Romania’s chemical industry

MachinesTechnical ArticlesSouth-East European INDUSTRIAL Мarket - issue 1/2022 • 22.03.2022

With most of all manufactured goods relying on chemicals, Europe’s chemical industry is a crucial element of almost all value chains and a vital part of Europe’s economy. During the last two years marked by the pandemic and the subsequent economic crisis, the sector proved in practice its strategic role for Europe producing the necessary healthcare materials and equipment. Tomorrow’s world will become even more so a world created by chemistry, as many future climate-neutral and circular solutions rely on chemistry, from wind turbines to electric vehicles. Consequently, the European Commission has recognised the chemical industry for its “indispensable” role to help society achieve the new European Green Deal objectives.

The European chemical industry has the ambition to become climate-neutral by 2050, and the sector is uniquely positioned at the heart of European manufacturing to contribute to realizing a climate-neutral society. At the same time, the chemical industry must remain competitive while undergoing a green and digital twin transition in order to become climate-neutral, circular and digital, all while navigating the Chemicals Strategy for Sustainability, which will not only affect the sector economically for the years and decades to come, but it will also create a significant “ripple effect” across many value chains relying on chemicals.
For this transition to be successful, a clear pathway that includes concrete timelines, milestones, and measures should be put forward by EU policymakers in close collaboration with Industry. This transition pathway for the chemical industry should ensure the availability of competitively priced renewable and low-carbon energy, promote innovation and the deployment of breakthrough technologies, support the development of relevant infrastructure and facilitate access to public and private finance.

 

Country profile

Romania’s most valuable exported products are automotive parts and accessories (9% of total) followed by cars (7,1%), insulated wire or cable (5,3%), refined petroleum oils (3,2%), electrical or optical circuit boards and panels (also 3,2%), seats and chairs (2,4%), new rubber tires (2,2%), corn (1,8%), wheat (1,7%) and mobile phones (1,6%). Romania imports mostly machinery and equipment, other manufactured goods, chemicals, agricultural products and foodstuffs, fuels and minerals, metals and metal products, raw materials, textiles and textile articles.

Until 1990, the chemical industry of Romania was one of the largest in Eastern Europe as the country enjoys substantial natural reserves, namely salt, sulphur, potassium, oil and methane gas. During the communist regime, this industry engaged significant material and human resources. 72 factories and combined plants which had the role of processing raw materials at national level were built. A high-performance education system was organized for the training of human resources with 12 vocational schools and 23 high schools, 17 faculties and 10 research and design institutes.

The peak of this industry was in 1980. Bucharest held 14,6% of chemical production, followed by Arges, where the petrochemical department of Arpechim Refinery accounted for about 8% of national chemical production, and Prahova, where the presence of refineries led the county at a rate of 7,2%. Bacau followed, producing mainly through the Borzesti Petrochemical Plant and Amurco Plant, with a share of 6,7%, Valcea, through Oltchim, had 6,5%, and Brasov County had a share of 6,1%.
In the beginning of 1990, the Romanian chemical industry produced goods worth RON 469 billion, i.e. about EUR 3 billion. The average annual growth rate was 14,9%. Between 1960 and 1989, the number of chemical enterprises rose from 57 to 89, and the average number of employees increased from 45 900 in 1960 to 207 000 in 1989. Production in the chemical industry increased 221 times in 1989 compared to 1960.

A percentage of the Romanian chemical industry was destroyed after 1989. Starting with 1990, Romania transitioned from a centralized economy, built on the excessive domination of the state property through specific regulations and institutions, to an economy based on the mechanisms and the institutions of the free market, which is more and more globalized. Therefore, the production of synthetic rubber, synthetic fiber, polystyrene, polyethylene, and pesticide, and the local market became dependent on imports.

According to the Romanian National Institute of Statistics, Romanian exports in 2017 had a value of EUR 2,76 billion, while imports had a value of EUR 10 billion, generating a difference of EUR 7,2 billion. The total trade deficit was over 13 billion, with more than a half of the deficit represented by the chemical industry. The reduction of the production capacity and the competitiveness issues led to the appearance of a negative balance in 2007, the equivalent of 56% from the total trade deficit or almost 4% from the Romanian GDP. Eurostat data shows that Romania registered an annual growing rhythm of 4,6% for the chemicals import from non-EU sources, for the period 2007 – 2017, and classifies the last as increase percentage of the exports for the same period and on the same relation (only 2%). Without improving the situation regarding the loss of competitiveness compared to the EU and non-EU countries, it will be very difficult to reverse the negative trend.

