SAO PAULO (ICIS)–EU chemicals trade group welcomed on Friday the “political agreement” between the 27-country bloc and the five-country bloc Mercosur on their free trade deal but, after being 25 years in the making, loose ends for its ratification remain. The agreement, yet to be published in full, must now be ratified by national parliaments as well as executive EU bodies. Considering the backlash it has already caused among some constituencies, such as farmers in France, it is not certain the deal will be ratified swiftly. Deforestation concerns in the Amazon or the sharp differences in workers’ rights in the EU and Mercosur have in the past also presented stones on the way. On Friday, the president of the European Commission – the EU’s main executive arm – told citizens of the 450-million people bloc their “livelihoods are protected”, addressing particularly farmers’ concerns. “This is a win-win agreement, which will bring meaningful benefits to consumers and businesses, on both sides. We are focused on fairness and mutual benefit. We have listened to the concerns of our farmers, and we acted on them,” said Ursula von der Leyen. “This agreement includes robust safeguards to protect your livelihoods. EU-Mercosur is the biggest agreement ever, when it comes to the protection of EU food and drinks products. More than 350 EU products now are protected by a geographical indication. In addition, our European health and food standards remain untouchable.” She added new safeguards had been added to the deal to comply strictly with those standards to access the EU market. Von der Leyen added EU companies will save €4 billion worth of export duties per year. BREATHING SPACE FOR BELEAGUERED EU CHEMICALS?The chemicals industry has always been in favor of the deal on both sides of the Atlantic. The EU’s chemicals trade group Cefic said on Friday its members should “gain an edge” in trade with Mercosur, paramount to compete against other global chemicals players. The EU and Germany – its largest chemicals producer – are net exporters of chemicals. In principle, they have a lot to win with free trade agreements as they can allow them to expand markets as trade barriers are reduced. At the same time, in the global game of trade, large companies also have more to win than small- and medium-size enterprises (SMEs), who do not have the same prowess in terms of reach and influence. Chemicals majors also tend to carry commanding voices in trade groups such Cefic, Germany’s VCI or, within Mercosur, Abiquim. In 2022, trade between the EU and Mercosur stood at €13.6 billion, with a trade surplus in favor of the EU of €5.2 billion, according to Cefic figures. The figures are modest considering the EU’s chemicals industry’s exports stood at €553.0 billion in 2022. The 27-country bloc imported chemicals worth €363.0 billion, so it posted a trade surplus of €190.0 billion, according to the EU’s statistics office Eurostat. This landmark agreement marks a significant milestone in fostering free, fair, sustainable and resilient trade relations between the European Union and the four Mercosur countries Argentina, Brazil, Paraguay and Uruguay. Both Cefic and the EU did not mention Bolivia as a Mercosur member, but the country joined the bloc in July. Venezuela used to be a part of it, but its membership was suspended under the current regime. Cefic and other industrial trade groups in the EU had already urged a rapid conclusion of the agreement in November in an open letter to EU bodies. “The EU-Mercosur Agreement opens tremendous opportunities for both regions. From an EU perspective, it is a crucial opportunity for companies to gain a competitive edge by accessing one of the world’s largest markets,” said Cefic’s deputy director general Sylvie Lemoine. “This agreement enhances market access, enabling EU businesses to compete more effectively on the global stage, fostering economic growth and strengthening the EU’s industrial base. This is fully in line with the spirit of the Antwerp Declaration.” “We now call upon all EU decision-makers to rapidly ratify and bring the agreement into force.” Brazil’s chemicals producers’ trade group Abiquim had not responded to a request for comment at the time of writing, but in the past it has been supportive of the trade deal. Front page picture source: Cefic

