 Non-university chemical R&D institutes: Hamburg Schwerin 9 Max Planck Society Bremen Berlin 6 Helmholtz Association Hanover Magdeburg Potsdam 9 Leibniz Association Düsseldorf Erfurt Dresden 11 Fraunhofer-Gesellschaft Wiesbaden Mainz Saarbrücken Stuttgart Munich Source: GTAI 10/2013. www.gtai.com 21

Plethora of logistics Europe s longest autobahn, rail and waterway network connects Germany with its nine neighboring states. Autobahn 12,550 km Railways 40,330 km Waterways 7,450 km Seaports 9 Major Airports* 12 Sources: Eurostat 2008, CIA Factbook, OECD 2012. Note: Latest data available for USA (Road- and Railways) refers to 2008. *(runways > 3,000m) www.gtai.com 23

Energy Generation In the last 25 years Germany got greener as Renewables has more than sextupled their share as energy carrier. Gross Electricity Generation in Germany by Energy Carrier in Percentage Share 100% 75% 50% 4 5 7 7 8 9 26 27 25 28 29 30 10 12 22 26 17 26 14 10 19 18 22 16 Renewables Natural Gas Oil Hard Coal Nuclear Energy 25% 31 27 26 25 23 25 Lignite 0% 1990 1995 2000 2005 2010 2014 Other sources Source: AG Energiebilanzen e.v. (http://www.ag-energiebilanzen.de/) www.gtai.com 24

Energy - Quality With low duration of unplanned power dips in Europe, German consumers enjoy high quality energy supply. Unplanned interruptions including all events, in minutes lost per year 2010 2012 66 66 111 NORWAY 92 SWEDEN 170 68 FINLAND 196 179 ESTONIA 81 68 GB 34 27 NL 36 39 BELGIUM 95 63 FRANCE 260 15 15 288 DANMARK LITHUANIA 386 20 263 17 186 POLAND GERMANY 136 CZECH Rep. 32 81 39 169 AUSTRIA SLOVENIA 89 140 58 SPAIN 133 ITALY Source: CEER Benchmarking Report 5.1 (Ref: C13-EQS-57-03), 2014, Table 1. SAIDI = System Average Interruption Duration Index. Note: 2010 and 2012 data chosen, as these years contain most complete data. 2012 data Spain unavailable, thus corresponding 2011 data is used. 2010 data Belgium unavailable, thus corresponding 2011 data is used. www.gtai.com 25

Energy - Cost High quality energy supply lead to slight price increases in Germany, while European energy prices have moved together in recent years. Industrial Energy Prices (500 2,000 MWh), in -Cent/kWh* 2009 2011 2013 10.1 10.4 12.0 GB FRANCE BELGIUM 6.5 8.1 8.5 11.0 9.4 9.4 NL 10.8 11.5 11.0 7.9 9.1 8.7 NORWAY 9.2 9.3 9.9 DANMARK 11.3 12.4 14.4 GERMANY 6.9 8.3 7.5 SWEDEN 11.2 10.8 9.9 CZECH Rep. 11.6 11.3 11.0 AUSTRIA 9.3 9.4 8.8 POLAND 6.8 7.5 7.5 FINLAND 6.5 7.5 9.7 ESTONIA 7.9 10.4 12.3 LITHUANIA 8.9 11.0 11.5 LATVIA 8.3 8.0 8.2 ROMANIA 11.2 11.6 12.0 SPAIN 13.7 16.6 17.2 ITALY Source: Eurostat: Electricity prices for industrial consumers (20 May 2014). *excluding VAT and recoverable taxes and levies www.gtai.com 26

Raw Materials Supply Germany s chemical industry regions are connected to the European pipeline grid. Infrastrucur of raw materials supply Crude oil via pipelines from: Russia the Mediterranean Sea France the North Sea Crude oil processing via: 14 refineries 8 steam crackers Pipelines for: ethylene propylene natural gas hydrogen carbon monoxide Source: Germany Trade & Invest, 2012. www.gtai.com 27

Foreign Direct Investments With 12% of total production investments Germany scores top in Europe. Number of Investment Projects to Europe (2005-2012) 350 300 250 200 150 100 50 Chemicals Plastics Rubber Source: fdi Markets, 2013. Total amount of investments (1383): Chemicals (695), Plastics (541), Rubber (147). Graph represent 72% off all investments. www.gtai.com 28

Chemical Parks - Advantages German chemical parks offer producers unique advantages. 40 chemical parks welcome companies to industry investments Cost-reducing and unique benefits through: Excellent infrastructure Chemical raw materials via pipelines Gases and steam via pipelines Secure energy supply Site operators offer expertise and services from one source Source: VCI and chemical companies, Germany Trade and Invest, 2009. www.gtai.com 30

Chemical Parks - Business Model Investors choose the site operator s plug and play services that suit their business model best. Vacant sites Warehousing Analytics Site security Energies/utilities Authority management Production Emergency management/ fire service HR services Logistics Maintenance Purchasing Supply and disposal networks Roads and railway tracks Hazardous goods handling Disposal Site canteens Engineering Trainings Source: VCI professional association chemical parks, 2009. www.gtai.com 31

Chemical Parks Selected Locations A B A B Source: Germany Trade & Invest, 2012 www.gtai.com 32

Chemical Parks Selected Locations A B C D C D Source: Germany Trade & Invest, 2012 www.gtai.com 33

Chemical Parks Selected Locations A B C D E E F F Source: Germany Trade & Invest, 2012 www.gtai.com 34

Worldwide Contacts for Chemical Industry Europe Berlin - Headquarters Paris Office Dr. (Mr.) Marcus Schmidt Director Chemicals & Healthcare T. +49 30 200 099 600 marcus.schmidt@gtai.com Dr. (Mr.) Thorsten Bug Senior Manager Chemicals T. +49 30 200 099 603 thorsten.bug@gtai.com Dr. (Mrs.) Sandra Bütow Manager Chemicals & Healthcare T. +49 30 200 099 604 sandra.buetow@gtai.com (Mr.) Raphaël Goldstein Représentant France Paris, France T. +33-(0)1 40 58 35 04 raphael.goldstein@gtai.com North America Washington, D.C. Office Mr. Omar Oweiss Director Washington DC, USA T. +1 202 629-5713 omar.oweiss@gtai.com Asia-Pacific Beijing Office Tokyo Office Mr. Markus Hempel China Representative Beijing, China T. +86 10 6539 6725 markus.hempel@gtai.com Mr. Iwami Asakawa Japan Representative Tokyo, Japan T. +81 3 5275 2072 iwami.asakawa@gtai.com 2014 Germany Trade & Invest All information provided by Germany Trade & Invest has been put together with the utmost care. However, we assume no liability for the accuracy of the information provided. www.gtai.com 35