Epca Cluster Report


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EPCA initiated a study which looked at the major chemical indsutry clusters in Europe with a view to understanding the supply chain in these clusters. I was fortunate to be a member of the think tank and co-author this report

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Epca Cluster Report

  1. 1. A Paradigm Shift : Supply Chain Collaboration and Competition in and between Europe’s Chemical Clusters Results of the EPCA Think Tank Sessions organized and sponsored by EPCAWith contribution of the INSEAD team, Technology and Operations Management,and the Editorial Committee THE EUROPEAN PETROCHEMICAL ASSOCIATIONAugust 2007
  2. 2. DISCLAIMER : All information contained in the report was collected from the participants and EPCA does not guarantee the accuracy thereof nor can it be held A liable in case it is not. Participants have guaranteed that information relating to cases summarised in the report was in the public domain and did not consist in sensitive business information. EPCA did not check the individual A compliance with competition rules of cases summarised nor can it be held liable if all or part thereof would violate competition rules. Competition law compliance is the individual responsibility of the individual companies concerned.2
  3. 3. INDEXNote on Competition Law 61. Management Summary 92. Introduction 13 2.1 European Chemical Industry – A Major Force under Threat? 13 2.2 Clusters & Competitiveness 14 2.3 The EPCA Study 153. Presentation of the ARRR and Tarragona chemical clusters 17 3.1 Definition of chemical clusters 17 3.2 Presentation of the ARRR and Tarragona clusters 20 3.2.1 ARRR Cluster 20 Antwerp subcluster 22 Rotterdam subcluster 24 Rhine Ruhr subcluster 27 Rhine Main subcluster 30 3.2.2 Tarragona cluster 304. Interview results 35 4.1 ARRR 35 4.1.1 Advantages of the ARRR cluster 35 Caselet: The benefits of co-siting: the Rotterdam 36 chlorine case Caselet: MultiCore pipeline in the port of Rotterdam: 38 a common infrastructure to the benefit of all 3
  4. 4. 4.1.2 Disadvantages of the ARRR cluster 39 Caselet: Asset pooling between LSPs in the Antwerp 41 cluster: the Oiltanking/Stolthaven collaboration Caselet: Benefit from cluster synergies via vertical 42 collaboration: the LBC/Ertisa case 4.1.3 Obstacles to overcoming cluster disadvantages 43 Caselet: Horizontal LSP collaboration in the Port of 44 Rotterdam - Pernis Combi Terminal 4.1.4 Opportunities for horizontal cluster collaboration 45 Caselet: ComLog – Common Logistics Procurement: 47 an example of both vertical and horizontal cooperation Caselet: The challenge of multi-company infrastructure 49 investments: the EPDC case 4.1.5 Opportunities for vertical cluster collaboration 52 Caselet: Joint consortium in the cluster: the CLA 54 initiative 4.1.6 Who should lead the development of the cluster? 55 Caselet: Proactive site leadership: the INEOS Ethylene 57 Oxide case 4.2 Tarragona 58 4.2.1 Advantages of the Tarragona cluster 58 Caselet: Dixquimics Pipe Rack 59 4.2.2 Disadvantages of the Tarragona cluster 60 Caselet: Multimodal Container Terminal 62 4.2.3 Obstacles to overcome cluster disadvantages 63 Caselet: Overcoming water scarcity in Tarragona: 64 a collaboration to the benefit of the cluster and its suroundings Caselet: Exploit synergies in the Tarragona cluster: 654 the disposal of treated water
  5. 5. 4.2.4 Opportunities for horizontal cluster collaboration 68 Caselet: When LSPs collaborate: 69 the Tradilo Multimodal Transport JV Caselet: When shippers collaborate: 70 the TAPP Mooring case 4.2.5 Opportunities for vertical cluster collaboration 71 Caselet: Ammonia Logistics 72 4.2.6 Who should lead the development of the cluster? 735. Comparison between the clusters in Antwerp, Rotterdam, 77 the Rhine/Ruhr region, and Tarragona 5.1 Raw material and competitive feedstock 77 5.2 Exports 77 5.3 Logistics 80 5.4 Authorities 80 5.5 Land owners 806. Conclusions & Recommendations 83 6.1 Manage cluster information to identify opportunities 83 6.2 Provide a platform to discuss cluster opportunities 84 6.3 Take common actions to exploit cluster opportunities 84 6.4 Long-term relationships are more profitable than short-term 85 benefits7. Appendix 87 Organization of the study 87 Literature sources 89 Definitions 89 5 Acknowledgments 90
  6. 6. NOTE ON COMPETITION LAW Competition law, both at national observed that the key objective level and at EC level, regulates – of rules against anticompetitive among other things – agreements agreements is that companies between companies that have the should act independently This p y. purpose or the effect of restricting of course does not mean that competition. any form of common action is excluded. It does, however, imply While in itself cooperation between that where cooperation is envis- companies to enhance supply aged, the intention should not be chain efficiency and, more broadly, to dampen rivalry between firms. to develop competitive industry It is therefore important that the clusters does not give rise to com- efficiency or competition enhanc- petition law concerns –and may ing intent behind cooperation be indeed help to reinvigorate compe- clearly identified at the outset. tition– the existence and nature of Moreover, the concrete effects on such cooperation may be misinter- r competition of cooperation should preted or not fully understood by be carefully weighed up. Do the competition authorities, or indeed increased efficiency, improved may be open to abuse. customer service and/or techno- logical advances promised by a For this reason it is important when certain cooperative strategy out- considering any form of coop- weigh the possible loss of rivalry eration to ensure (i) the compat- between firms working together on ibility of individual strategies with a project? competition law and (ii) that these strategies are described and com- Clearly, the compatibility of municated in a clear way that limits specific cooperative agreements any possible misunderstanding as with competition law ultimately to their nature and intent. requires a case by case approach. However, the following general ob- Broadly speaking, it can be servations can be made. Generally6
  7. 7. speaking, competition authorities volved in cooperative agreementswill be more concerned about: are important elements of evi- “Horizontal” cooperation than dence in the event that breaches “vertical” cooperation; of competition law are alleged at a Cooperation involving (even ex- later date. changes of information on) key parameters of competition such Finally, it is emphasized that – in as price or output; accordance with competition Cooperation between players in law – the present report is not concentrated sectors or coop- intended as a “shopping list” or set eration involving many players in of recommendations to industry, a sector. but aims to identify the great efficiencies that can be derivedIn addition to assuring themselves from the development of effi-that a particular course of conduct cient supply chain managementis indeed compatible with com- and strong economic clusterspetition law, companies must also more generally. Ultimately, it isensure that their assessments are up to each company to decidecarefully documented. Rigorous individually upon its own bestdocumentation and document business strategy.retention policies are thereforekey. Clear records must be kept,for example, of the reasoningbehind strategies adopted and anymeetings concerning them, theassessment of the effects of thosestrategies and why the companyconsiders them to be compatiblewith competition law. Paper trailsclearly showing the good will andintentions of the companies in- 7
  8. 8. 8
  9. 9. 1. MANAGEMENT SUMMARY With the attention of the chemical indus- Develop research connections with try focused on exploiting the low cost universities and institutions. feedstocks in the Middle East and the Continue with the working group growth markets of Brazil, Russia, India, activities where there are areas for China and South East Asia, this report further discussion and development. > A PARADIGM SHIFT : SUPPLY CHAIN COLLABORATION AND COMPETITION IN AND BETWEEN EUROPE’S CHEMICAL CLUSTERS provides a timely reminder to policy makers, chemical companies and logis- As a consequence it was proposed that tics service providers of the significant the successful Think Tank model be opportunities for improving business maintained, comprising senior stake- potential in Europe’s chemical clusters. holders and decision-makers, to study Europe is still the largest, most sophisti- supply chain collaboration in chemical cated global market for chemical prod- clusters in Europe. During the first half ucts, with a well developed, efficient, of 2007, under the sponsorship of the highly productive asset base, sound EPCA Board, 53 senior representatives A infrastructure, leading edge research and of chemical companies, logistics service development and significant purchasing providers, public authorities and institu- power. Provided these advantages are tions, together with researchers from IN- sustained, including continued attention SEAD, engaged in this study. The Think to asset maintenance and operational Tank was chartered to test the conclu- and supply chain improvements, Europe sions from previous think tanks, identify can remain a competitive force in the working examples of cooperation (suc- global market place, despite what the cesses as well as opportunities for doom-mongers may say to the contrary. improvement and missed opportunities), develop ideas to overcome constraints The EPCA Supply Chain Think Tank and stimulate future supply chain col- reports of 2004 and 2005 concluded that laboration initiatives, using the examples there is a huge potential to be achieved of Tarragona and Antwerp/Rotterdam/ through collaboration between produc- Rhine-Ruhr (ARRR). Although each of ers, customers, suppliers and service the components of ARRR are clusters providers to drive out waste and cost. in themselves, the integration through Recommendations were made to: pipelines, waterways, rail and roads as well as the intensity of the exchanges Actively promote the conclusions of between them encouraged the Think the Think Tank working groups in order Tank to explore this as one mega-cluster. to change attitudes and perceptions of the industry. The work of the Think Tank has culmi- Alert entrepreneurial stakeholders to nated in the production of this report. 9 the business opportunities.Tank train, Marl Chemical Park, ChemSite
