In this article we aim to present a quick and easy to digest run-down of the main trends and developments in a highlighted sector of the process manufacturing industries in one of our covered regions. For more information on the areas we cover, click here.
The UK chemical industry has shown solid growth in 2015 and this trend is expected to continue into 2016 and beyond. The £50bn UK industry is the nation’s biggest manufacturing exporter and, while having a relatively small global market share, remains a strong asset to the UK economy.
Despite a challenging second half of 2015, optimism in the industry remains high for next year with many organisations reporting an expected increase in exports and sales for the year ahead. High global levels of merger and acquisition activity along with a rise in research and development have helped to add definition to the more buoyant future outlook.
Capital expenditure investment levels continue to remain high, with 40% of manufacturers intending to increase capex investment in the coming years to around £4bn – a 7% increase on 2014. The 150,000 jobs in the industry are also expected to grow in number in 2016.
UK expertise in the industry is being sought globally, with global players seeking to access strong UK clusters such as that in the North East of England, where over 50% of the sector is currently located.
On our capex project database MyProtel, we are currently covering 270 planned investment projects, with many scheduled to move into procurement in 2016. This represents a very healthy level of opportunity for domestic and foreign suppliers of equipment and project related services.
One major emerging area of growth now and moving into 2016 is in more speciality chemicals. While the bulk chemicals market is increasingly moving away from the UK to overseas areas, niche primary chemical manufacturing is booming.
Areas such as green chemistry and advanced materials engineering are of particular note, and we are seeing more project schemes being planned in these areas. In these projects, there is a strong requirement for high specification equipment, services and even cleanroom environments.
• Nova Pangaea Technologies Ltd – New biomass/liquid fuel pilot facility – £5m demo then £30m production plant
• BioMe Polymers – Southampton – lignin used to produce bio plastics for printing and possible coffee pods – a £3m development programme – potential for £10m production plant in the Midlands
• Hexcel Composites – Duxford – site manufactures composite materials and structural parts for aerospace sector several projects £4.5m, £10m – rolling programme
• Rolls Royce – Bristol – capacity expansion for advanced engine and cowlings – £10m in 2016 then £30m+ in 2018
Shale gas import is an expected area of growth in the coming years, as plans are considered to introduce a dedicated pipeline for US gas to be processed by INEOS in the UK. On the other hand, Petrofac has placed plans for a Shetland gas handling plant on hold. TATA steel consolidations have resulted in a likely gain for South Wales, with Port Talbot jobs and investment to follow. The refineries remain relatively quiet.
The chemical industry is becoming increasingly competitive for suppliers as more players move from the oil & gas industry due to downward pressure on prices as a result of global price reductions. However, the higher cost associated with expertise from this industry leaves some relatively uncompetitive compared to chemical industry stalwarts.
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