Industry & Parliament Trust, Ludwigshafen21st July, 2016

Chemistry Growth Partnership

Philip Robinson

Chemistry Growth Partnership

• Scope - to address headline themes:

– Energy & Feedstocks

– Innovation

– Supply chains

• Underpinned by work on: – Exports

– Skills

– Access to Finance

• Leading to creation of “Chemistry Growth Partnership” (CGP) in October 2013

CGP: Membership

• Anna Soubry BIS Minister and MP (co-chair)

• Steve Foots (Croda International & co-chair)

• Tony Bastock (Contract Chemicals)

• Paul Booth (SABIC UK Petrochemicals)

• Charles Bragg (P&G)

• Tom Crotty (Ineos)

• Torben Jensen (BASF)

• Ian Shott (Shott Trinova)

• Harry Swan (Thomas Swan)

• Dave Tudor (GSK)

• Ian Waddell (UNITE)

• Calum MacLean (Synthomer)

• Robert MacLeod (Johnson Matthey)

CGP Vision

“By 2030, the UK chemical industry will have further reinforced its position as the country’s leading manufacturing exporter and enabled the chemistry-using industries to increase their Gross

Value Added contribution to the UK economy by 50%, from £195 billion to £300 billion.

Secure and competitive energy and feedstock, accelerated innovation and strengthened supply chains will be critical in

realising this vision.”

Strategic Priorities and Enabling Themes

Three Strategic Priorities

Six Underpinning, Enabling Themes

• Skills

• Climate change solutions

• Leveraging Government initiatives

• Trade opportunities

• Regulation

• Finance and Funding

5

Securing competitive energy and feedstocks

Rebuilding UK Chemistry supply chains

Accelerating Innovation

£35bn £35bn£35bn

providing an additional £105 bn growth in GVA

Are chemicals

important?

Worldwide Chemicals 4.3 trillion dollars/year

Automotive 2.8 trillion dollars/year

Europe Chemicals 1.0 trillion dollars/year

Automotive 1.0 trillion dollars/year

Chemicals in Europe employs 1.7 million people direct

7.0 million people including indirects

European Chemicals exports 70 billion dollars/year

Most other major industry sectors

rely on the European chemical

industry for their raw materials

A sense of scale …

Impact on global chemicals economics

Source: ICIS

US and Western

European costs were

comparable in 2005

US shale gas has been a

‘game changer’

Impact on global chemicals economics

Source: ICIS

US and Western

European costs

were comparable in

2005

Ethylene costs are

now 2x higher in

Western Europe

Western European

manufacturers are

struggling to

compete

US ethylene costs

are now comparable

with the Middle East

US shale gas has been a

‘game changer’

Utilise a national asset for national

benefit

- Exchequer revenue

- Balance of payments

- Wealth and job creation

- Downward pressure on gas price

- Security of supply

Play our part in making European

energy and feedstock prices

competitive

The very survival of the Chemicals

industry and other energy intensive

industries is at stake

What can UK and EU shale

production deliver?

Source: BGS 2013

A Strategy for Innovation in the UK Chemistry-using Industries (2013)

— Prepared by CIKTN and CPI and adopted by CGP

— Report identifies 8 priority manufacturing sectors

& 3 focus areas

1. Aerospace – lightweight materials and formulated products for lower cost and

reduced environmental impact;

2. Automotive – low carbon vehicles with improved driver experience;

3. Construction – Sustainable, low carbon buildings delivered through the whole

supply chain;

4. Energy Generation & Supply – Delivering secure, economical, sustainable

energy;

5. Life Sciences – Personalised treatments requiring niche, high-value products

with improved delivery;

6. Food – Food for the world: nutritional, pleasurable and sustainable;

7. Home & Personal Care – Delivering desired functionality to a demanding

consumer base using natural ingredients and clever formulation; and

8. Chemicals Manufacturing - Manufacturing chemicals more competitively and

sustainably from a variety of feedstocks.

Chemistry Innovation Strategy8 Priority Manufacturing Sectors

To establish the UK as a world leader in:

The development and deployment of

Industrial Biotechnology

Process Intensificationproductively delivering global competitiveness for UK manufacturing

The development and production of high

performance Functional Materials

Developing options for UK chemical feedstocks, including unconventional oil & gas

Driving economic growth through SMEs and exploiting local specialisation and capability

Strategic Objectives:

Accelerating Innovation

Journey of IB: the opportunity for growth

2009--------2015-----------------2025

£1.8

Bn

£4.5

Bn

£1

2B

n

National Formulation Centre

Overarching Capability to Enable Outstanding R&D

i) Access to Expert staff with multi-sector experience

ii) Digital Infrastructure- Informatics and Modelling

iii) Experimental Design

iv) Data Analytics

Complex Solids Handling and Preparation

i) SHEQ Enabled for Nano-materials and powders- High grade air handling

ii) Milling

iii) Plasma functionalisation

iv) Mixing (high shear, low shear, turbine)

v) Atomic Layer Deposition/ Chemical Vapour Deposition

Formulation Preparation

HTE

Draw downs (coatings)

Plaques (composites)