  10. 10. There is general agreement that, while operational decisions are taken remotely, progress has been made – and case without necessarily exploring all the supply studies illustrating this view are included chain opportunities within the cluster (*). in the report –, there are both op- portunities and threats for the future It is generally acknowledged that supply growth and added value of the clus- chain excellence can deliver lower unit ters which will require the attention costs, higher capital productivity (ROCE), of public policy makers and senior improved service and reduction of carbon management in the industry. Much emissions. With capital investments in the of the cluster development to date has chemical industry often having a lifetime been driven by individual rather than col- of 30-40 years, it appears prudent to lective initiatives. The long-term health ensure that such supply chain benefits of a cluster requires adequate infra- and the associated competitiveness can structure and sustainable mobility, but be obtained over the life of the project. also a strategic view on supply chains. This report explores and illustrates how To achieve the latter, more attention these benefits are being achieved through should be paid to creating the right cluster arrangements, but, more impor- r conditions for successful end-to-end tant, how many opportunities still remain supply chain collaboration. Whereas unexploited. Recommendations are made the integral supply chain perspective has on how this can be improved it being become a successful reality in sectors understood that decisions must be taken like consumer electronics and automo- by each individual company in full compli- biles, it has barely surfaced in the chemi- ance with competition rules. cal industry. Research by INSEAD, conducted The Think Tank discussions showed through interviews with key industry that the concept of chemical clusters, leaders and subsequently discussed with the associated dynamics and sup- inside the Think Tanks, has identified ply chain value proposition, receives many drivers, as well as blockers, increasing attention on Board meeting which impact cluster growth. These agendas and by senior manage- are discussed in detail in the body of the ment, but a paradigm shift has not report, and the reader is urged to explore come true yet. Despite the fact that the interviews and Think Tank results in some 8-10% of total industry turnover Chapter 4. On the basis of these results is spent on supply chain and logistics the Think Tank has derived four recom- activities, representing more than 37% of mendations for companies acting in10 total value-added, many investment and the clusters. (*) Cefic ‘Horizon: 2015: Perspectives for the European Chemical Industry’ Brussels, March 2004.
  11. 11. Information sharing is key.The interviews have shown that manyopportunities to benefit from chemi-cal clusters are missed because eachcluster stakeholder (producer, LogisticsService Provider (LSP) or authority) hasonly a partial view of the flows proc-essed. Compared to chemical clustersin the rest of the world, it is surprisinglydifficult to obtain even basic aggregateinformation on European chemical clus-ters. Consequently, initiatives to buildcluster-wide infrastructure solutions oreven merge shipments from differentcompanies are very difficult to under- rtake. Without a certain level of structuredand available information accessibleto all partners, firms will value invest-ments in the cluster with a higher risk ormight even invest in the wrong alterna-tive. Thus, to ensure that the competi-tive forces still work to the benefit of allcluster members, information sharing iskey and should go beyond exchangingforecasts between business partners.Clearly, any information exchange mustbe done in full compliance with competi-tion rules.A flexible discussion platformis required to organizeinformation sharing andcoordinate cluster initiatives.Considering the constraints of the chem-ical industry with respect to competitionlaw as well as the fact that firms operateindependently, we recommend the 11
  12. 12. creation of a flexible discussion platform in this report, the study has shown that to coordinate the information gather- r a significant gap between words and ing at a supply chain level and to create facts still exists. Although producers are common knowledge. This platform very knowledgeable about the benefits VCM’s production should be opened to producers, LSPs of going beyond arm’s length relation- plant, Tarragona, and authorities (state, region, port/ ships with LSPs, the interviews highlight Ercros cluster authority) who have the power the limits in practice. Frequent tendering to exchange ideas and opinions on the practices with limited information shar-r basis of the information gathered. ing reduces planning visibility for service providers and result in a high cost posi- Take actions to solve current tion for producers. cluster issues. The value of the cluster platform will be This report is a demonstration of con- demonstrated as soon as actions start fidence in the future of the European to be launched under its initiative. The chemical industry, but recommends platform will be an especially important policy makers, local authorities and communication channel when it comes industry leaders to be alert to the op- to discussing ways to improve cluster portunities and to the need for effective performance. Infrastructure shortages lean logistics and efficient supply chain or congestion problems are topics that economics to help sustain this com- have to be solved collaboratively, taking petitive advantage. Although individual into account the complexity of the inter-r companies will continue to pursue their dependencies between stakeholders in own self-interest, the report urges the the cluster. For the ARRR mega-cluster, establishment of local chemical industry a working group should be dedicated to platforms, represented by all stakehold- the harmonization of the legislation and ers, to explore these opportunities in supply chain practices between compa- more detail. nies and the three countries. No platform currently exists that brings companies Leveraging these supply chain oppor- together to address such issues. tunities through intensive collabora- tion within and between clusters will The paradigm shift on collabo- go a long way to ensuring the con- rations has not taken place. tinued competitiveness of Europe’s Despite the various examples provided chemical industry.12
  13. 13. 2. INTRODUCTION2.1 European Chemical Industry – and generated 2% of Europe’s gross A Major Force under Threat? national product (Source: Eurostat, 2007). Recent studies performed in theFrom food packaging to pharmaceuti- Rhine/Ruhr region indicate that one job > A PARADIGM SHIFT : SUPPLY CHAIN COLLABORATION AND COMPETITION IN AND BETWEEN EUROPE’S CHEMICAL CLUSTERScals, the chemical industry plays a domi- in the chemical industry creates threenant role in today’s national and global additional jobs in the chemical-relatedeconomies. Developing and sustaining a sector.local chemical industry, able to competeon a global scale, has both economic Since 1990 the European chemicaland political importance as the chemi- industry has been growing at an averagecal industry supplies the full spectrum rate of 2.8% per year, outstripping theof Europe’s manufacturing industry with European manufacturing industry whichintermediate products. has grown by 1.6% in the same period. At the end of 2006 the industry had de-In 2006 the European chemical industry livered a positive trade surplus of 41.0comprised more than 30,000 firms, billion, up by 6% compared with 2005.directly employed 1.9 million workers, Extra-EU chemicals trade balance 1995-2006 120 100 80 billion 60 40 40.6 41.3 39.0 41.0 35.8 37.0 38.1 20 24.5 26.5 23.8 19.3 20.9 0 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006** Trade balance Extra-EU imports Extra-EU exports 13 Figure 2-1 Extra-EU chemicals trade balance (Eurostat, 2007)