LONDON (ICIS)–While countries around the world bet on battery technology, Germany has taken a step back with plans to cut funding for battery research – to the dismay of its chemicals and other industries. Battery research key to energy transformation Trying to catch up with China New government may reverse cuts after election With the cuts in the federal government’s 2025 draft budget, the German federal research and education ministry could stop funding new battery research projects as soon as next year. The cuts would also include a reduction in so-called “commitment appropriations” (Verpflichtungsermachtigungen) of more than €100 million for spending on battery research in future years, according to the opposition Christian Democrats. Chemical producers’ trade group VCI said that the cuts would lead to “a loss of added value” and raised the risk of Germany becoming more dependent for batteries on other countries or regions. Germany needed strong research funding in this field in order to catch up with other countries, said Ulrike Zimmer, head of science, technology and environment at VCI. “This is the only way Germany can maintain its chances in competition with the US and China, and also train the urgently needed skilled workers,” she said. The planned funding cuts have already created uncertainties at academic and research institutes, VCI warned in a joint statement this week with trade groups from the machinery, electronics and digital sectors. As it stands, employment contracts could currently not be extended and new contracts could not be signed, the groups said. Research institutions were losing scientists due to the lack of prospects in the battery field, and the technology transfer via collaborations and start-up companies was coming to a standstill, they said. They said the cuts would have far-reaching consequences as they affected all industries involved in the battery value chain: chemical companies, mechanical and plant engineering, cell manufacturers and all industries whose products are based on the performance, price and availability of batteries. Affected sectors included electric vehicles (EVs), stationary storage systems, drones, power tools and robots, among others, they said. TRYING TO CATCH UP WITH CHINA Peter Lamp, head of battery technology at automaker BMW, told a parliamentary committee on Wednesday, 4 December that without powerful batteries, the transformation to a carbon dioxide (CO2)-neutral energy and transport industry was not possible. The availability of modern battery technologies was crucial to successfully implementing the energy transition, he said. Lamp criticized Germany’s current dependence on Asian battery cell suppliers. Germany and the EU needed “technological sovereignty” in this area, he said, adding that the planned reduction in funding was therefore “incomprehensible”. Auto industry trade group VDA said that funding for battery research was of “central significance” for the future of the German automotive industry. The country’s Fraunhofer research institute said in a submission to the committee that government support for battery research was “an essential prerequisite” for the success of Germany’s energy and mobility transition. Battery research played a key role in the development of electrochemical energy storage solutions, as well as battery and production development, it said. China and other Asian countries were far ahead in developing and producing batteries, the institute noted. “In order to counter the dominance of Asian players in battery technology and the associated supply chains, Germany and Europe must constantly build up skills and technologies for large-volume battery cell production for all applications, also as insurance against geopolitical dependency,” it said. NEW GOVERNMENT Government officials have said that the cuts were necessary because the country’s supreme court ruled last year that Berlin needed to trim spending in order to comply with the “debt-brake” (Schuldenbremse), which is a constitutionally enshrined provision to keep public deficits low and limit debt. However, there is a chance that the cuts may be reversed in the event of a change in government in Berlin. Following the collapse last month of Chancellor Olaf Scholz’s coalition government, early elections will likely be held in February. The Christian Democrats, which are ahead of Scholz’s Social Democrats in opinion polls on the election, have said that the cuts to battery research, as well as the abolition last year of an incentive for the purchase of EVs, were “short-sighted”. The party has introduced a motion in parliament calling for “strong battery research in Germany”, which prompted Wednesday’s parliamentary committee hearing. Countries such as China, the US, Japan, and South Korea had nearly tripled public spending on battery research over the past four years while Germany risked falling behind internationally in this important area, it said. The cuts would also jeopardize the support the government already committed for investments in construction for battery plants, the party said, and noted the support the government has granted to a project by Sweden’s Northvolt at the Heide chemicals and refining site northwest of Hamburg. Spending a lot of money on battery factories and significantly less on research and training was “highly risky”, it said. The Northvolt project may not be realized, however. The company last month filed for Chapter 11 protection