Asia Pacific is a growth market with lot of investments and collaborations: Dr. Volkar Fitzner, Global Chemicals Leader, PwC

Apart from China, there are countries like India, Indonesia, Thailand, Vietnam, and Taiwan that present huge opportunities

  • February 04, 2025

In an exclusive interview with Pravin Prashant, Executive Editor, Indian Chemical News,  Dr. Volkar Fitzner, Global Chemicals Leader, PwC shared his views on the latest global trends

Global trends in the chemical industry that you foresee in 2025?

When we look at the future trends, there are various regional dynamics that come into the play. The European market has a sluggish growth and there is a high energy cost structure. There appear to be no improvements in sight as there are imports from China and it puts the pressure on the companies. Thus, it has become a stagnant market with the closing down of plants.

The market in the USA is growing along with the economy and the feedstock is cheaper as compared to Europe. With restructuring in Europe, people will be investing in the US sometimes without the IRA incentives. One interesting fact is that the production of steel is expensive in China and in the US, the steel market is underestimated. In the Middle East, they have cheap feedstock and a kind of dual strategy, going for gas production and focusing their investments into green chemicals. It is a combination of play and integration. Meanwhile, the African market has been a non-starter.

Asia Pacific is a growth market and much better than the US. We see a lot of investments and collaborations happening in the region. Apart from China, there are countries like India, Indonesia, Thailand, Vietnam, and Taiwan that present huge opportunities. With India being a market which is very much in focus now, a lot of foreign players, especially German companies are looking at collaboration. The country will benefit as more companies are looking at it as an alternative to China. 

How do you look at overall green hydrogen play globally?

There was more hype in the last couple of years and now when it comes to reality, the prices are too high and there is less commitment from off takers. The hydrogen transport structure is very expensive at the moment. It will be difficult to run it without infrastructure and incentives and overall government support. In terms of the action points, the demand should be addressed through contracts and pre-contracts. There must be concrete steps to build the infrastructure and bring down the cost of green electrolyzer to the extent that they are of bigger scale. Going forward, the viability gap funding is required to bridge the gaps.

Green hydrogen is meant for industrial use rather than household use. Currently, six million tonnes of hydrogen is being consumed annually in India. The green hydrogen has to substitute this hydrogen that is derived from gas. When you split methane, you get hydrogen and carbon dioxide and when you split water, you have hydrogen and oxygen. This from sustainability is more viable. Ethanol and biofuels are being looked at. Burning methane as compared to splitting methane has a cost difference due to electrolyzer availability and cost. It is a fuel of the future and has a fully recyclable process as compared to all other sustainable alternatives such EV.

PwC's sustainability report in Europe says that the chemicals industry will require cumulative investment in its net-zero transformation of between US $440 bn - US $1 tn through 2040 and between US $1.5 tn and US $3.3 tn through 2050? Where do you see this investment coming from? 

The report was commissioned in collaboration with the University of Technology Sydney (UTS) to define the net zero pathway and what it will take to reach there. We calculated the carbon budget by 2050 to stay below 1.5 degrees. The research focused on the seven major base chemicals that account for 74% of the energy used in the chemicals industry and on the G20 markets which account for 97% of all energy-related chemicals industry emissions. Those seven chemicals are methanol, ammonia, benzene, toluene, and xylene as well as ethylene and propylene. Based on our calculations, we came up with the investment numbers.

What is the step by step process to achieve sustainability?

Creating an ecosystem is very important for sustainability but it is like a jigsaw puzzle. The best way is to create one and keep pushing as sustainability is a long term game and needs a lot of innovation and collaboration. The customization of products and backward integration of feedstock mostly oil and gas is also required. As we are aware, there are two forms of energy: One is direct feedstock from raw materials and second is sourcing it. For example, Shell provides basic raw material to BASF within a country, thus saving costs as compared to cross country collaborations. The best way is to either set up a manufacturing site near feedstock source or bring feedstock itself near to manufacturing set up.

What path should Indian chemical companies follow with respect to sustainability?

The route is not different from what is followed globally. They must play to their strength and build capacity through collaboration. In India, expansion and innovation is required. Unless you get that feedstock, India will remain processor or converter and in the middle of the value chain. If you are in the middle, you will encounter volatility that keeps happening in commodity chemicals and now in specialty chemicals where you have higher margins. Unless you get backwards which gives you a solid foundation and then you have to go forward towards the growth which means hyper personalization where the customer gets what he wants, same as in e-commerce.

How do you look at India coming up as the next manufacturing hub? What should we do to latch on to the opportunities?

India being the biggest market in Asia is expected to grow faster compared to Europe and the US. To get there, it needs to expand the scope for chemical R&D and do more collaboration with companies that are advanced in technologies. The collaborations don’t have to happen only between Indian companies but between Indian and international companies. In terms of developing India as a manufacturing hub, the global companies have a critical role to play because of the value it brings to the table. The manufacturing doesn’t have to be always by Indian companies but together. That’s the whole sustainability mantra.

Most of the companies across the world are looking at India but there are challenges related to land, tax, and better incentives. In our sustainability report, we emphasize the 3i model of the ecosystem in terms of innovation, integration, and incentives. Build innovation models for feedstocks, integration of supply chain, and government incentives for producing and setting up or viability gap funding.

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