Chemical cost restructuring

Global M A activity in the chemical industry peaked during 1998 and 1999 at about EUR 100 billion p.a., reflecting the equity markets support of such transactions. The market s focus on cost restructuring later led to a fall in M A to an annual volume of about EUR 15-25 billion. Recent industrial buyer-driven transactions in chemicals include Lubrizol s acquisition of Noveon in June 2004, Cytec s acquisition of Surface Specialties from UCB in early 2005, and Albemarle s acquisition of Akzo Refinery Catalysts in August 2004. 

Figure 10 also explains why any production network design decision in specialty chemicals needs to take into account the interdependencies between the two perspectives. Restructurings at the value chain level usually affect several production sites. The decision to relocate a value chain s production to a different site may for example endanger the cost competitiveness of the entire site if a large share of the site s fixed costs was absorbed by this value chain. Similarly, the decision to close a production site generally affects multiple value chains and may require network redesign projects for each value chain to decide on how to redistribute production. 

The Spanish chemical industry was also faced with considerable difficulties. Short of innovations, it had developed through foreign technologies and had lived a sheltered life behind customs barriers and import licenses not conducive to cost cuts. Neither Spain s petrochemicals industry, which was in the hands of the Enpetrol state group and the private company CEPSA, nor the main national companies Explosivos de Rio Tinto (ERT) and Cros, were in a position to face without transition the pressure of competition felt when Spain joined the Common Market. This was particularly true of ERT, which had missed bankruptcy by a hair, and Cros, which had remained in the red for a long time. Neither would be able to avoid severe restructuring. 

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