and reorganization in the US, raising questions about its future and the prospects of the German project. BATTERIES, EVs AND CHEMICALS Batteries and the EVs they power are important market opportunities for the chemical industry. An EV contains more plastics and polymer composites and more synthetic rubber and elastomers than a conventional vehicle powered by the internal combustion engine. However, BASF said earlier this year that market dynamics in the EV sector were slowing, and the company would therefore pause or may not make certain investments connected to the industry. One project on which BASF paused work is a proposed commercial-scale EV battery recycling metal refinery at its chemicals production complex in Tarragona, Spain. GERMANY AUTO INDUSTRY SENTIMENT IN DECLINE Meanwhile, the sentiment in Germany’s automotive industry continued to deteriorate in November, according to the latest survey by Munich-based research group ifo this week. Demand was weak and the industry remained stuck in a “mix of far-reaching transformation, intense competition, and a weak economy”, ifo said. Also, thousands of Volkswagen workers went on a short strike on Monday, 2 December to protest against potential job cuts and plant closures in Germany, and their union, IG Metall, has announced another strike for Monday, 9 December. The automotive sector drives demand for chemicals such as polypropylene (PP), along with nylon, polystyrene (PS), styrene butadiene rubber (SBR), polyurethane (PU), methyl methacrylate (MMA) and polymethyl methacrylate (PMMA). Additional reporting by Tom Brown Please also visit the ICIS topic page Automotive: Impact on chemicals Thumbnail photo source: BASF Focus by Stefan Baumgarten

LONDON (ICIS)–Senior Editor for Recycling Matt Tudball discusses the latest developments in the European recycled polyethylene terephthalate (R-PET) market, including: Different views on colourless (C) flake prices in northwest Europe (NWE) Higher bale prices heard but not confirmed in eastern Europe and Poland Outlook for 2025 still a big question mark

LONDON (ICIS)–Economic growth in both the eurozone and the EU accelerated in Q3, according to official revised data on Friday. Seasonally adjusted GDP increased by 0.4% in the eurozone and the EU from the previous quarter. In Q2, GDP grew by 0.2% in both the eurozone and the EU from Q1, statistics agency Eurostat said in an update from its initial estimate at the end of October. % change from the previous quarter Q1 Q2 Q3 Eurozone 0.3 0.2 0.4 EU 0.3 0.2 0.4 On a year-on-year basis, Q3 GDP increased by 0.9% in the eurozone and by 1.0% in the EU.

MUMBAI (ICIS)–India’s central bank on Friday maintained its benchmark interest rate at 6.5% but cut its cash reserve ratio (CRR) by 50 basis points to 4%, in a bid to improve growth and rein in high inflation. Monetary policy stance kept at “neutral” Year-to-March 2025 GDP growth forecast cut to 6.6% from 7.2% High food prices to keep consumer inflation elevated in Oct-Dec 2024 In its monetary policy decision, the Reserve Bank of India (RBI) retained its monetary policy stance at “neutral”. It has maintained the repo rate at 6.5% since February 2023. CRR is the percentage of a bank’s total deposits that it is required to maintain in cash with the RBI as a reserve. India is a giant emerging market in Asia and is a major importer of petrochemicals. The central bank’s hawkish outlook is due to persistently high food inflation, which has yet to stabilize, RBI governor Shaktikanta Das said during his address to the media. While the central bank remains optimistic about India’s growth outlook, following a good monsoon season and an anticipated revival of capital expenditure, global factors could slow down growth, Das said. “Headwinds from geopolitical uncertainties, volatility in international commodity prices, and geo-economic fragmentation continue to pose risks to the outlook,” RBI said in its official statement. The outlook is also “clouded by rising tendencies of protectionism which have the potential to undermine global growth and push inflation higher”, it added. RBI has lowered its GDP growth forecast for the fiscal year ending March 2025 to 6.6%, from 7.2% previously, in view of weak fiscal Q2 performance. India’s GDP for the July-September quarter slowed to an almost two-year low of 5.4%, on sluggish growth and weak demand. It was also significantly lower than the RBI’s projection of a 7% growth for the quarter. RBI GDP Forecasts New – 6 December 2024 Old October-December (Q3) 6.8% 7.4% January-March (Q4) 7.2% 7.4% Fiscal year ending March 2025 6.6% 7.2% April-June (Q1 FY2025-26) 6.9% 7.3% July-September (Q2) 7.3% – Meanwhile, inflation forecast for the current fiscal year was raised to 4.8% from 4.5% on continued high food inflation. “Inflation increased sharply in September and October 2024, led by an unanticipated increase in food prices. Core inflation, though at subdued levels, also registered a pickup in October,” Das said. In October, consumer inflation had risen to a 14-month high of 6.21% due to a spike in food prices. The RBI expects food prices to keep inflation rates elevated in the October-to- December quarter, Das said. RBI inflation forecasts New – 6 December 2024 Old October-December (Q3) 5.7% 4.8% January-March (Q4) 4.5% 4.2% Fiscal year ending March 2025 4.8% 4.5% April-June (Q1 FY2025-26) 4.6% 4.3% July-September (Q2) 4% – Focus article by Priya Jestin

