Europe's chemical firms pin hopes on R&D with customers

Thu Feb 20, 2014 3:16am EST
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By Ludwig Burger

FRANKFURT (Reuters) - European chemicals and plastics makers are cutting in-house research and instead trying to persuade industrial customers to work together on developing running shoes, cars or electronics.

Collaborating can cut millions of euros from research and development (R&D) budgets and translate into exclusive supplier contracts as chemical and plastics profits come under pressure from cheaper emerging market competition and rising fuel bills.

German chemicals group BASF (BASFn.DE: Quote) has started working with sportswear maker Adidas (ADSGn.DE: Quote) to make running shoe soles more bouncy. Solvay (SOLB.BR: Quote) is developing polymer linings for corroded pipelines with an oil major while Lanxess (LXSG.DE: Quote) is helping VW (VOWG_p.DE: Quote) unit Skoda make car parts.

"These days cooperations are much more common. It's much more beneficial than doing it all by yourself," said Werner Breuers, executive board member at German specialty chemicals group Lanxess.

Europe's 650 billion euro ($888 billion) chemicals industry relies on innovation after selling most of its bulk chemicals businesses over the past 20 year to focus on high-tech materials

for industrial customers.

But they need to make sure they stay innovative because emerging market companies are becoming more sophisticated at copying established products while U.S. rivals are getting a boost from shale gas as a cheap source of energy.

Weakening the European position further, many businesses in the region's largest chemicals-producing nation Germany are facing painful surcharges on their electricity bill to fund the country's shift to renewable energy.   Continued...

General view of buildings with advertising signs of the German insurer Allianz and the chemical company BASF during sunset in Berlin, November 22, 2013. REUTERS/Thomas Peter