  14. 14. Therefore, the European chemical 2.2 Clusters & Competitiveness industry has been, and will remain, a leading factor in economic An Arthur D. Little study from 2005 – The growth, warranting specific atten- Staying Power of Europe’s Chemical In- tion from policy makers. dustry – compared the production costs of Europe’s chemical sites to the US, Despite these positive numbers, there India, China, and the Middle East. While are signals that the growth and export the report acknowledged that Europe potential of the European chemical in- may be expensive, the surprising conclu- dustry could be under threat. Agricultural sion was that it still remains one of the chemicals and fibers have experienced most competitive regions in the world. negative growth, the trade surplus for The study challenges the hypothesis that organic chemicals has declined in the significant relocation of European-based face of increased import flows from chemicals manufacturing operations Saudi Arabia, and despite a strong is likely to happen in order to serve performance from polyolefins, huge new developing and developed markets at petrochemical capacity in the Middle reduced cost. East will inevitably impact demand for European sourced production. The study conducted both a qualita- tive and a cost based assessment of European companies have of course the operating environment in which a contributed to the development of com- chemical company can deliver value. peting clusters closer to emerging mar- The four factors determining the quality kets (China/India) and cheap feedstocks of the environment were demand condi- in the Middle East. Although much of tions, technological advancement and the new production is expected to find innovation, environmental regulations, a home in Asian markets, there is a and the formation of clusters. With concern that European competitiveness the exception of environmental regula- will suffer as companies prefer to invest tions for which the report underlined that scarce financial resources in growing “governments must improve cooperation regions, and allow the European asset with companies to develop environmen- base to become obsolete. Up-to-date tal efficiency at low administrative cost”, manufacturing assets as well as efficient all other factors are well established and reliable logistics networks are a in Europe, including the presence of prerequisite for remaining competitive in strongly integrated clusters. global markets.14
  15. 15. The report observed that Europe enjoys collaborative relationships, as a way ofthe benefit of a limited number of raising the bar on performance, withoutstrongly clustered areas. With raw mate- negatively impacting competition.rials being the main input to the chemi-cals industry, their immediate availability In addition, notwithstanding the factthrough ports, refineries, and pipelines is that Europe has well-established andof prime importance, as well as the op- effective clusters in place, supportedportunity to develop derivative products by highly sophisticated logistics serviceat the lowest possible logistics cost. providers and supportive public authori- ties, further benefits would be obtainedIt should be clear that the continued by engaging all stakeholders in enhanc-global competitiveness of European ing the linkage between clusters.chemical manufacturing is closelylinked to the efficiency of its clus- In this context EPCA took the initiativeters. Chemical clusters are all about of conducting a more in-depth study ofthe supply chain at work. European chemical clusters.The port and pipeline infrastructurefacilitates upstream supply chain 2.3 The EPCA Studyoperations and economics. The highlevel of integration and interconnectivity Since European manufacturers cannotbetween the cluster participants creates differentiate themselves through a costsignificant opportunities to benefit from advantage on feedstocks (versus Middleefficiencies through reduced transporta- Eastern producers), the integration oftion intensity (i.e. lower freight costs, energy and intermediate raw materialsreduced risk from the movement of haz- as well as supply chain efficiencies rep-ardous products, reduced emissions), resent key drivers for competitiveness.more effective utilization of assets, and Previous studies from EPCA and CEFICefficient use of working capital. have shown that 37% of the value added created by chemical companies can beThe inevitable tension between com- spent on transforming, storing, and mov-petition and collaboration has probably ing products.limited the full exploitation of theseopportunities in the past. However, there The EPCA-CEFIC Think Tank Reportsis evidence of an increasing willingness issued in 2004 and 2005 concludedto explore the scope and benefits of that a huge potential can be achieved 15
  16. 16. through collaboration between “custom- tion as well as missed opportunities, ers, suppliers, service providers and, develop ideas to overcome blockers and occasionally, competitors, to drive out constraints and stimulate future supply waste, and hence cost”. The estimated chain collaborative initiatives. accumulated potential in Europe from a range of proposed measures was up to The scope of the study, represented in 15 billion. Figure 2-2, is therefore at the interface between supply chain topics and cluster The key recommendations suggested theory. in these reports as “next steps” were centered on capturing supply chain The Think Tank study was limited to an collaboration opportunities, in various empirical investigation of two principal forms. The 2004 report explored pooling clusters; ARRR (Antwerp, Rotterdam, of resources, enhanced use of multi- Rhine, Ruhr) and Tarragona. Although modal and multi-user terminals (hubs), traditionally the ARRR cluster has been and further exploitation of swaps and viewed as separate individual clusters, pipelines. The 2005 Report specifically the degree of interdependence, integra- encouraged more collaboration and tion and infrastructure linkage encou- information sharing to achieve improved raged EPCA to consider this as one asset utilization. mega-cluster. The ARRR group reflected this approach. Consequently the successful Supply Chain Think Tank model (comprising Following a brief generic presenta- senior stakeholders and decision-makers tion of chemical clusters and a more representing producers, service provi- detailed description of the target clusters ders, public institutions, and academia) in chapter 3, the results of interviews was maintained in order to explore the conducted in the ARRR and Tarragona opportunities offered by Europe’s chemi- clusters will be presented in chapters cal clusters in terms of supply chain 4, including numerous case studies efficiency and to identify to what extent illustrating successful cluster-driven col- cluster development can contribute to laboration. The comparative governance Europe’s long term competitiveness. structure of each cluster and the impact Specifically, the study would test the on cluster development will be reviewed conclusions of the previous think tanks, in chapter 5, followed by conclusions identify working examples of collabora- and recommendations in chapter 6. economies of scale share information cluster scope of supply chain share assets economies of scope economics EPCA study collaboration proximity of customers/ coordinate actions suppliers and competitors Figure 2-2: Scope of the EPCA study16
  17. 17. 3. PRESENTATION OF THE ARRR AND TARRAGONA CHEMICAL CLUSTERS3.1 Definition of chemical clusters Langen, 2004), a cluster is defined as a “geographically limited concentrationLinks between a specific industry and of mutually related business units,a geographic location can be easily associations and public or privateobserved in the economic map of the organizations centered on a specific > A PARADIGM SHIFT : SUPPLY CHAIN COLLABORATION AND COMPETITION IN AND BETWEEN EUROPE’S CHEMICAL CLUSTERSworld. For example, financial services economic focus”. This definition willare related to the city of London, fashion be extended in the following chapters toto Milan and Paris and high-technology match the specificities of the chemicalelectronics to Silicon Valley. The chemi- industry.cal industry could be associated withthe area of Rotterdam, Antwerp and the A chemical cluster, like other industrialRhine/Ruhr region, strongly sustained by clusters, is characterized by a highthe presence of 3 important ports (the 2 concentration of manufacturing compa-seaports of Antwerp and Rotterdam and nies and service providers operating inthe inland port of Duisburg) and by the the chemical business. But the clusterdense network of logistics interconnec- population consists also of associationstions in place. and public or private organizations that participate in and are co-responsible forThe phenomenon of regional industry creating a vibrant environment in termsconcentration was explored by Alfred of productivity, innovation and creationMarshall as early as the 1920s (Marshall, of new businesses. For example, in the1920) with respect to the progressive chemical clusters examined by the Thinkconcentration of firms making and ma- Tank the relevant port authorities attractchining steel around Sheffield. The atten- new investors in the area and offer stra-tion of the economic and political sphere tegic land positions for specific businesson this phenomenon has continuously development in addition to dealing withincreased since then, due especially traditional port activities.to the recognition that such networkswould constitute an ultimate source of In the manufacturing stage of the valuecompetitive advantage for an economy chain, the products of a company are(Porter, 1990). the inputs for the manufacturing process of a company further downstream inThese localized industries that combine the value chain. In addition, chemicala high specialization with an unusual companies tend to outsource industry-competitive success in a particular related services and therefore attractfield and a specific geographic location waves of third party investments inrepresent what Michael Porter described warehousing, transportation, general 17in the 1990s as “clusters” (Porter, 1998). services, waste treatment and disposal,According to more recent research (de as well as a full range of utilities.
