Chemical Industry in Europe – Trends Cefic Industrial Policy Programme 10th July 2019 Dr Moncef HADHRI, Cefic Industrial Policy, Economic Affairs, mha@cefic.be

1. Where the EU stands today Europe’s economy Source: Europe in May 2019 (EU communication), https://ec.europa.eu/commission/sites/beta-political/files /euco_sibiu_communication_en.pdf

Nearly 2/3 of citizens think that being in the EU is a good thing for their country Happy to be a member of the EU area. 2/3 is this enough? Having the same currency? 75% of euro area citizens are in favour of the euro, the highest level since the introduction of the euro. Three in four euro area citizens support the single currency. This is the highest share ever. Good thing: Nearly 2/3 of European citizens think being an EU member is a good thing (up from 54% in 2014) Among the largest EU countries, Germany took the lead with 81% of citizens believe on Europe Union For Spain, it is 10% above the EU average (72% are convinced about the EU, only 6% are unhappy) The best country is of course Luxemburg with 87% followed by Ireland 85% Among the largest EU economies, the lowest satisfaction is observed in Italy (42%) For the UK, nearly 50% of citizens are convinced about Europe, Bad thing: 11% of EU citizens think it is bad thing, far below the share in UK and Romania (21%), About 20% of Citizens in both UK and Romania think it is bad thing to belong to the EU area as member, the highest share compared to the average of 11% for the EU area The best country is Luxemburg with 3% only (bad thing) Uncertain: 25% are still uncertain (yellow), ar below the higher share in Hungary 41%   A continuously increasing majority of Europeans think that being a member of the EU is a good thing for their country. This is the highest level in 27 years. Source: Europe in May 2019 (EU communication), https://ec.europa.eu/commission/sites/beta-political/files /euco_sibiu_communication_en.pdf

Unemployment is at a record low level Robust economic recovery. There are now 240 million people at work in Europe – more than ever before Unemployment is at a record low. it still remains high for young people (14%) Poverty and social exclusion are now decreasing and there is more convergence amongst Member States. Thanks to the stronger European financial sector: supporting credit and investment. Unemployment is a key indicator of development of society Europe’s economy: The EU’s ambitious agenda for jobs, growth and investment, along with efforts to deepen the single market and the European Central Bank’s accommodative monetary policy have contributed to a robust economic recovery. Europe’s economy has grown for six consecutive years. There are now 240 million people at work in Europe – more than ever before And unemployment is at a record low this century, although it still remains high in some Member States, in particular for young people. Public finances have improved across the board. Poverty and social exclusion are now decreasing. This is notably due to the positive impact of the EU’s structural and investment policies. A stronger European financial sector is supporting credit and investment. Strong increase of unemployment from 2008 to 2012 (financial crisis effects) Stabilisation in 2012 A sharp decline between 2013 and 2014 Strong decline between 2013 and 2018 Source: Europe in May 2019 (EU communication), https://ec.europa.eu/commission/sites/beta-political/files /euco_sibiu_communication_en.pdf

Reducing Inequalities: Europe is by far the leading continent in the world The welfare gap between Member States is generally narrowing. Europe is by far the leading continent in the world when it comes to progress made towards reducing inequalities. At the same time, the welfare gap risks widening within Member States, notably between urban areas and rural, more remote regions. While challenging, economic modernisation will provide opportunities for faster regional development and job creation. Technology and automation will continue to profoundly change the way we work, make products and deliver services. Many younger Europeans will work in professions that do not exist today and most workers will need to change jobs and renew their skills many times during their careers. Source: Europe in May 2019 (EU communication), https://ec.europa.eu/commission/sites/beta-political/files /euco_sibiu_communication_en.pdf

Europe is a world leader in quality of life What does mean Quality of life? Improving welfare and ensuring access to high quality, inclusive education, professional retraining, social protection and public services are pressing concerns for Europeans. Access to social and affordable, energy-efficient housing is a challenge. Around 10% of households in the EU spend over 40% of their income on housing costs. Europe is by far the leading continent in the world when it comes to progress made towards reducing inequalities. What about tomorrow? Economic modernisation will provide opportunities for faster regional development and job creation. Technology and automation will continue to profoundly change the way we work, make products and deliver services. Many younger Europeans will work in professions that do not exist today and most workers will need to change jobs and renew their skills many times during their careers.