Romanian MP calls on EU to work closely with member states to cut back on red tape Incoming Romanian government must address bureaucracy, high taxation, introduce market reform Romania can establish itself as viable regional alternative to Austrian gas hub LONDON (ICIS)–The incoming European Commission should simplify procedures to access funds for energy projects and strengthen the dialogue with member states particularly in Eastern Europe amid growing popular discontent, a Romanian parliamentarian told ICIS. Speaking to ICIS, Cristina Pruna, vice-president of the industries and services committee in the Romanian parliament said the Romanian energy sector played a major role not only in the EU but also in supporting neighbouring countries such as Moldova and Ukraine. She warned previous delays in allowing Romania to join key agreements such as the EU’s Schengen area, which abolishes border controls, or bureaucratic procedures complicating efforts to tap funds had created major frustrations, which may be partially responsible for gains made by far-right parties in recent polls. REFORM She conceded the incoming Romanian government, which will be formed following parliamentary elections on December 1, will also have to address multiple internal challenges. These include encouraging local and foreign investments in the gas and renewable sectors, cutting back on red tape, reducing taxes and preparing the market for deregulation. She said her party, Uniunea Salvati Romania (USR), which is currently in talks to form the incoming coalition government, had proposed to establish a one-stop-shop at the regulator ANRE to help investors navigate the bureaucratic process to access EU funds for renewable projects. Furthermore, she said Romania should establish power and gas markets where prices are set by demand and supply and insisted there should be a predictable legal framework in place to support vulnerable consumers as well as industrial consumers. One of her party’s proposals is to introduce an automatic mechanism to guarantee tax credits for industrial consumers, which would allow them to deduct from taxes part of rising energy costs. Market participants have complained caps on electricity and gas prices introduced following the 2022 energy crisis had led to burdensome taxation and market distortions. Pruna agreed caps should be lifted but insisted consumers should be prepared for market deregulation expected in 2025. TAXATION Although the ruling Partidul Social Democrat (PSD) won the latest polls with a narrow lead, their policies to date have led to a high taxation regime that has throttled investments and led to nosediving liquidity on Romania’s forward electricity and gas markets. As a result of policies spearheaded by PSD and the liberal party, PNL, in the outgoing coalition government, up to 87% of the money made from gas/oil sales is paid in royalties, windfall taxes and contributions to various funds. Their policies have also led to regulatory unpredictability, deterring large-scale investments. Meanwhile, there are fears that the three far-right populist parties which won seats in parliament –  Alliance for the Union of Romanians (AUR), Partidul Oamenilor Tineri (POT) and S.O.S. Romania – could push for policies that would exacerbate an already visible nationalist streak which has underpinned Romania’s energy regulations in recent years. AUR calls into question the privatisation and sale of Romania’s oil and gas assets to OMV Petrom in the early 2000s. Meanwhile, the front-running presidential candidate Calin Georgescu who will face the USR candidate Elena Lasconi in a run-off on December 8, claimed Romanians are ‘suffocated by taxes’ but neither he nor his newly established party POT has proposed concrete measures to scrap them. ENERGY MIX Although USR advocates scaled up nuclear and solar as well as onshore and offshore wind production, Pruna is keen to point out that Romania should capitalise on its gas reserves. “Offshore Black Sea gas production is due to come onstream in 2027 during the mandate of the incoming 2025-2028 government. We need to ensure that Romania establishes itself as a viable regional market and an alternative to the Austrian gas hub,” she said. She also noted the importance of working closely with Moldova and Ukraine to increase border capacity for electricity and gas flows.

