CAN THE CHEMICAL INDUSTRY MAKE A COMEBACK?
Publication: THE SUNDAY GAZETTE-MAIL
Published: 05/11/2003
Page: 1D
Headline: CAN THE CHEMICAL INDUSTRY MAKE A COMEBACK?
Byline: MARTYN CHASE
What's the future of the chemicals industry in the Kanawha Valley?
Is it doomed to continue its long-term downhill slide and eventually wither and die?
The prognosis isn't encouraging. Employment continues to fall year after year as additional facilities are cut back.
Most
of the chemical plants in the Valley were designed and built for commodity
chemical production. To be blunt, that's not where the action is these days
for U.S. outfits. Commodity chemical producers are racing offshore to China
and other low-cost locations as fast as they can.
While
the recent Kanawha Valley Chemical Heritage Symposium highlighted past successes
and an intriguing history, George E. Keller II was pondering highly pertinent
questions about the industry's future.
Keller
is vice president of NewCarbon LLC in Charleston and a former Union Carbide
executive. He knows the chemicals business inside out. He retired in 1997
as senior corporate research fellow and manager of separations and process
fundamentals at Union Carbide.
Keller succinctly surveyed the global chemicals landscape - and West Virginia's role in it - for the monthly update for Industries of the Future-West
Virginia program. He noted that the chemical industry, like many others in
manufacturing, is going through a period of "agonizing" change.
From
the 1930s through the 1970s, plants producing ethylene and propylene, the
key petrochemical building blocks, were constructed at a rapid rate in the
United States. Since then, virtually no new plants have been built in the
U.S.
Instead, massive
olefin and olefin-derivatives plants have been built in Saudi Arabia, Kuwait,
Malaysia and elsewhere in the Middle East and Far East.
"The
primary lure is cheap oil and gas, because raw material costs are typically
the single largest contributor to the cost of producing commodity chemicals,"
Keller noted. Other factors favoring offshore production include less stringent
environmental regulations, lower labor costs and lower tax rates.
Is
there anything we can do to reverse the significant cost advantages other
nations have over us? Keller asked. "It's not likely."
So
what can be done? One obvious but tough choice: "Incorporate advanced technologies
and switch to producing specialty chemicals where raw material costs are
far less important," he wrote.
This
trend already is well underway. But where does that leave chemical plants
in West Virginia, most of which were built for commodity production?
Are we doomed to watch these continue to be shut down and demolished?
The
plants in the Kanawha Valley have a number of things working in their favor,
Keller said. These include power, steam, cooling water, wastewater treatment
facilities, laboratories, infrastructure - and most of all, land. There's
an abundance of flat land that makes them "extremely valuable sites for new
production facilities," he noted.
So how do you match up old plants with new products?
The
first step is to inventory everything these sites already have, Keller suggested,
including infrastructure, equipment and human talent. Next, and more difficult:
Decide what to put into these sites.
After
that, a series of other questions need to be addressed. These include: Will
the owners be willing to tackle the job of reworking their plants, or are
they interested in leasing to others who would be interested in making new
products? What incentives and programs are available to assist in restructuring
these companies? How can area universities help? What federal, state or private
resources are available?
"It's
a daunting task, but if we wish to stop the continuing downward slide of
chemical plants in the state, we need answers and actions - ASAP," Keller
concluded.
To contact business editor Martyn Chase, use e-mail or call 348-5156.
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