Today: the EU Economic Sentiment Indicator (ESI) decreases markedly The ESI rose in the Netherlands, while it decreased in France and Italy and, more significantly in Germany and Spain. Data reflects also the strong deterioration of sentiment in the UK (−1.5) and Poland (−3.7). The ESI dropped for the eleventh consecutive time to its lowest level since August 2016 The EU industry confidence took a blow and consumer sentiment weakened. The negative mood of the industry is mainly driven by trade conflicts, weak dynamics of the economy, ongoing uncertainty on Brexit and the problem of automotive sector in Germany What is the economic situation today? The ESI dropped for the eleventh consecutive time to its lowest level since August 2016 Time now is really “perfect storm” Trade conflicts US-China New conflicts US versus Mexico Trade conflict with Kuba Iran conflicts with USA Brexit issues: uncertainty Car sector: EU tensions with the USA Car sector affected by Brexit discussion The ESI rose in the Netherlands, while it decreased in France and Italy and, more significantly in Germany and Spain. Data reflects also the strong deterioration of sentiment in the UK (−1.5) and Poland (−3.7). The EU industry confidence took a blow and consumer sentiment weakened. The negative mood of the industry is mainly driven by trade conflicts, weak dynamics of the economy, ongoing uncertainty on Brexit and the problem of automotive sector in Germany Risks The business environment is risky. some of high risk are materialised but not all of them in 2019. The economic & business environment Labour market too slow Export restriction And industry recession Consumption doing well, Populism (increasing) and the election of new parliament is long term risk. More fragmented parliament *EU Commission Report, Business and Consumer Survey, April 2019

2. Where the EU chemicals demand stands today Source: Europe in May 2019 (EU communication), https://ec.europa.eu/commission/sites/beta-political/files /euco_sibiu_communication_en.pdf

Demand for chemicals was weak Increase JJ Q4-2018: Positive Q1-2019: Positive + 0.4% + 1.3% +2.0% -0.6% + 1.0% +0.5% +0.4% Increase JJ Q4-2018: Positive Q1-2019: Positive What about the key sectors impacting chemicals demand? Demand for EU chemicals was weak: Output in the EU manufacturing sector as a whole was 0.5% above the previous year’s level. The analysis shows different growths among the EU sectors. Output in construction was 4.6% above the previous year’s level Food & beverage posted 2% growth in Q1-2019 compared to the same period of last year. less sensitive to economic cycles: Good expectations for production, price & employment in 2019 (better than 2018) based on EU surveys Food & drinks maybe less sensitive to economic cycles than other industrial sectors Inflation is not high Unemployment is really low Rubber & plastics, electrical appliances and machinery & equipment are in line with the manufacturing (growth less than 1%). Very strong 1st quarter in 2019 after declining in 2018 Very high occupational rate (more than 80%) Construction is doing good and plastics are a major part of it Should also be careful with the coming years and the potential changes in legislation 10% drop in R&P in Italy Packaging is the main end markets of rubber and plastics Automotive (-) Plastics (-) Construction (+) Food & beverage (+) impact packaging   Machinery & equipment This sector is sensitive to uncertainty (companies hesitate to invest) when business climate is uncertain Investment good Strong 1st quarter compared to Q4 2018 Electric appliances Good 1st quarter (both compared to Q1 &Q4 2018) Slightly positive forecasts for 2019 (production and prices) Very high occupational rate Exports forecasts weak but positive Sector depending on the economic cycle ?  The automotive sector posted a decrease of 3.7% in Q1-2019, mainly affected by the modest performance in Germany. Uncertainty on the global market and Brexit issue did not help. The EU automotive sector is still relatively strong. More than one fourth of global car exports is attributable to the EU area (Market share). Negative growth in the automobile sector in 2018 (regulation ; most of the new cars are still on diesel & petrol) Exports from EU stable but imports growing in 2018 (ACEA) Confidence indicator (EU 28) decreasing for 9 months in a row and getting worse in 2019 Production strongly negative in May 2019 Expectations are negative for production & employment growth in 2019 / price might increase Trade wars are another negative aspect (Trump vs EU & China) Impact of the EU elections on climate story & regulation (CO2 emissions) Water shortage problem in Germany Risks: Brexit (hard) and US market behaviour There is no global consensus on electric car. Regulation is driving the car business world wide -3.7% -0.2% + 0.9% + 0.5% + 0.7%