HOUSTON (ICIS)–Canadian farmers reported growing more wheat, oats, soybeans, dry peas and lentils, but less canola, corn and barley in 2024, according to the production of principle fields crops report from Statistics Canada. The government agency said that overall yields were higher this year compared with 2023 but there were some areas where farmers continued to face issues related to dry conditions. This was true particularly in western Canada, which the report states had a promising start to the 2024 growing season. It noted that much of the prairies received timely precipitation during seeding, although cool conditions delayed crop development in some areas. Yet a lack of rain as the summer progressed, coupled with hot weather, resulted in lower yields in some areas compared with 2023. There were good field conditions throughout the fall months which allowed farmers to complete harvest ahead of schedule, with most crops out of the fields before data collection for the November field crop survey. The agency said there were locations that did receive above-average rainfall, specifically in Ontario and western Quebec, which when combined with increased summer heat benefitted growers with higher yields. Total wheat production rose 6.1% to 35 million tonnes in 2024, with Saskatchewan wheat production rising 12.2% to 16.5 million tonnes in 2024. In Alberta, higher yields resulted in a 6.4% increase in wheat production to 9.9 million tonnes, while Manitoba was up 0.7% to 5.5 million tonnes. Canola production decreased 7.0% nationally to 17.8 million tonnes in 2024, with this drop because of lower yields and harvested area, with the declined output attributed to the hot and dry conditions in parts of western Canada in July and August. Total corn for grain production fell 0.5% to 15.3 million tonnes in 2024 with harvested area down by 4.6% to 3.6 million acres, offsetting a 4.3% increase in yields to 168.7 bushels/acre. Ontario farmers, who grow almost two-thirds of Canada’s corn were down 3.5% to 9.6 million tonnes, while Quebec rose 7.9% to 3.6 million tonnes in 2024. Manitoba farmers had 1.8 million tonnes in 2024 with lower harvested area, but yields were up 8.6% to 139.4 bushels/acre. Soybean production increased 8.4% nationally to 7.6 million tonnes in 2024 with the increase due to higher yields, which were up by 7.0% to stand at 49.1 bushels/acre, while the harvested area for the crop increased 1.3% to 5.7 million acres. In Ontario soybean production climbed 7.9% year on year to 4.4 million tonnes in 2024, while in Manitoba the harvested area fell 10.9% to 1.4 million acres in 2024. Production in Quebec rose 9.3% to 1.4 million tonnes in 2024, on higher yields and harvested area. Barley production was decreased by 8.6% to 8.1 million tonnes in 2024 because of lower harvested area, which the report said was partially offset by a 3.3% increase in yields to 63.2 bushels/acre nationally. Total oat production increased by 27.0% to 3.4 million tonnes as both harvested area and yields increased in 2024. The improvements in crop output reflects the sentiment towards fertilizer consumption within in Canada this year, with nitrogen and potash volumes having robust periods of consumption during the spring. There were additional stretches of demand with significant refill participant and a good post-harvest run of ammonia also taking place before the recent arrival of winter conditions. Sentiment is that spring demand could continue at a strong pace if nutrient values do not escalate over the coming weeks and if future crop prices either stay steady or can gain some slightly increase before sowings start again.