Injection Moulding

Formulation Application Testing

Electrical

Thermal

Abrasion

Lubricity

Complex Liquids Handing and Preparation

Flow reactors

OBR

Scalable Batch

Process Scale-Up and Metrology

Metrology

Modelling

Supply Chain Working Group Vision

Supply Chain Working Group: Vision

By 2030 the UK chemistry-using supply chain will have delivered £35bn of increased GVAThis will achieved by focussing on the following Strategic Priorities:

o Understanding our strengths and delivering new growth opportunities in selected target sectors

o Establishing the capacity and capability to deliver that growth

o Identifying and securing critical infrastructure

o Communicating the existence and contribution of the CGP’s SC Working Group to the chemistry-using industries and the wider economy

o Strengthening connectivity and clustering

o Ensuring associated supply chain skills / capability are available

o Highlighting the requirements in terms of a government policy framework

Supply Chain Working Group Membership

Suppliers

Products

Pharmaceuticals

Diversified

Fine and SpecialityPrimary Building Blocks

Raw Materials

Oil

Gas

Biomass

Minerals

Coal

Water

Air

Energy

Speciality Organics & Inorganics

Plastics and Rubber

Industrial Gases

Fertilisers

Basic Organics

Man-made Fibres

Basic Inorganics

Agrochemicals

Food Additives

Additives

Diversified Product Companies

Speciality Polymers

Basic PharmaAnimal Health

Cell Cultures and Reagents

PharmaPreparations

Paints, Inks and Coatings

Glues & Gelatines

Explosives

Photographic Chemicals

Soaps and Detergents

Personal Care Products

Other

End User Markets

Materials Supply

Equipment Supply

Engineering Services

PackagingTransport & Logistics

StorageWaste

HandlingProfessional

Services

Suppliers

Chemical Sciences Manufacture

Materials Supply

Equipment Supply

Engineering Services

PackagingTransport

& LogisticsStorage

Waste Handling

Professional Services

Metallic Materials

Polymeric Materials

Coatings & Linings

Process Vessels

Process Pipework

Pumps & Valves

Process Control

Equipment

Laboratory Equipment

Engineering Design

Precision Engineering

Polymer Moulding

Asset Management

Primary Packaging

Secondary Packaging

Labels

Electrical Equipment

Ovens & Furnaces

Logistics

Road Haulage

Rail Freight

Sea Freight

Air Freight

Bulk Storage

WarehouseStorage

Effluent Treatment

Collection of

Hazardous & Non-

Hazardous Waste

Treatment of

Hazardous & Non-

Hazardous Waste

Remediation Activities

Technical Services

H,S & E Consultants

Specialist Legal Services

Regulatory Specialists

Training Providers

Supply Chain Working Group Focus

Supply Chain Sub-Group: Sector Groups

• Automotive

• Pharmaceutical

• Chemical Manufacturing

• Home & Personal Care

• Aerospace

• Construction

GSK – potential UK Supply Chain

RobinsonBrothers

Source: BASF

Cars without Chemistry would simply not look the same

Automotive industry requires close collaboration across the value chain

Solutions only with

and through

Chemistry

Source: BASF29

UK automotive parts – trade balance

-8000

-7000

-6000

-5000

-4000

-3000

-2000

-1000

0

£ millions

‘Clustering’ to increase SME capability

Capability covers all ISAS elements:

• Asset management

• Supplier management

• Capability & operations

• Inventory management

• Cost/price management

• Quality management

• Product dev’t, launch

• Delivery performance

• Strategy

• Human resources

Clustering as a catalyst to accelerate capability

increase of SMEs

“Increasing the apparent size of SMEs to reduce risk”

32

Grangemouth

Teesside

HumbersideRuncorn

4 Major inter-connected Centres of

Chemical Activity in the UK

Typical Integrated complex : reduces costs and ensures availability of skills

Medium term opportunities - synergistic link to existing TVPI assets and/or

production streams and which could give the TVPI a sustained competitive

advantage over other international sites.

Opportunity Downstream Benefit Potential Constraint / Mitigation / Action

Acrylic Acid and Acrylates

production

Acrylic Acid to Esters for Paints and Coatings

Acrylic Acid to Super adsorbent polymer for

consumer, plant media medical and (emerging)

industrial good

Proprietary technologies from Asia

but derivatives markets mentioned

have good growth.

Needs low cost propylene as

feedstock

Acrylonitrile (AN) from PDH or

Naphtha

Acrylonitrile to AN Butadiene Styrene Copolymer /

Styrene AN

Acrylonitrile to Poly AN to Carbon Fibre. Lightweight

high strength materials for use in cars, trucks, bridges,

aerospace, sports and medical equipment

Unfashionable but derivatives

markets mentioned have good

growth.

Needs propylene as feedstock

Ammonium carbonate and

bicarbonate

Local ammonia plus local waste CO2. There are

customer blending opportunities Investor required

Opportunity Downstream Benefit Potential Constraint / Mitigation / Action

Animal feed production

Related to previous example. There are existing and

potential resources within TVPI, e.g. minerals and

bio-based

Mostly small size but high value

trace materials plus some general

bio-waste beneficiation

Cellulosic ethanol (CE), Bio-

based materials and Sugars e.g.