  18. 18. This interaction and interdependence same might not be true for companies between the firms in a cluster creates operating in the same stage of the value complementarities, synergies and a chain. Companies operating in the same combination of skills and incentives product or business segment in the that is hard to reproduce by competi- cluster could choose whether or not to tors operating on an isolated basis. collaborate. This aspect is the real strength of a clus- ter and explains why many governments, However, the fact of being located in especially in Europe, are attempting to a cluster offers unique opportunities promote the formation of local clusters. for collaboration, even between rival firms. Optimizing capital investments, Figure 3-1 shows how chemical compa- increasing the average utilization of nies are integrated into the materials flow assets, swapping capacities and ma- system from crude-oil to ethylene and terials and exchanging information are propylene and the C4 cut between BP’s only a few examples of collaboration Gelsenkirchen sites and the companies opportunities that can successfully located in the ChemSite-Marl Chemical take place in a cluster. The geographi- Park in Germany. cal proximity of firms within the cluster and the possibility of having frequent While the interaction between compa- face-to-face interactions represent an nies operating in subsequent stages ideal trigger for developing this kind of of the value chain is almost essen- collaboration initiative. tial for each company’s success, the C4-Cut interactions in the Rhine/Ruhr cluster BP’s Gelsenkirchen refinery obtains crude-oil feedstock via the crude-oil pipelines from Rotterdam and Wilhelmshaven. The re- finery transforms this crude-oil into a range of products, among them naphtha, which is used as feedstock by the 2 crackers owned and operated by BP in Gelsenkirchen. These crackers produce, among others, ethylene, propylene and the C4 cut, which are feedstocks for chemical companies. Sabic Polyolefin located in the Gelsenkirchen site, uses ethylene and propylene from the crackers. BP’s sites are also connected to the ARG ethylene and the Rhine-Ruhr propylene grids to for- ward what is not consumed locally. The C4 cut is used as feedstock for the production of a range of chemical products produced by several chemical companies located in the ChemSite-Marl Chemical Park.18 CLUSTER
  19. 19. Crude oil Wilhelmshafen / RotterdamChemSite - BP Refining & Petrochemicals Gelsenkirchen (Germany) Refinery gas Jet fuel Ammonia P-Xylene Solvents C4 Cut 350kt 280kt 130kt 100kt LPG Diesel and heating oil Methanol Ethylene Hydrogen 300kt 960kt 210K Nm3/h Gasoline Bitumen Benzene Cumene Propylene 430kt 500kt 660kt Petroleum Coke Cyclohexane 150ktBP Polyethylene Polypropylene 400kt 500kt Sabic PolyolefineChemSite - Marl Chemical Park (Germany) Butanes ETBE Butadiene 1-Butene Tert.-Butanol Di-n-Butene Syngas Iso-Butene i-Nonanol Plasticizers Oxeno Polyoil Lanxess Buna T-Butyl-phenols Sasol Latices Polymer Latex Cyclo- Cyclodo- Homo-, Co- octadiene decatriene Terpolymers Polyocte- Cyclodo- Cyclodo-decane namers decanol Capacities: = 0-50kt Cyclodo- 1,12-Dode- = 50-100kt Polyamides Lauro-lactame decanone candioic acid = 100-200kt = 200-500kt Degussa 19 Figure 3-1 C4-Cut interactions within the Rhine/Ruhr cluster
  20. 20. 3.2 Presentation of the ARRR and 3.2.1 ARRR Cluster Tarragona clusters Though Antwerp, Rotterdam, and the On the basis of the previous EPCA Rhine-Ruhr separately form clusters reports, the Think Tank decided to as defined in Section 2, the Think Tank investigate to what extent firms decided to consider the whole of the actually benefit from the supply chain region as one mega-cluster, hereafter optimization opportunities provided referred to as ARRR. Indeed, the inte- by chemical clusters. For the sake of gration, interconnectivity and product consistency, the Think Tank decided flow between the individual areas to limit its scope to Northern Europe justify this approach notwithstanding (i.e. Antwerp, Rotterdam and Rhine/ the fact that ARRR is spread out over Ruhr - ARRR) as well as Tarragona three EU member states. (Spain), leaving other significant clus- ters out of the analysis. The ARRR mega-cluster is the largest interconnected chemical production In the following subsection, the historical cluster in the world in terms of pro- evolution and uniqueness of each of the duction throughput. The mega-cluster clusters mentioned will be described. is also the most integrated chemical production region in the world. The main clusters include the port areas of Antwerp in Belgium, of Rotterdam in The Netherlands, and two major inland areas – Rhine/Ruhr in North Rhine-Westphalia (NRW) and the Ludwigshafen-Mannheim-Karlsruhe area. A number of “satellite” clusters are interconnected with these clusters. These include Terneuzen, Geleen/ Sittard, Feluy and Frankfurt. These satellite clusters have in common that they are highly dependent on the clus- ters in order to be successful, as they Figure 3-2 Main chemical clusters in lack the manufacturing depth to be20 Northern Europe self-sufficient. The interconnections
  21. 21. Figure 3-3 Overview of cluster interrelationshipsbetween the clusters and surround-ing satellite clusters include pipeline,waterways, rail and road, enabling asophisticated and highly efficient sup-ply chain management.The Antwerp/Rotterdam and Rhine/Ruhrclusters are connected via ethylene pipe-lines passing through the SABIC satellitecluster in Geleen. The propylene pipelineconnection between both regions (EPDCproject) has not taken place for reasonsmentioned in Section 4 (see caselet inSection 4.1.4). 21
  22. 22. Antwerp subcluster The Antwerp chemical cluster, located in the Port of Antwerp, covers more than 3,650 hectares along the Schelde Figure 3-4 Port of Antwerp - geographical River. Antwerp strongly developed as a overview classical trading port in the 19th century, and the petrochemical industry only emerged in the 1930s with the construc- The right bank kept growing between tion of two refineries. Chemical produc- 1966 and 1971 with major investments tion in Antwerp really took off after the from BASF (1966), Bayer, Monsanto and Second World War when two additional Solvay (all 1967) and Degussa (1970). refineries and the first ethylene oxide The growth dynamics of BASF’s inte- production facility started in 1951 at the grated Antwerp site attracted Air Liquide Marshall dock. which in 1971 signed one of the first co- siting agreements in the Port of Antwerp. Between 1951 and 1963, the first series The remaining areas were leased step by of investments in downstream refinery step in 1972 to Dow-Halterman, Rhône products emerged on the right bank Poulenc (at present these facilities are (Figure 3-4), leading to the extension of owned by Katoen Natie) and Bayer, fol- the historical docks up to the Zandvliet lowed by Aqualon in 1979. lock, and to the opening of the Boudew- ijn lock. Joint investment in two steam The cluster experienced a growth phase crackers and corresponding ethylene between 1979 and 1987 without signifi- processing capacities (at the time 500K cant new settlements. Subsequently, tons) in 1963 clearly made the Port during the period between 1987 and of Antwerp an increasingly chemical- 2006, the port of Antwerp benefited focused cluster. By that time, Union from the arrival of additional manufactur- r Carbide Belgium and Amoco Fina had ers such as North Sea Petrochemicals already opened up their factories in the (Shell/Borealis), INEOS Phenol (at the port in order to exploit the by-products time Phenolchemie), as well as, from of the refineries. 1963 was also the year 1999 onward, Japanese companies when the left bank of the port began to (Kuraray, Nippon Shokubai and Tokyo be exploited by Bayer Rubber (at the Kasei Europe). time Polysar Belgium), subsequently followed by five chemical multinationals The Port of Antwerp encompasses22 by 1970, among others 3M and Exxon a wide range of the chemical value Mobil (at the time USI Europe). chain, as illustrated in Figure 3-5.