 

Major chemical companies

The Nitrogenous Fertilizers Works Targu-Mures – now Azomures SA was founded in 1962 as an enterprise with a profile of manufacturing nitrogenous fertilizers having 3 producing plants (ammonia, nitric acid and ammonium nitrate) and 5 auxiliary units for providing the plants with cooling water, demineralized water, steam, electric power, tools and spares. After 1990, Azomures went through several periods of restructuring. In the late 90’s privatization took place and as of 2012 Azomures is transferred in property to Ameropa. The company’s shares are registered in Bucharest Stock Exchange since January 1996. Azomures SA is delisted since December 7, 2012

Oltchim is a major producer in the chemical industry in Central and Eastern Europe. Over time, the company has proven technological flexibility and ability, backed by over 45 years of research and innovation, to provide competitive products. Oltchim was founded in 1966 as the Chemical Works and since 1990 the company has operated as a joint stock company in accordance with Government Decision 1213/1990, by incorporating the entire patrimony of the former Chemical Works. Oltchim became a public company in 1997 by listing on the Bucharest Stock Exchange.

Some of the benefits of Oltchim’s location include: existence of multiple mineral resources in the area – salt, limestone, oil and gas, coal; there is an important source of water, the Olt River at a distance of 0,7 km; close sources to supply ethylene and propylene, the main raw materials for Oltchim’s products, through two underground pipelines, 60 km in length each; easy access to road transport routes and railways – direct connection to ports on the Danube and the Black Sea.

Romgaz is the largest natural gas producer and the main supplier in Romania. It is a joint stock company whose majority shareholder is the Romanian State owning a 70% stake. The company is listed on Bucharest Stock Exchange and global depositary receipts are transacted on London Stock Exchange.

Romgaz has vast experience in the field of gas exploration and production and a history that began in 1909 with the discovery of the first commercial gas reservoir in the Transylvanian Basin by drilling well Sarmasel. The company undertakes geological exploration in order to discover new gas reserves, produces methane by exploiting the reservoirs included in the company portfolio, stores natural gas in the underground deposits, interventions, workover and special operations on wells and technological transport. Starting with 2013, Romgaz extended its scope of work by taking over the Iernut thermoelectric power station, and thus it also became an electric power supplier.

The company dwells on the implementation of the latest technology in geologic exploration, gas production and underground storage, financed from its own or external sources. Its economic and financial position is characterized by the profit constancy and solvency. Thus, Romgaz is one of the state-owned companies that have fulfilled all the conditions for economic rise, turning into one of the most important companies in Romania.

Chimcomplex produces and markets inorganic and organic chemicals. In addition to chlorosodium products, it also produces a wide range of other chemicals. The products manufactured by Chimcomplex are used daily to produce thousands of other safer and more durable products: from polyurethane shoe soles and car seat foam to PVC prosthetic limbs, titanium aircraft wings, and batteries for hybrid cars. Its products are used in several fields, including the automotive, furniture, plastics, textiles, sugar, metallurgical, pharmaceutical industries, in the production of bleaching agents, soaps, detergents or road defrosting substances, in refining petroleum products, manufacturing cellulose, purifying free fatty acids in the oil industry, in water treatment facilities, thermal insulation, etc.

The company has been recycling chemicals for many years now. In 2020 alone, it recycled over 1000 tons of hydrochloric acid. Chimcomplex continues its investments in new technologies that will increase the C02 mass that it will capture and reprocess into 12 finished products, from 6 manufacturing lines. Innovation projects and the flexibility of the development teams are the company’s strengths, this is why its products are exported and used in over 43 countries in Europe, Asia and Africa.
The company captures and reprocesses over 50 000 tons of C02 year after year. Chimcomplex absorbs CO2 emitted by other industries and uses it in chemical processes alongside hydrogen.

In 1991, Conpet SA was registered in the Commercial Register Prahova as a joint stock company whose main shareholder is the Romanian state. The Company is active in the pipeline transportation of crude oil and its derivatives, including gasoline, condensate and liquid ethane, to refineries in Romania and other clients. The Company operates a network of approximately 3800 kilometers of pipes, under a concession agreement signed with the Romanian National Agency for Mineral Resources. The system, operated by Concept SA, includes pumping stations, loading and unloading platforms, and storage facilities. The main shareholder of the company is the Romanian Ministry of Energy, Small and Medium Enterprises, and Business Environment. Conpet SA has 1540 employees and generates USD 98,74 million in sales. There are 27 companies in the Conpet SA corporate family.