HOUSTON (ICIS)–The 15 January deadline for finalizing a new labor agreement between unionized dock workers at US Gulf and East Coast ports and the negotiating entity for the ports is nearing with no clear progress on a key remaining issue – automation. This week, a union vice president criticized semi-automated rail-mounted gantry cranes (RMGs) for eliminating jobs and posing national security risks in a post on the International Longshoremen’s Association (ILA) website. In response, the United States Maritime Alliance (USMX), the group representing the ports, defended automation as essential for port modernization and addressing land constraints. The ILA paused a three-day strike on 3 October after agreeing on a wage increase, with a commitment to negotiate the remaining issues by 15 January. Top among the remaining issues is the automation or semi-automation at the ports, which the ILA is adamantly against because they think it will take jobs typically done by humans and which the USMX says is needed for the US to remain competitive. ILA Vice President Dennis A Daggett said in his post on the union’s website that the ILA is not against progress, innovation, or modernization – “but we cannot support technology that jeopardizes jobs, threatens national security, and puts the future of the workforce at risk”. Daggett explained that in the early-2000s, employers introduced semi-automated RMGs at a greenfield terminal on the East Coast, saying the move would create thousands of jobs. “What seemed like a win for one port turned out to be the project that is becoming the model for automation that could potentially chip away at many jobs at almost every other terminal along the East and Gulf coasts,” Daggett said. Daggett said 95% of work performed by RMGs is fully automated. “From the moment a container is dropped off by a shuttle carrier, the RMG operates on its own – lifting, stacking, and moving containers, including gantry and hoisting, without any human intervention,” Daggett said. “This includes the auto-stacking of containers in the container stack, which is also fully automated. Only in the last six feet of the container’s journey on the landside, when it is placed on a truck chassis, does an operator step in. But how long until employers automate those final six feet as well?” The USMX, in a response, said modernization and investment in new technology are core priorities required to successfully bargain a new master contract with the ILA – they are essential to building a sustainable and greener future for the US maritime industry. “Port operations must evolve, and embracing modern technology is critical to this evolution,” the USMX said. “It means improving performance to move more cargo more efficiently through existing facilities – advancements that are crucial for US workers, consumers, and companies,” the USMX said. “Due to the lack of available new land in most ports, the only way for US East and Gulf Coast ports to handle more volume is to densify terminals – enabling the movement of more cargo through their existing footprints. It has been proven this can be accomplished while delivering benefits to both USMX members and to the ILA.” The USMX stressed that it is not, nor has it ever been, seeking to eliminate jobs, but to simply implement and maintain the use of equipment and technology already allowed under the current contract agreements and already widely in use, including at some USMX ports. As an example, the USMX pointed to a terminal where modern crane technology was implemented more than a decade ago, which was previously limited to a 775,000-container capacity using traditional equipment. That same terminal nearly doubled its volume after incorporating the use of modern rail-mounted gantry cranes into its daily operations. “The added capacity delivered an equal increase in hours worked, leading to more union jobs, as the terminal went from employing approximately 600 workers a day to nearly 1,200,” the USMX said. “Moving more containers through the existing terminal footprints also means higher wages from the increased cargo, bringing in more money for volume/tonnage bonuses.” Container ships and costs for shipping containers are relevant to the chemical industry because while most chemicals are liquids and are shipped in tankers, container ships transport polymers, such as polyethylene (PE) and polypropylene (PP), are shipped in pellets. They also transport liquid chemicals in isotanks. No negotiations are currently underway with just about five weeks left before the deadline. Focus article by Adam Yanelli