  23. 23. C1 C2 C3 C4 C6 C 7,8 CIShip, pipeline, barge Pipeline, barge, rail Rail, road Mainly road Figure 3-5 Value chain of the Antwerp cluster (red items are produced, grey items 23 are not produced, in the cluster)
  24. 24. Rotterdam subcluster replaced coal during the war), industry and society. Oil had to be imported Rotterdam, initially a fishing village in the from other world regions and Rotterdam 15th century, was already a significant quickly became the biggest European gateway to the European hinterland port of oil imports. before the rise of the industrial revolu- tion, due to regular trade lines to Asia The oil refineries of Shell and Caltex and South America (for tobacco and (Texaco) started the cluster just after the spices). Fueled by the rise of the Ger-r Second World War. In the sixties, crude man steel industry in the Ruhr region, oil pipelines to refineries in Germany Rotterdam became through its access and Antwerp were commissioned. This to the Rhine River the port of choice for decade also saw the first big wave of importing ores for the German factories chemical investments: Dow, Akzo, ICI and exporting steel products. In order (now Hexion), Esso Chemicals, Kemira to cope with higher traffic and heavier and Arco (now Lyondell) all set up their L loads, access to the port was improved plants. Since the petroleum trade con- by a new channel (“Nieuwe Waterweg”) tinued to grow tremendously quick in the and the port was extended stepwise sixties, shipbuilders had to increase the towards the sea. capacity of their vessels. However, the new “mammoth” tankers were not able After the First World War, with the grow- to enter the existing port infrastructures. ing use of automobiles, oil became a Consequently, the Europoort zone was24 strategic resource for armies (oil had built to the west of the port; it was 20
  25. 25. Figure 3-6 Port of Rotterdam - graphical overviewmeters deep and had three additional As land became scarcer in the port in therefineries. The logistics facilities kept last few years, more and more co-sitingpace with the construction of several initiatives took place between chemicaltank storage terminals, working both for plants and tank storage companies, es-the industry and for companies using pecially in biofuel production (BioPetrolthem as entry or exit points for Europe. at a Vopak terminal, Dutch Biodiesel atBarges, railways, trucks and pipelines Argos and When Biofuels at Koole).took care of the transport to and fromthe hinterland and within the port area. The oil and chemical cluster within the Port of Rotterdam now comprisesOver time, the port kept on growing an extensive combination of crude oilwestward with more chemical plants and refineries, chemical plants, industrialservice companies, and the decision gases production, tank storage termi-was taken to extend the port by nals, pipeline connections and all kindsreclaiming land from the sea. This gave of service companies. In total it coversbirth to the Maasvlakte in 1973 (Figure 2,865 hectares, representing 60% of3-6). In the nineties, several co-siting the available land in the port, with anagreements were set up with industrial emphasis on raw materials process-gases and combined heat and power ing and base chemicals manufactur-producers (e.g. Eastman with Air Prod- ing (Figure 3-7) (pag 26).ucts and Eneco, ICI/Huntsman with AirLiquide and Eneco). 25
  26. 26. C1 C2 C3 C4 C6 C 7,8 CI Ship, pipeline, barge Pipeline, barge, rail Rail, road Mainly road Figure 3-7 Value chain of the Rotterdam/Moerdijk cluster (green items are26 produced, grey items are not produced in the cluster)
  27. 27. Rhine-Ruhr subcluster Most of the chemical sites were run by one user only (single user sites) untilThe German state of North Rhine- the mid-1990s when chemical majorsWestphalia is the base of two major started to reorganize their product port-chemical centers: the Ruhr region folio. In the course of structural changes(ChemSite cluster) in the northern in the chemical industry, traditionalpart and the Rhine area (ChemCo- chemical industry sites with single userslogne cluster) in the southern part. were transformed into integrated multi-Together these chemical regions form user sites (chemical parks), where manythe Rhine/Ruhr cluster. They are well users benefit from shared material flowsconnected by road, rail, pipeline and and infrastructure, making efficient jointwaterway, with Duisburg as the largest use of all the facilities available. The utili-inland port in Europe. With 720 km of ties as well as the site management arewaterways, 180 inland ports and 8,000 mostly still performed by the initial userkm of railways, the region is connected of the site (site operator). This structuralto both the raw material import centers change has created new opportunities,or feedstock production sites (Rotter- as each site is now even more focuseddam, Antwerp, Wilhelms-haven) and the on attracting complementary partnersGerman and Eastern European hinter- (manufacturers, LSPs, research centers)land. to create additional synergies within the chemical parks.The chemical industry in the Rhine/Ruhrcluster emerged in the 19th century In the late nineties, some manufacturerswith the exploitation of the neighboring of the cluster decided to merge theircoal reserves of the Ruhr. In a similar efforts in attracting new companies,fashion as in Antwerp and Rotterdam, triggered by the vision of the “openedthe development really took off after chemical cluster” idea. The ChemSitethe Second World War when the former initiative was created in 1997 as a public-chemical group IG Farben was broken private partnership between the Germandown into several units and petrochemi- state of North-Rhine-Westphalia andcal manufacturers installed refineries and chemical manufacturers in the Northernsteam crackers in the cluster (Rheinische Ruhr region promoting the attractivenessOlefinwerke GmbH in Wesseling, EC of the region. Hüls AG (now Degussa),Erölchemie in Worringen). This helped which has been operating in Marl onethe cluster to maintain its long-term of Germany’s biggest sites since 1938,competitiveness by replacing the declin- founded ChemSite together with, amonging lignite and anthracite reserves by oil others, Veba Oel (now BP Refining & 27as an input for the chemical cluster. Petrochemicals), Rutgers Chemicals,
  28. 28. Figure 3-8 ChemSite cluster - graphical overview (source ChemSite, 2007) DSM (now SABIC) and the state of ChemSite currently promotes 7 sites, North Rhine-Westphalia. Since then, from the fully integrated petro-chemical the ChemSite initiative has successfully cluster operated by Degussa to the extended to the whole Ruhr region. research focused cluster of TechnoMarl. All chemical parks and sites are situated very closely together in the Ruhr region. With a total area of 1,400 hectares, these locations offer about 240 hectares for the relocation of new companies. ChemCologne represents the counter- part of ChemSite for the Cologne/ Leverkusen/Bonn region with the biggest producers in terms of volume being Bayer and its spin-offs, as well as Degussa. The range of its 150 members spans classical manufacturers, logistics service providers and authorities; it also includes universities. Like ChemSite, the sites represented (Figure 3-9) are promoted with the objective of attracting new investors. The chemical parks and sites in the Rhine/Ruhr cluster cover the whole chemical value chain with particu- Figure 3-9 ChemCologne sites lar emphasis on base and specialty (source ChemCologne, 2007) chemicals (see Figure 3-10). This emphasis is key when considering the potential provided by the high density of universities and chemical research cent-28 ers in the vicinity.