SC Oil Terminal is one of the oldest Romanian companies in the oil industry. It was founded in 1898, part of the most modern refinery in Europe at that time, Steaua Romana. Over time, the company had various names and in 1990, based on law 31/1990, by Romanian Government Decision no. 1200/12.11.1990 SC Oil Terminal SA Constanta was founded, a joint stock company with majority state capital.

Benefits of the company include: high capacity terminal at the Black Sea; direct access to road and rail roads; three large warehouses equipped with tanks with a total storage capacity of 1 700 000 m3; loading/unloading capacities of petroleum and chemical products at the railway ramps with a total length of 30 km; transport pipelines for loading/unloading petroleum and chemical products. SC Oil Terminal SA Constanta has 944 employees and generates USD 46,55 million in sales. There are 15 companies in the Oil terminal SA corporate family.

 

Positive outlook

Romania registered the second highest annual growth rate of imports of chemicals from non-EU sources for the period 2007 – 2017.The increase in imports was 13,1% per year, immediately after Ireland. In contrast, during the same period, exports grew at an annual rate of only 2%. This percentage placed Romania in the last place in the EU in terms of the evolution of chemical exports to countries outside the European Union.
Starting in 2017, companies interested in investing in the chemical and petrochemical sector in Romania reappeared. The prospect of exploiting the Black Sea gas opened up new opportunities for the chemical sector as well.

Data, published in 2018 by Eurostat, showed that Romania’s imports of chemicals from non-EU countries were growing, while exports were advancing at a much slower pace. In 2018, Oltchim began restructuration, its assets were acquired by Chimcomplex Borzesti. In May 2019, the company announced that it had become the largest exporter in Romania, following the acquisitions from Oltchim. The acquisition of Oltchim’s functional assets was determined by the need to relaunch the country’s chemical industry by capitalizing on the material, financial and human resources available in Romania, and to establish the import/export balance of chemicals.

Two major companies operating in Romania – Romgaz and OMV – have included investments into petrochemicals in their long-term plans, in advance of an anticipated hike in natural gas production from 2020. Their plans, along with Chimcomplex’s ambitions to create a local chemicals giant, could lead to the revival of the local petrochemicals industry.

The chemical industry as a whole is now enjoying a better outlook again as natural gas production is likely to soar after 2020 and investors look more inclined to capture the opportunities. Major Romanian natural gas producer Romgaz has included petrochemicals among the new markets envisaged in its 2018 – 2020 development strategy, and OMV is considering developing a petrochemical unit at its Romanian refinery Petrobrazi as well as set out in the group’s 2018 – 2025 Development Strategy, after shutting down such a unit several years ago. Bucharest is looking to develop gas transportation infrastructure to deliver its Black Sea gas to other markets, including the Bulgaria-Romania-Hungary-Austria pipeline.

Accordingly, Romania is likely to become more active in retaining the gas in the country for domestic processing, or redirecting the gas toward other countries, namely Moldova and Ukraine.

Fertilizer production, besides petrochemicals and other segments of the chemical industry, holds robust development potential. Romania, which has a large agricultural sector, imported EUR 10 billion (5,5% of GDP) worth of chemical products in 2017. There is only one petrochemical unit in Romania, operated by KazMunay Gas at Rompetrol Rafinare on the Black Sea coast.

According to Cefic, the European Chemical Industry Council, strengths of Romania’s chemical industry include: a strong petrochemical base; abundant natural resources (raw materials and energy); available processing capacity; strategic location for production and distribution; long tradition of chemical production. Among its weaknesses are: lack of innovation and specialization; relatively small local players; the industry is fragmented in many associations; low level of value added local processing (export of raw materials and import of processed goods); lack of integrated value chains; lack of a national development concept; low level of preparedness for the requirements and opportunities triggered by the European Green Deal.

Cefic’s SWOT analysis of the Romanian chemical industry defines the following opportunities: high demand for chemical products; potential for cooperation with universities, research institutes in the area of R&D and talent development; exploring more markets outside EU for export; creating larger and more influential associations; foreign direct investment (FDI) potential; EU membership; market size and growth potential; developing strategic programs within the frame of the Green Deal; creating synergies among the key players in the chemical Industry – including partnerships with related associations; tightening relations with Cefic. The identified threats include: high competition, especially for smaller companies; inconsistent public policies; the fact that the chemical sector is not seen as an essential sector; ageing population; rising labor and energy costs, migration of workforce abroad; vulnerability to external shocks (imports, energy crisis, pandemics, political tactics); poor transport infrastructure; lack of competence and capacity of Romanian authorities to facilitate major investment programs.

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