Citral and Dibasic Acids

Historically sugar based chemistry for ethanol but CE

is more attractive for making green ethylene. Niche

demand exists today and will grow Sugars can

provide specialities and many intermediates e.g.

FDCA as a PTA replacement

Major long term technical issues

remain. Some progress from

Scandinavian and Italian

innovators.

Chloralkali e.g.

NaOH + Cl2 + H2 (pure)

KOH + Cl2 + H2

An enabler for Chlorine derivatives e.g. TiO2 and

other minerals; shale via HCl; esterification of

biomaterial.

Chlorinated isocyanurates option.

Target KOH rather than NaOH

Sustainability and safety

enhanced by avoiding Chlorine

shipment for water treatment -

Trans Pennines

Coal chemistry

Pitch feedstock is basis to make advanced specialty

high value materials to be converted locally e.g. Pitch

carbon fibre, specialist phenols. Large global

speciality materials company has wider for plans Coal

to Ethanol for refinery mandate.

Intellectual Property (IP)

innovation and ownership

Affordable power is an enabler.

Optimisation studies required

Ethylene specialities

EO derivatives

Linear Alpha Olefins

Alpha MMA

Provides basis for revival of fine chemical using EO

as a building block.

Several ethylene LAO technologies available.

MMA via ethylene - many downstream markets

Commit to ethylene cracker

expansion.

Active lobby programme

Fertiliser - Blending and Exports Expand on the Mineral base with cheap local power

to build unique cost competitive business

Real advantages over Rotterdam

& Antwerp need to be publicised

Opportunity Downstream Benefit Potential Constraint / Mitigation / Action

Mineral Beneficiation As with fertiliser, real local resources mean this is

a strategic opportunity.

Build on existing project which

are largely based on non-UK

firms. Needs UK Plc approach

Post-consumer waste

beneficiation

Numerous TVPI chemistries based in Innovation

Parks and local know-how for fillers for rubbers

and plastics

IP innovation and ownership

Affordable power is an enabler.

Optimisation studies required

Poly-tunnel and Algal Pool

Uses for CO2

Land availability, CO2 (and H2) plus waste heat to

make highly effective plant growth media.

Studies ongoing

IP innovation and ownership

Build on sugar to biochemical

knowhow.

Special salts e.g. MgCl2 to Mg

metal from Seawater

Historically magnesium and aluminium production

was within TVPI (Alcan in Lynemouth) but no

longer, predominantly due to high power costs.

Lithium and magnesium are used in the

production of light-weighting in cars, plus

aerospace and interruptible power.

Power resources are required

for long term solutions.

Derivatives markets mentioned

have good growth.

Surface chemistry

EU Framework Programme (F8) based innovation

e.g. graphene and PVD (Physical Vapour

Deposition) and CVD (Chemical Vapour

Deposition) services

Lack of entrepreneurial spirt in

University portion of F8

participants

Waste Stream Recovery from

Industry – Multiple Options

There are existing immediate opportunities from

the survey and potential new concepts, e.g.

Scandium and other rare earth elements from

TiO2 and fuel ash mining

Mostly small size but early

returns. Plus with innovation

funding some high value metals

and some general plastics

valorisation prospects

Antwerp

Rotterdam

An impressive site/hub for

containers, refinery and fuel, bio

feedstocks, food, grains and

minerals.

Antwerp

Manufacturing hub for downstream

development such a car parts

moulders and consumer goods.

TVPI

Has the potential to mirror Antwerp

in terms of size/activity.

Has advantages of oil and gas

pipeline, coal bed methane, mineral

resources and matching

infrastructure.

Needs to attract more large players

to expand value chain.

Products Materials Park Market Segments

Ethane

Naphtha

Teessid

e C

racker

3rd

larg

est in

EU

Prim

ary

Chem

icals

P

ark

Convers

ion P

ark

(s)

CO2 Feedstock

Methanol Chain

Ammonia

Pitch Tars

Ethylene Chain

Propylene Chain

C4s

Pygas

Pyoll

Specialty Films

Household Products

Fertiliser Systems

Adhesives/Sealants

Paints & Coatings

Windmill Laminates

Oil & Gas Chemicals

Detergents

Water Treatment

Cables

Construction Material

Textiles

Furniture/Insulation

Automotive Parts

Aerospace Materials

Shale

Gas Benzene/Aniline

Hydrogen

Sea Bed

Coal

Biogas

Chem

icals

Users

Syngas

TVPI Current and Future?

EQUATES TO1 job 10 jobs

Conclusions

• Every major UK manufacturing sector relies on chemicals

• It is therefore critical to build a strong UK chemical industry with supply chains into these key sectors

• There are enormous opportunities for innovation and growth in the UK

• The Chemistry Growth Partnership is working with stakeholders and the UK government to ensure that we take advantage of these opportunities

39

Industry & Parliament Trust, Ludwigshafen21st July, 2016

Chemistry Growth Partnership

Philip Robinson

Thank You … Any Questions ?