  29. 29. C1 C2 C3 Polyether polyol, PG C4 C6 C 7,8 CIShip, pipeline, barge Pipeline, barge, rail Rail, road Mainly road Figure 3-10 Value chain of the Ruhr cluster (orange items are produced, and grey items are not produced, in the cluster) 29
  30. 30. Rhine Main subcluster 300,000 intermodal units per year are handled in the cluster. This cluster consists of the Miro (Karlsruhe) refinery and petrochemi- 3.2.2 Tarragona cluster cals complex, the BASF Ludwigshafen Verbund site, and several smaller The Tarragona region is located 100 chemical sites including Raschig’s km west of Barcelona, in the north- specialty chemical site in Ludwig- east of Spain. The petrochemical cluster shafen. The cluster receives primary raw of Tarragona plays a major economic materials (crude oil and natural gas) via and social role in a region inhabited by pipeline and depends on the Miro and some 500,000 people. Tarragona is the other European refineries for its primary most important chemical manufactu- feedstock naphtha. The BASF Verbund ring cluster in the southern Europe site also currently receives naphtha and Mediterranean area. The global from Antwerp and Cologne via barge on chemical production of the chemical the river Rhine. Other feedstocks and companies in the Tarragona cluster intermediates are transported by either amounts to 18 million tons per year, rail or road. 25% of which is exported mainly to the Mediterranean area. Approximately 44% In terms of overall volumes, the clus- of the total plastics production in Spain ter handles over 20 million tons of raw is produced in the cluster, thus confirm- materials per year and similar volumes of ing its leadership in the Mediterranean sales products. The Rhine Main cluster area. The Tarragona chemical cluster is is the most integrated petrochemical, in- the third largest producer of ethylene in termediates, polymers and performance Europe. materials cluster in Europe with over 200 production units producing more than The economic success of the chemical 8,000 products (including brands and area depends on Tarragona Port, which formulated products). enables the import of raw materials and competitive feedstock for the chemical All of the sites in the cluster have highly manufacturing process. The total mari- integrated infrastructure, utilities, ser- time traffic through the Port of Tarragona vice, waste management and logistics amounts to about 35 million tons per systems serving to minimize their envi- year and the petroleum products (crude ronmental impact. Although significant petroleum, naphtha, fuel oil, propane, volumes into and out of the cluster are crude condensates, diesel) and chemical30 conveyed by pipeline and barge, over products represent around 50% with a
  31. 31. total of almost 18 million tons per year.Since the 1960s, thirty-four companiesincluding some major international oneslike Bayer, BASF and Dow, and Repsol,Spain’s largest petrochemical company,have set up production sites in thechemical cluster of Tarragona.The cluster consists of a northern anda southern area that are both linked tothe port (Figure 3-11).North industrial park covers 470 hec-tares in the municipalities of La Pobla deMafumet, El Morell, Constantí and Pera-fort. It is a refinery and cracker basedintegrated petrochemical complex.The main players are Repsol and DowChemical Iberica.South industrial park covers 717 hec-tares in the municipalities of Tarragona,Vila-Seca and Reus. It is a multi-companyintermediates, polymers and specialtychemicals site including Repsol, DowChemical Iberica, Bayer, BASF, Basell,Ercros and Solvay.In the locations of Flix and Tortosa,about 100 km south of Tarragona, thereare other smaller Ercros plants, produ-cing chlorine, formaldehyde and deriva-tives. Although well interconnected withthe cluster in Tarragona, these plants arenot part of it. Figure 3-11 Tarragona’s chemical cluster consists of 31 a South and a North industrial park linked to the port.