PARIS (ICIS)–Global specialty chemicals producer Arkema aims to supercharge growth in key targeted markets by leveraging proprietary chemistries to develop new products with clear sustainability and performance benefits. From France-based Arkema’s spinoff from energy giant Total (now TotalEnergies) in 2006, the company has undergone a major transformation from a diversified chemical company with a mixed bag of commodity, intermediates and specialty businesses, to nearly a pure play specialty and materials business today. “We had to revisit the strategy of the company in-depth, and we had a strong belief at that time that there was an exponential growth [opportunity] in innovative and high performance materials,” said Thierry Le Henaff, chairman and CEO of Arkema, in a video interview with ICIS. “So our strategy was to focus on specialty materials around three segments – adhesives, coatings solutions, and also high performance additives and polymers in order to make Arkema a pure specialty player,” he added. Le Henaff is the 2024 ICIS CEO of the Year, having been selected in a vote among his peers – the CEOs and senior executives in the ICIS Top 40 Power Players. M&A STRATEGY AND LATEST DEALSThe latest move in the company’s transformation is the acquisition of Dow’s flexible packaging laminating adhesives business for $150 million which just closed on 2 December. The deal adds about $250 million in sales to Arkema’s Bostik adhesives business, and Le Henaff calls it a “step change” for Bostik in the flexible packaging adhesives market, giving it a unique opportunity to be a key partner for customers across the packaging industry. Arkema will spend around $50 million in implementation costs or capex related to the acquisition and is targeting about $30 million in annual cost and development synergies after five years. “We are going to continue to invest in… cost optimization, but at the same time continue to change the portfolio, which means to invest in M&A,” said Le Henaff. The Dow deal comes on top of major acquisitions such as a 54% stake in South Korea-based PI Advanced Materials (polyimide films for mobile devices and electric vehicles) in December 2023 and US-based Ashland’s performance adhesives business (pressure-sensitive adhesives for auto and buildings) in February 2022. While the company will now focus more on organic growth, bolt-on acquisitions will be an important part of Arkema’s strategy in the coming years, he noted. One such smaller bolt-on deal was the April 2024 acquisition of a 78% stake in Austria-based Proionic, a start-up company for the development of ionic liquids, a key component for the next generation of EV batteries. HYPER GROWTH SUBMARKETSSpeaking of organic growth, the Arkema CEO has an ambitious goal of growing sales in certain parts of its specialty businesses at a rate triple that of its overall business through 2028. These high growth areas are green energy and electric mobility; advanced electronics; efficient buildings and homes; sustainable lifestyle; and water filtration, medical devices and crop nutrition. “It is really with this combination of our technologies [in] these submarkets… where we want to multiply by three, the average growth of Arkema. This means that in this market, we could deliver 12% organic growth while for the average of Arkema it would be 4%,” said Le Henaff. Arkema aims to grow these businesses from around 15% of sales in 2023, to 25% of total sales, which are projected to be around €12 billion, by 2028. These high growth areas with three times higher sales than the group average will account for 50% of the company’s R&D budget. “We have about 15 technologies, superior technologies, where we can really differentiate ourselves. Our strategy is really to take advantage of this sustainability trend,” said Le Henaff. “In fact, the answer to climate change is through the solutions we can develop for customers. This is really the core of our strategy,” he added. Within electric mobility, in addition to the acquisition of a majority stake in Proionic, Arkema in January 2024 took a stake in Tiamat, a pioneer in sodium-ion battery technology – a potential alternative to lithium-ion batteries. RENEWABLE RAW MATERIALS AND DECARBONIZATIONArkema is also undertaking organic growth projects in these hyper growth submarkets. One key project is in bio-based polyamide 11, used in bicycle helmets, consumer goods, wire and cable and medical equipment. “We are adding more and more renewable raw materials in the product range we are offering to our customers. One good example and very emblematic [of our strategy] is this polyamide 11 made from castor oil, which is a fully sustainable, renewable, bio-sourced, high performance polymer,” said Le Henaff. “We are very proud of it, and we have just invested in a plant in Singapore to accelerate the growth of this polymer,” he added. Its Rilsan bio-based PA 11 has an 80% lower carbon footprint versus traditional polyamide resins using