Construction is doing well -0.3% + 1.2% increase JJ Q4-2018: Positive Q1-2019: Positive + 0.2% + 2.2% +0.5% +4.6% -0.9% -1.1% 0.0% -0.4% What about the key sectors impacting chemicals demand? Demand for EU chemicals was weak: Output in the EU manufacturing sector as a whole was 0.5% above the previous year’s level. The analysis shows different growths among the EU sectors. Output in construction was 4.6% above the previous year’s level Food & beverage posted 2% growth in Q1-2019 compared to the same period of last year. less sensitive to economic cycles: Good expectations for production, price & employment in 2019 (better than 2018) based on EU surveys Food & drinks maybe less sensitive to economic cycles than other industrial sectors Inflation is not high Unemployment is really low Rubber & plastics, electrical appliances and machinery & equipment are in line with the manufacturing (growth less than 1%). Very strong 1st quarter in 2019 after declining in 2018 Very high occupational rate (more than 80%) Construction is doing good and plastics are a major part of it Should also be careful with the coming years and the potential changes in legislation 10% drop in R&P in Italy Packaging is the main end markets of rubber and plastics Automotive (-) Plastics (-) Construction (+) Food & beverage (+) impact packaging   Machinery & equipment This sector is sensitive to uncertainty (companies hesitate to invest) when business climate is uncertain Investment good Strong 1st quarter compared to Q4 2018 Electric appliances Good 1st quarter (both compared to Q1 &Q4 2018) Slightly positive forecasts for 2019 (production and prices) Very high occupational rate Exports forecasts weak but positive Sector depending on the economic cycle ?  The automotive sector posted a decrease of 3.7% in Q1-2019, mainly affected by the modest performance in Germany. Uncertainty on the global market and Brexit issue did not help. The EU automotive sector is still relatively strong. More than one fourth of global car exports is attributable to the EU area (Market share). Negative growth in the automobile sector in 2018 (regulation ; most of the new cars are still on diesel & petrol) Exports from EU stable but imports growing in 2018 (ACEA) Confidence indicator (EU 28) decreasing for 9 months in a row and getting worse in 2019 Production strongly negative in May 2019 Expectations are negative for production & employment growth in 2019 / price might increase Trade wars are another negative aspect (Trump vs EU & China) Impact of the EU elections on climate story & regulation (CO2 emissions) Water shortage problem in Germany Risks: Brexit (hard) and US market behaviour There is no global consensus on electric car. Regulation is driving the car business world wide -3.2% -2.0%

Manufacturing sector modestly recovers from technical recession Demand for EU chemicals was weak: Output in the EU manufacturing sector as a whole was 0.5% above the previous year’s level. The analysis shows different growths among the EU sectors. Output in construction was 4.6% above the previous year’s level Food & beverage posted 2% growth in Q1-2019 compared to the same period of last year. less sensitive to economic cycles: Good expectations for production, price & employment in 2019 (better than 2018) based on EU surveys Food & drinks maybe less sensitive to economic cycles than other industrial sectors Inflation is not high Unemployment is really low Rubber & plastics, electrical appliances and machinery & equipment are in line with the manufacturing (growth less than 1%). Very strong 1st quarter in 2019 after declining in 2018 Very high occupational rate (more than 80%) Construction is doing good and plastics are a major part of it Should also be careful with the coming years and the potential changes in legislation 10% drop in R&P in Italy Packaging is the main end markets of rubber and plastics Automotive (-) Plastics (-) Construction (+) Food & beverage (+) impact packaging   Machinery & equipment This sector is sensitive to uncertainty (companies hesitate to invest) when business climate is uncertain Investment good Strong 1st quarter compared to Q4 2018 Electric appliances Good 1st quarter (both compared to Q1 &Q4 2018) Slightly positive forecasts for 2019 (production and prices) Very high occupational rate Exports forecasts weak but positive Sector depending on the economic cycle ?  The automotive sector posted a decrease of 3.7% in Q1-2019, mainly affected by the modest performance in Germany. Uncertainty on the global market and Brexit issue did not help. The EU automotive sector is still relatively strong. More than one fourth of global car exports is attributable to the EU area (Market share). Negative growth in the automobile sector in 2018 (regulation ; most of the new cars are still on diesel & petrol) Exports from EU stable but imports growing in 2018 (ACEA) Confidence indicator (EU 28) decreasing for 9 months in a row and getting worse in 2019 Production strongly negative in May 2019 Expectations are negative for production & employment growth in 2019 / price might increase Trade wars are another negative aspect (Trump vs EU & China) Impact of the EU elections on climate story & regulation (CO2 emissions) Water shortage problem in Germany Risks: Brexit (hard) and US market behaviour There is no global consensus on electric car. Regulation is driving the car business world wide