  32. 32. The main raw materials - crude oil and sent from Bayer back to the Ercros plant natural gas - are all imported. Natural in Flix, where, combined with phosphoric gas is imported in the form of LNG and rock received by train from the port of then processed in several gasification Tarragona, it is used for the production Terminal, Constantí - facilities along the coast around Barce- of dicalcium phosphate. Tarragona, Katoen Natie lona and Cartagena. Natural gas is also provided via the Trans Pyrenean pipeline The majority of the Tarragona chemical link Calahorra from Lacq in France, and cluster companies are members of the from the Maghreb-Europe Gas pipeline Tarragona Chemical Business Associa- from Algeria to Spain. tion (AEQT), which is, in turn, part of ( the national chemical trade association 25% of the Tarragona cluster’s produc- FEIQUE. The main role of AEQT is to tion is exported. The value chain, from lobby the local, regional and national raw materials and feedstocks to final government with the aim of defending products is depicted in Figure 3-12. the interests of the chemical industry The value chain of the Tarragona cluster and to maintain and develop the chemi- is typical of a refinery-cracker based cal cluster’s reputation as a whole. AEQT petro-chemical complex. Since the refin- has participated with the local authorities ery produces a typical “coastal” product in several projects, including the case slate, refinery residues are not gasified of assuring water supply from the Ebro to synthesis gas, resulting in no produc- river, setting up a fire-fighting brigade tion of C1 feedstocks or intermediates for all the companies in the cluster, and in the cluster. Similarly the production of developing the rack of pipelines from xylenes is also absent from the cluster. the port to the southern industrial park (Dixquimics). There is a high integration between the companies in Tarragona, as one third of the products are used within the cluster as input to other manufacturing stages. Repsol and Dow, for instance, provide ethylene via a 100 km long pipeline to Solvay for its PVC manufacturing plant in Martorell. Ercros sends chlorine from its plant in Flix both to the Ercros plant in Vila-Seca for the production of EDC/ VCM and to the Bayer plant for the pro-32 duction of MDI. Hydrochloric acid is then
  33. 33. Acetic Acid, methyl VAM, methyl methacrylate, acetate, acetocyanohydrin PVOH C1 Ammonium Nitric Acid Sulphate LDPE, HDPE Polymers, Copolymers C2 Ethylene oxide, acetaldehyde, ethyl acetate Ethoxylates, glycols Polyols, poly glycols Polyurethane C3 Polyester resins, acrylic Propylene Oxide, ACN Polyols, propylene glycols dispersions Butadiene, MTBE, Butadiene- C4 succinic anhydride, Polybutadiene Styrene, 1-octene C6 Ethyl Benzene Styrene EPS, SBR, ABS, SAN C 7,8 PVC, MDI, Plastics, bleaches, CI VCM, HCL hypochlorites polyurethanes Ship, pipeline Pipeline Pipeline, rail Mainly roadFigure 3-12 Chemical value chain - Tarragona cluster. The products in orange are produced within the cluster, whereas the products in grey are not. 33
  34. 34. 34
  35. 35. TERQUIMSA terminal, Port of Tarragona 4. INTERVIEW RESULTS A total of 26 executives from the 4.1.1 Advantages of the ARRR ARRR cluster and 27 executives cluster from the Tarragona cluster were interviewed by INSEAD researchers. For producers, the access to competitive Statistics obtained from the inter- raw materials and feedstocks, proxim- views were subsequently discussed ity of suppliers within the cluster area > A PARADIGM SHIFT : SUPPLY CHAIN COLLABORATION AND COMPETITION IN AND BETWEEN EUROPE’S CHEMICAL CLUSTERS in the respective ARRR and Tarragona and existing infrastructure are the main Think Tanks, as well as in the Steering reasons for being in the ARRR cluster Committee. This section presents a (Figure 4-1). Proximity of suppliers and summary of the results from this proc- availability of feedstock account together ess. It is organized around 6 questions for 44% of the responses stating input concerning the ARRR and Tarragona costs as being the main advantage of cluster functioning: the chemical clusters. Manufacturers de- What are the advantages of the clus- velop close physical links with their sup- ters? pliers to maximize operational efficiency What are the main disadvantages of and shorten freight legs, as illustrated in operating in the clusters? the Rotterdam chlorine case (see below). What are the obstacles hindering Although accessibility to the hinterland problem solving? customer base is vital, the proximity of What are the opportunities for hori- customers is not perceived by chemi- zontal cluster-driven collaboration? cal manufacturers as being a significant What are the opportunities for vertical reason for locating in the cluster, while it cluster-driven collaboration? is the main driver for LSPs who decide Who should lead the ARRR and Tar- to locate close to their markets. This also ragona clusters? indicates that outbound logistics was not considered as a limiting factor when 4.1 ARRR cluster manufacturers decided to locate in the The statistics for the ARRR cluster clusters. together with the comments and in- terpretations of the ARRR Think Tank are reported below. High concentration of customers 62% 11% Availability of infrastructures 10% 26% Proximity of suppliers 6% 23% Availability of competitive feedstock and raw materials 2% 21% Availability of skilled workforce 8% 10% Marketing 8% 6% 35 Availability of right technology 1% 3% Eased flow of informations and benchmaking 3% Figure 4-1 ARRR - Benefits of chemical clusters (green/LSPs, blue/producers)
  36. 36. The benefits of co-siting: the Rotterdam chlorine case Rotterdam is home to one of the most highly integrated and ef- ficient chlorine and derivatives clusters in the world, built around the modern chlorine manufacturing operations of Akzo Nobel in the Botlek part of Rotterdam. Chlorine is supplied by a network of pipelines to a number of derivatives producers in the vicinity. Shin-Etsu, a Japanese producer of vinyls, has a long-term contract with Akzo Nobel for the supply of chlorine to its ethylene dichloride (EDC), vinyl chloride monomer (VCM) and polyvinyl chloride (PVC) manufacturing processes. The EDC and VCM plants are physically located on the Akzo Nobel site, while the PVC plant is a few kilom- eters away in Pernis. The connection between VCM and PVC units is by pipeline, leasing one of the multicore pipelines for this stretch (see description of Multicore below). Huntsman is another important member of the Rotterdam chlorine derivatives cluster, having a long-term chlorine supply contract with Akzo Nobel for its MDI manufacturing operations in the Ro- zenburg area of Rotterdam. The chlorine that Huntsman uses is returned to Akzo Nobel in the form of gaseous hydrochloric acid, which is then used as an additional feedstock for the EDC/VCM production by Shin-Etsu. This recycling step allows the chlorine molecules to be used twice. Hexion takes chlorine from Akzo Nobel for epichlorhydrin produc- tion and uses it to manufacture a range of epoxy resins at its plant in Pernis. Tronox also plays a role in the Rotterdam chlorine derivatives clus- ter. The company manufactures titanium dioxide at its Botlek plant and draws its chlorine needs from Akzo Nobel via a dedicated pipeline link. These 5 companies have established a highly integrated and syn- ergistic collaborative model enabling optimal production efficien- cies and economics to the benefit of all stakeholders, avoiding in addition the highly dangerous above-ground transportation of chlorine. A significant expansion of chlorine capacity has been necessary to support the growing demand among the derivative producers.36 CLUSTER
  37. 37. Terminal, Tarragona, VOPAKThe discussion of the Think Tankaround these results provided theoccasion to review the history of theexisting clusters with the participants.The group agreed that there is a virtu-ous development cycle of a chemicalcluster. Companies move to clustersas part of natural organic growthand self interest – not necessarily toconsciously exploit the collabora-tive opportunities and advantages ofthe cluster. First, manufacturers settlein a region for geographical reasons,looking for upstream supply synergieswith other manufacturers. LSPs thensettle in the cluster once a critical masshas been reached, ensuring serviceproviders a satisfactory revenue streammainly from storage warehousing,handling activities and transporta-tion within the cluster, and servicingcustomers of their customers locatedoutside the cluster. The critical massalso applies to the development ofsupporting infrastructure like internalcluster pipelines which can only beoperated with a sufficient guaranteedthroughput. We observe that LSPsand port authorities often team up toprovide attractive infrastructure formanufacturers, reinforcing the clusterdynamics. The MultiCore pipeline inRotterdam is a very good illustrationof this situation. It seems that similaractions initiated by producers are rare. Pipe rack connection, Marl Chemical Park, ChemSite 37
