Chemicals react to oil price crisis

Agile and resilient UK chemicals companies remain among the most dynamic in Europe.

Defying rising feedstock costs and escalating oil prices, the UK chemicals sector continues to thrive.

Nimble UK companies use their nous

The UK industry is innovative and technologically advanced, specialising increasingly on leaner, greener manufacturing.

Despite the rise in oil costs, specialty and fine chemicals companies in the UK are staying put.

The UK’s focus on higher-value technology and R&D intensive products has been paramount to this success.

Swimming upstream is easier

Fortunes all depend on how far upstream chemicals companies are placed.

The closer they are to the oil and petrochemical operations upstream, the greater the return on investment. Operators here are more able to pass raw material prices further downstream.

Johnson Matthey Ltd, is a specialty chemicals company focused on catalysts, precious metals and fine chemicals.

The company uses raw materials of very high value. They are able to pass these costs directly to the customer. When costs are high, costs are passed on - when they reduce, savings are passed on.

Product differentiation

The UK’s companies tend to focus on differentiation of product, which enhances sales and margins.

R&D is essential in providing a unique product or one that is sufficiently different to that of a competitor.

Today, the UK is estimated to make some 95,000 substances.

Sustainability: the new watchword

The UK government’s latest budget announced a number of measures that should improve regulation in the industry. They were broadly welcomed by professionals in the sector.

The Chemical Industry Association said the reforms were key to underpinning the sustainability of the industry in the long term.

Simple new EU legislation

Incoming REACh (Registration, Evaluation and Authorisation of Chemicals) legislation is set to simplify the rules for chemical manufacturers.

It will set a benchmark for standards which other manufactures will be measured against.

Bringing harmony to chemicals

REACh replaces numerous ailing pieces of legislation and harmonises the approach to existing and new chemicals.

The EU regulation will assure consistent application throughout member states. It also demonstrates EU companies’ genuine commitment to Responsible Care and Sustainable Development.

Burnishing chemicals image

REACh will require the testing of thousands of chemicals, some of which are already at market.

But the general consensus is that it will improve the image of the industry still further, and attract investment.

A huge rise is expected in the demand for the services of testing houses - in particular for animal testing, bacterial testing and chemical testing.

REACh will also benefit downstream industries, consumers and the environment.

Intermediates will prosper

UK company Contract Chemicals has an annual turnover of £35 million and are based in a £12 million state-of-the-art site. The company focuses on chemicals such as brominated organics for pharmaceutical applications.

Tony Bastock is chief executive of Contract Chemicals and was president of the UK Chemicals Industry Association.

He says those who are involved with the manufacture of intermediate chemicals will largely avoid the additional costs of new REACh legislation that requires testing. They will reap the benefits that accreditation brings.

“If we supply an intermediate to a large pharmaceutical company and it is fully consumed in the manufacture of that pharmaceutical that is itself thoroughly tested, we will not have to test our product extensively.”