Few manufacturing sectors are above the previous year’s level Demand for EU chemicals was weak: Output in the EU manufacturing sector as a whole was 0.5% above the previous year’s level. The analysis shows different growths among the EU sectors. Output in construction was 4.6% above the previous year’s level Food & beverage posted 2% growth in Q1-2019 compared to the same period of last year. less sensitive to economic cycles: Good expectations for production, price & employment in 2019 (better than 2018) based on EU surveys Food & drinks maybe less sensitive to economic cycles than other industrial sectors Inflation is not high Unemployment is really low Rubber & plastics, electrical appliances and machinery & equipment are in line with the manufacturing (growth less than 1%). Very strong 1st quarter in 2019 after declining in 2018 Very high occupational rate (more than 80%) Construction is doing good and plastics are a major part of it Should also be careful with the coming years and the potential changes in legislation 10% drop in R&P in Italy Packaging is the main end markets of rubber and plastics Automotive (-) Plastics (-) Construction (+) Food & beverage (+) impact packaging   Machinery & equipment This sector is sensitive to uncertainty (companies hesitate to invest) when business climate is uncertain Investment good Strong 1st quarter compared to Q4 2018 Electric appliances Good 1st quarter (both compared to Q1 &Q4 2018) Slightly positive forecasts for 2019 (production and prices) Very high occupational rate Exports forecasts weak but positive Sector depending on the economic cycle ?  The automotive sector posted a decrease of 3.7% in Q1-2019, mainly affected by the modest performance in Germany. Uncertainty on the global market and Brexit issue did not help. The EU automotive sector is still relatively strong. More than one fourth of global car exports is attributable to the EU area (Market share). Negative growth in the automobile sector in 2018 (regulation ; most of the new cars are still on diesel & petrol) Exports from EU stable but imports growing in 2018 (ACEA) Confidence indicator (EU 28) decreasing for 9 months in a row and getting worse in 2019 Production strongly negative in May 2019 Expectations are negative for production & employment growth in 2019 / price might increase Trade wars are another negative aspect (Trump vs EU & China) Impact of the EU elections on climate story & regulation (CO2 emissions) Water shortage problem in Germany Risks: Brexit (hard) and US market behaviour There is no global consensus on electric car. Regulation is driving the car business world wide Demand for the EU chemicals industry was weak. Output in key customer industries was significantly below the previous year’s level. Output in construction was 4.6% above the previous year’s level

3. Where the EU stands today EU Chemicals Industry

Chemicals business modestly recovers from ‘technical’ recession - 0.8% + 1.7% Output in Q1-2019 was at the same level as in Q1-2018 Chemicals business modestly recovers from ‘technical’ recession Are we in a recession? What does this mean? Output was as the same level in Q1-2018 Chemicals production in the EU chemicals sector posted an increase of 1.7% in the first quarter of this year compared to Q4-2018. Output was as the same level in Q1-2018. Base chemicals still below the previous year’s levels. Producer prices were above the previous year’s level, growing 1.1% in the EU chemicals sector in Q1-2019, Chemicals sales rise by 0.3% from January to February 2019 (y-o-y) Chemicals consumption went up 0.9% from January to February 2019 (y-o-y) Chemicals exports value jump 2.3% from January to February 2019 (y-o-y). A significant decline in EU petrochemicals exports to the USA (-€390 million). EU exports to China went up mainly in petrochemicals (+€303 million) Chemicals imports value jump 5.8% from January to February 2019 (y-o-y) Chemicals trade surplus down by €0.5 billion from January to February 2019 (y-o-y) After a period of declining output growth rates were positive in the beginning of 2019. The modest demand of key customers sectors slowed growth of chemicals

