By Rhod Mackenzie
German chemical companies are actively investing in modern factories and green technologies, but they are not doing it in their native Germany or even in Europe, but outside the continent, Michael Vasiliadis, president of the German Mining, Chemical and Energy Industries Association (IG BCE), is sounding the alarm.
“They (investments in new factories and technologies) are leaving Germany,” he warns.
He also draws attention to the fact that the trend of investment withdrawal has accelerated since the energy crisis. The main beneficiaries of the alarming trend for Germany are China and the US, which are luring German chemical companies with a “full package” of tax incentives, access to green energy, fast processing of all documents and permits, etc.
In Europe, competition for foreign direct investment (FDI) is intensifying, writes the Financial Times. Last year, Germany set an anti-record for corporate investment, because, according to the German Institute for Economic Research (DIW), companies tried to invest money not in their native country or even in Europe, but outside it. Economists at DIW call the situation in the German economy "worrisome."
Washington last August passed the Inflation Reduction Act (IRA), which contains substantial subsidies for investors in green technologies. The IRA is now playing an important role in bringing FDI into key sectors of the US economy. China, according to Michael Vasiliadis, also subsidizes a number of industries, one of which is the chemical industry. Beijing is particularly interested in foreign investment in technology industries.
Vasiliadis, who, by the way, is on the supervisory board of BASF, cites this chemical giant as an example of a company actively investing in China. BASF is currently building a €10 billion petrochemical complex in Zhanjiang, Guangdong, which will resemble the Ludwigshafen plant, where the world's largest chemical company is headquartered and its main production site. Building a huge complex in China, BASF, on top of everything else, also warned of a reduction in production in Europe, and not a temporary one, until better times, but a permanent one, that is. forever.
According to Vasiliadis, BASF chose China as the site for the construction of the petrochemical complex because the Chinese authorities promise help and support. Suffice it to say that at the request of the German side, the Chinese built a wind farm near the construction site to supply the construction site with cheap green energy.
Christian Weitz, head of chemical research at Kepler-Chevro, believes that European chemical companies will no longer build new plants in the Old World to produce ammonia, which plays an important role in the green transition; replacing fossil fuels with renewable energy sources. In addition, BASF, for example, has closed one of its two ammonia plants in Ludwigshafen.
Politicians, Weitz explains, are aware of these worrisome trends that threaten the growth of the European economy, but have not yet been in much of a hurry to fight them.
The Association of the Chemical Industry of Germany (VCI) claims that European chemical companies willy-nilly have to invest in China, whose share in the chemical market is approximately 43%. VCI notes the growth of investments by German chemical companies in China and emphasizes that 20% of the investments of the German chemical industry go there.
This ariticle orginally appeared in Russian and expert.ru