fossil-based raw materials and conventional energy sources, according to the company. Arkema also recently launched more sustainable adhesive solutions, including its Kizen LIME range of packaging adhesives made with a minimum of 80% renewable ingredients, and Bostik Fast Glue Ultra+ for do-it-yourself (DIY) applications with 60% bio-based materials. Along with helping its customers decarbonize, the company is also decarbonizing its own operations, targeting a 48.5% reduction in Scope 1 and 2 emissions, and a 54% reduction in Scope 3 emissions by 2030 versus a 2019 base. One major project is to decarbonize its acrylics production in Carling, France by installing new purification technology. The €130 million project should result in a 20% reduction in CO2 emissions at the site by 2026. GLOBAL FOOTPRINTAlong with its transformation into pure play specialties, Arkema has also diversified its global footprint, with more exposure in North America than Europe. Today Arkema is a global player with close to 40% of sales in North America, 25% in Asia and around a third in Europe, versus Europe at about 60% of sales when it was spun off in 2006, the CEO pointed out. “I still believe in Europe, but it’s clear that we have a gap in competitiveness and also in demand. The pace of demand is slower for Europe than it is for the rest of the world,” said Le Henaff. “It’s very important that our governments and the European Commission understand that the cost of doing business in Europe is too high compared to what it is in the rest of the world because of legislation, because of the cost of energy, because of the cost of raw materials,” he added. There is much work to do on this front to get Europe back to competitiveness and growth, especially for chemicals, he said. DEMONSTRATING RESILIENCEArkema’s geographic diversification and specialties focus has made it more resilient to challenging macroeconomic markets. In Q3, sales rose 2.9% year on year to €2.39 billion and adjusted earnings before interest, tax, depreciation and amortization (EBITDA) increased 5.4% to €407 million, the latter driven by 9.0% growth in specialty materials, offsetting a 7.3% decline in intermediates segment. Its overall EBITDA margin expanded to 17.0% versus 16.6% a year ago. A strong focus on efficiency and a healthy balance sheet has served it well. “Arkema over 20 years has doubled in size and we have a set number of headcount. This means that competitiveness and productivity is very important for Arkema, even if we are less vocal than other companies on this topic,” said Le Henaff. On the balance sheet side, net debt of around €3.11 billion is “tightly controlled” at a conservative two times last 12 months EBITDA. TRANSFORMATION NEVER OVERKey to success for Arkema is to continuously evolve, be nimble and be open to growth opportunities. “It’s never over. The status quo in this world is not possible, because the world is changing all the time, because of demography, because of geopolitics, for plenty of reasons, so we have to move forward,” said Le Henaff. “There are plenty of opportunities, but the opportunities of today won’t be the opportunities of tomorrow. So we really need to have a company which is structured to be able to catch these new opportunities which arise all the time,” he added. Meanwhile, on the macro-outlook for 2025, he is cautiously optimistic. “We are all cautious because we thought 2023 would be the year of the rebound and also 2024, so we have to be cautious for 2025. But I’m cautiously optimistic,” said Le Henaff. “I still think that we should have some kind of rebound for 2025. We’ll see if I’m right or not, but in the meantime, I would say the most important thing is we need to continue [evolving]. We are very glad to be in a unique position because at the end of 2024, we will have nearly fully financed billions of euros of projects, including external growth and organic growth,” he added. PEOPLE AND CULTUREKey to any ongoing transformation is of course the people involved. Arkema deems it critical to keep its people engaged with the mission. “I think, in a world which is quite volatile, quite changing, it’s very important to have fixed points,” said Le Henaff. First, the long-term strategy and vision has to be attractive. But equally as important is having a corporate culture with clear and simple values. These five values for Arkema are: Solidarity, Performance, Simplicity, Empowerment and Inclusion. It is the culture that amplifies the inherent strengths in an organization, including technology, and smooths the path for continued successful transformation in an uncertain world, he said. Interview article by Joseph Chang Watch the exclusive Q&A video interview with Arkema CEO Thierry Le Henaff on the 2024 ICIS CEO of the Year landing page.