Employment in Q4-2018 back to the same level of Q2-2009 -7.0% -10.0% EU employment in 2018 (1.19 million of workers) were above the previous year’s level, growing 1,7% Positive development of employment: Back to the same level of Q2-2009 Moderate downward between 2003 and 2007 (gains of labour productivity): Employment 2007 was 7% lower compared to the 2003’s employment level Strong decline between 2007 and 2010 (financial crisis effects): 10% below the 2007’s level Stabilisation of employment from 2010 to 2015 Significant upward trend of chemicals employment since 2015 EU employment in 2018 (1.19 million of workers) were above the previous year’s level, growing 1,7%

Employment rise by 1.7% in 2018 (y-o-y) EU employment in 2018 were above the previous year’s level, growing 1,7%

Prices went down but still 1.3% above the previous year’s level EU price growth: +1.3% Prices in Q1-2019 were above the previous year’s level

Total sales remained unchanged and is about 1.0% above 2018’s level EU total sales (€144,6 bn, Q1-19), up from €143.4 bn in (Q1-18)

Domestic sales went 1. 2% down but still 0 Domestic sales went 1.2% down but still 0.6% above the previous year’s level EU domestic sales (€103,2 bn, Q1-19), up from €102.6 bn in (Q1-18)

Consumption went up by €2.3 bn compared to 2018’s level (1.8%) EU consumption (€133,3 bn, Q1-19), up from €131.0 bn in (Q1-18)

Chemicals exports rise by €0.6 bn (1.4%) Extra-EU exports (€41,4 bn, Q1-19), up from €40.8 bn in Q1-18 Chemicals exports rise by €0.6 bn from January to March 2019 compared to the same period of 2018. Exports outside the EU28 area reached the value of €41.4 bn through March 2019, up from €40.8 bn during the same period of last year (1.4%). The main changes are the following: EU exports to the USA were below the previous year’s level, declining 6.8% (y-o-y). Data shows also a significant decline in EU petrochemicals exports to the USA while EU exports to China went up mainly in petrochemicals. Chemicals imports rise by €1.6 bn through the first three months of 2019. Imports outside the EU28 area reached the value of €30.1 bn from January to March 2019, up from €28.5 bn during the same period of last year (5.7%). The main changes are the following: EU imports from the USA reached the value of €6.4 bn in Q1-2019, up from €5.8 bn (11.7%). They went up mostly in petrochemicals. Next to that, EU imports went up significantly from China in both petrochemicals and polymers. Last but not least, EU imports from Russia went down by €130 million in petrochemicals. Chemicals surplus down by €1.0 bn. The net trade surplus was €11.3 bn from January to March 2019, down from €12.4 bn during the same period of last year. EU chemicals registered a trade deficit with Japan, China, India and South Korea. The EU chemicals surplus with the USA went down dramatically from €3.0 bn to €1.8 bn. This represents 42% down compared to the previous year’s level.

Chemicals imports rise by €1.6 bn (5.7%) Extra-EU imports (€30,1 bn, Q1-19), up from €28.5 bn in (Q1-18) Chemicals exports rise by €0.6 bn from January to March 2019 compared to the same period of 2018. Exports outside the EU28 area reached the value of €41.4 bn through March 2019, up from €40.8 bn during the same period of last year (1.4%). The main changes are the following: EU exports to the USA were below the previous year’s level, declining 6.8% (y-o-y). Data shows also a significant decline in EU petrochemicals exports to the USA while EU exports to China went up mainly in petrochemicals. Chemicals imports rise by €1.6 bn through the first three months of 2019. Imports outside the EU28 area reached the value of €30.1 bn from January to March 2019, up from €28.5 bn during the same period of last year (5.7%). The main changes are the following: EU imports from the USA reached the value of €6.4 bn in Q1-2019, up from €5.8 bn (11.7%). They went up mostly in petrochemicals. Next to that, EU imports went up significantly from China in both petrochemicals and polymers. Last but not least, EU imports from Russia went down by €130 million in petrochemicals. Chemicals surplus down by €1.0 bn. The net trade surplus was €11.3 bn from January to March 2019, down from €12.4 bn during the same period of last year. EU chemicals registered a trade deficit with Japan, China, India and South Korea. The EU chemicals surplus with the USA went down dramatically from €3.0 bn to €1.8 bn. This represents 42% down compared to the previous year’s level.

