We live in a chemical world.
Just about everything we use, wear, drive in and live in is made from chemicals. However, this vitally important industry largely operates under the public radar in Scotland even though the chemical industry is the second largest exporter, after food and drink, with £4.5 billion of exports in 2012.
To sustain and develop this position, the sector needs to address a number of challenges. One of the biggest of these is energy costs. Chemicals is an energy-intensive industry with energy and utilities making up a significant proportion of the industry's cost base.
Lower energy costs are essential for the Scottish chemicals industry to remain competitive in a global market place, where other competing countries have lower energy costs. Most notable is the very cheap energy currently available in the United States, largely based on shale gas.Chemical plants need to have the ability to run around the clock, 365 days per year.
Having the ability to run energy plants around the clock means selling any surplus energy into the grid. However, without contracts, no one company or power plant can do so with any confidence that any spare energy can be sold. This would need collaboration between the main industry players but, because there are many competing companies within the sector in Scotland, this is often difficult.
Any collaboration would require a significant investment in infrastructure so that the surplus energy generated can be distributed to the companies that require it. It could also be used in the public sector to heat colleges and schools and potentially any district heating scheme to the benefit of the local community. However, for any companies entering into such a collaboration, there will always be questions around who owns and who manages it.
To negotiate this impasse, there is talk of setting up a managed syndicate to buy energy, possibly run or facilitated by the Government to avoid any one of the interested parties having ownership. Such an initiative would go some way towards helping Scottish-based companies compete internationally.
For example, Chinese companies are the biggest source of competition for our contract chemicals business based in Grangemouth. The big multi-national agrochemical companies, such as the Dows and DuPonts of the world, typically outsource 40-60 per cent of their supply to China. As in India, the legislation and compliance in China are less strict than ours, which enables them to move forward more promptly and more cheaply.
Along with energy resources, another area of importance for the chemical sector is human resources. Chemicals is a technical industry and it needs highly skilled scientists and engineers. There is a shortage of these skills in Scotland and the UK and, in recent years, it has been unfashionable for young people to study these subjects so the skills shortage has become even bigger.
The mismatch between supply and demand means that salaries escalate as companies compete for the best people in a war of resources.
With companies such as GlaxoSmithKline looking to reshore production back to the UK from countries such as Singapore, it is important that the industry attracts and keeps young talent to feed the supply chain. The UK has a lot of catching up to do, having slipped down the league tables compared to most Asian countries. Again, China is a major competitor in this field, producing more science and engineering graduates each year than any other country (more than 500,000 graduates in 2012 alone) and this figure is increasing rapidly.
There is a big investment in Scotland in the modern apprenticeship programme but it will take years for this to make any significant impact on the industry. At the Chemical Sciences Conference, a skills investment plan will be launched to address these issues. This, and other initiatives, are vital if the chemical industry in Scotland is to continue to grow and flourish.
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