  38. 38. MultiCore pipeline in the port of Rotterdam: a common infrastructure to the benefit of all The effective and efficient operation of the Rotterdam chemical cluster depends on the availability of adequate infrastructure. For many years the Port of Rotterdam Authority has played an active role in supporting the creation of optimum conditions for par- ticipants in the cluster. Pipelines play a key role in the cluster in moving large volumes of liquids and gases in a safe, environmen- tally friendly, and cost efficient manner between producers and users. Working in a Joint Venture with VOPAK, the Port of Rot- terdam Authority has created Multicore, a unique concept for the renting of pipeline capacity (on a variable time and distance basis) for companies in the port and industrial area. This offers an attrac- tive, cost effective alternative to truck transport or inland vessels and barges. The 20 kilometer long Multicore pipeline bundle (four pipelines with different diameters and constructed of different materials) runs from east to west, straight through the port and industrial area. Further expansion west (between Europoort and Maasvlakte over a distance of 17 kilometers) is in preparation. Oil products, as well as chemicals and gases, can be transported via the MultiCore pipeline bundle. CLUSTER38 Figure 4-2 MultiCore pipeline concept in the port of Rotterdam
  39. 39. The competition of LSPs benefits the 4.1.2 Disadvantages of the ARRRexisting base of chemical producers clusterand signals the attractiveness of thecluster to potential new entrants. This As a consequence of the developmentpositive feedback loop might weaken if of the Antwerp and Rotterdam clusters,the cluster becomes a victim of its own the tonnage leaving both clusters hassuccess and starts struggling with bot- grown significantly over the lasttleneck issues. 15 years (for instance the container traffic in Antwerp increased fromUnlike the Silicon Valley cluster, inter- 16.5 million tons in 1990 to 80.8 millionviewees did not view the availability tons in 2006). Unfortunately, chemicalof skilled workforce and marketing producers from Antwerp and Rot-capabilities in Antwerp, Rotterdam and terdam share their road infrastructurein the Rhine/Ruhr area as a significant with private users and other indus-advantage compared to the geographi- tries, thereby creating a bottleneckcal and infrastructure advantages. that the public authorities will haveNevertheless, the Think Tank dis- difficulties solving in the short term.cussions pointed out that a skilledworkforce is needed today and also Manufacturers, LSPs and portincreasingly in the future. authorities need to team up and use the Antwerp and Rotterdam cluster Traffic congestion 44% 43% High competition 30% 17% Land unavailability 21% 13% Lack of investments 5% 13% Lack of infrastructures 15% Figure 4-3 ARRR - cluster disadvantages (green/LSPs, blue/producers) 39
  40. 40. Derivatives site, Tarragona, Dow synergies on hinterland deliveries to cluster development that has attract- make environmentally friendly trans- ed many service providers to the port modes a competitive alternative region. However, one LSP mentioned to road transport. Indeed, more than that the size of the market was big 70% of the responses mention conges- enough to allow many LSPs to build tion stems from the lack of investment sufficient critical mass to work profit- in infrastructure in the Antwerp/Rot- ably, thus not requiring LSPs to merge terdam cluster. The extension of the their assets. As a result of this frag- Port of Rotterdam with the scheduled mentation of the market, companies Maasvlakte 2 (see Figure 3-6) might may have to load and/or discharge aggravate the problem if producers are parcels from different storage points not willing or able to increase the rail in the port. This extends the waiting and barge portion of their shipments in time for the vessels, increases demur- the near future. rage costs and harms asset produc- tivity. To tackle the asset fragmenta- Apart from traffic congestion, manufac- tion issue, Oiltanking and Stolthaven turers do not consider land availability Terminals, two logistics providers, or competition as being significant have teamed up to develop dedicated hurdles for operating in the clusters. storage facilities, thereby reducing inef- Competition is considered by the ficiencies in vessel loading. interviewees as being worldwide and not simply limited to the ARRR cluster. Furthermore, the existence of swap arrangements and common capacity investments such as the HPPO plant in Antwerp show that, subject to the respect of competition rules, manufac- turers have no problem collaborating when the synergies are obvious and the value proposition is economically and strategically sound. Apart from traffic congestion, LSPs perceive competition between them- selves as a disadvantage of the clus- ter. This, as mentioned earlier, is the40 logical consequence of a successful
  41. 41. Asset pooling between LSPs in the Antwerpcluster: the Oiltanking/Stolthaven collaborationIn March 2006, Oiltanking GmbH and Stolthaven Terminals BVannounced an Antwerp terminal joint venture called OiltankingStolthaven Antwerp NV, which will operate as an independentliquid storage provider on the right bank of the river Schelde.The terminal is located in the midst of the Antwerp chemical clus-ter and is part of the extensive logistics infrastructure supportingcluster operations. The terminal will be developed as a “SpecialtyChemical Hub” for the Antwerp and Rotterdam (plus Amsterdam)clusters, and as a transportation hub to improve the turnaroundand utilization of the Stolt chemical parcel tanker fleet.Parcel tanker operators can face up to 40% of total vessel timein port, moving from one jetty to another. The downside of thecluster may be that there are too many producers and LSPs whohave the critical mass to build their own assets, rather than beingforced by their small size to explore all the opportunities to sharelogistics assets inside the cluster.CLUSTERThe LBC/Ertisa collaboration is another illustration of a logistics pro-vider (LBC) collaborating and setting up dedicated storage assetson a customer’s site (Bayer) to serve another customer (Ertisa). 41
  42. 42. Benefit from cluster synergies via vertical collaboration: the LBC/Ertisa case In July 2006 the LBC tank terminal group and Ertisa, a subsidiary of the Spanish oil and energy group CEPSA announced their intention to form a Joint Venture to build and operate a tank stor- age terminal in Antwerp. The first phase of the project would be to build storage for Ertisa products – followed by a second phase for other LBC customers. There would also be facilities for the han- dling of rail tank cars, road tank trucks, and tank containers. Other value added services, such as drumming and blending, would be built in line with demand. The terminal will be located at the Bayer site on the right bank of the Schelde river, in the heart of the chemical cluster. The site offers deepwater access to accommodate the largest chemical parcel and product tankers. The demand for storage was based on Ertisa’s increasing pro- duction of phenol and acetone in Huelva in the south of Spain, and the need to position product close to its major customers in Northern Europe. This complemented LBC’s plans to strengthen their position in the growing Antwerp chemical cluster, extend their relationship with an established customer, and provide existing and new customers with a prime new location for stor- age and other services. This development is also in line with Bayer’s plans to develop the spare land on their site as a chemical park, and with the process of optimizing the use of services and infrastructure available on the site. This is a good example of cluster-driven collaboration.42 CLUSTER
  43. 43. TTR terminal, Port of Rotterdam, VOPAK 4.1.3 Obstacles to overcoming balanced, but point out two issues in cluster disadvantages the current cluster setup. The first is linked to the competition intensity According to shippers, the main ob- between LSPs, which is fueled by the stacle to solving congestion issues is producers’ practice of breaking down the low willingness of the stakehold- their logistics activities into smaller ers to tackle this issue in a collabo- pieces and granting short term con- rative fashion (55% of the answers, tracts to a set of competing LSPs, Figure 4-4). Since manufacturers have rather than exploiting a “total cost to outsourced their logistics activities, serve” solution. According to a service they do not see themselves taking the provider participating in the Think lead in developing logistics solutions Tank, the fragmentation of the logistics on a local scale. This point of view is market is the consequence of the lack reinforced by the fact that the deci- of willingness of producers to collabo- sion centers for potential investments rate with LSPs. Nevertheless, the Think are often not located in the cluster, Tank discussions also highlighted the which leads to such projects receiving fact that LSPs collaborate voluntarily lower attention on the radar screen of when their service scope is comple- a producer’s top management (22% of mentary (e.g., the Pernis Combi Termi- the answers). nal in Rotterdam) or when a producer asks competing service providers to The answers of LSPs are more develop a solution together. Lack of collaboration between the companies 23% 55%Lack of port authorities, governmental and regional actions 23% 12% Absence of companies local decision centres 9% 22% Fragmentation of the market 26% 5% Lack or misallocation of EU investment funds 19% 6% Figure 4-4 ARRR - obstacles to overcoming cluster disadvantage (green/LSPs, blue/producers) 43