Chemicals surplus down by €1.0 bn Chemicals exports rise by €0.6 bn from January to March 2019 compared to the same period of 2018. Exports outside the EU28 area reached the value of €41.4 bn through March 2019, up from €40.8 bn during the same period of last year (1.4%). The main changes are the following: EU exports to the USA were below the previous year’s level, declining 6.8% (y-o-y). Data shows also a significant decline in EU petrochemicals exports to the USA while EU exports to China went up mainly in petrochemicals. Chemicals imports rise by €1.6 bn through the first three months of 2019. Imports outside the EU28 area reached the value of €30.1 bn from January to March 2019, up from €28.5 bn during the same period of last year (5.7%). The main changes are the following: EU imports from the USA reached the value of €6.4 bn in Q1-2019, up from €5.8 bn (11.7%). They went up mostly in petrochemicals. Next to that, EU imports went up significantly from China in both petrochemicals and polymers. Last but not least, EU imports from Russia went down by €130 million in petrochemicals. Chemicals surplus down by €1.0 bn. The net trade surplus was €11.3 bn from January to March 2019, down from €12.4 bn during the same period of last year. EU chemicals registered a trade deficit with Japan, China, India and South Korea. The EU chemicals surplus with the USA went down dramatically from €3.0 bn to €1.8 bn. This represents 42% down compared to the previous year’s level.

4. US-China Trade Tensions: Any changes on chemicals ?

US chemicals exports to China: Latest changes China is the US’s #1 imports source while Mexico is 2nd and Canada is 3rd. 22% of all imported goods come from China (only 13% from MX and 13% from CA). About 31% of all chemicals imported from China are from a related party. (this compares to 56% for US total from all partners). In 2017, the US imported $505 billion in goods from China. At this point, there are additional tariffs on about half of all goods imported from China. About 37% of all US chemicals exports to China are to a related party. (this compares to 40% for US total to all partners) *Many of the goods facing additional tariffs are capital goods and intermediated goods but, remember, that: Nearly all imports, even consumer goods, are inputs for US firms, retailers and factories (acc to Brookings Institution, about 30% of what the US imports from China is intermediate goods) As you think about supply chains and customer industries: **All industries within the US mfg sector make intensive use of intermediate inputs and source at least 10% of these internationally… for certain industries and firms where it is harder to substitute with domestic counterparts, then they are likely to have a significant impact on the function of US manufacturers (St Louis Fed. How Could Higher Tariffs Affect American Manufacturers? 7/12/18). Source: ACC, June 2019

US chemicals imports from China: Latest changes China is the US’s #1 imports source while Mexico is 2nd and Canada is 3rd. 22% of all imported goods come from China (only 13% from MX and 13% from CA). About 31% of all chemicals imported from China are from a related party. (this compares to 56% for US total from all partners). In 2017, the US imported $505 billion in goods from China. At this point, there are additional tariffs on about half of all goods imported from China. About 37% of all US chemicals exports to China are to a related party. (this compares to 40% for US total to all partners) *Many of the goods facing additional tariffs are capital goods and intermediated goods but, remember, that: Nearly all imports, even consumer goods, are inputs for US firms, retailers and factories (acc to Brookings Institution, about 30% of what the US imports from China is intermediate goods) As you think about supply chains and customer industries: **All industries within the US mfg sector make intensive use of intermediate inputs and source at least 10% of these internationally… for certain industries and firms where it is harder to substitute with domestic counterparts, then they are likely to have a significant impact on the function of US manufacturers (St Louis Fed. How Could Higher Tariffs Affect American Manufacturers? 7/12/18). Source: ACC, June 2019

US chemicals trade with China: quarterly growth (y-o-y) China is the US’s #1 imports source while Mexico is 2nd and Canada is 3rd. 22% of all imported goods come from China (only 13% from MX and 13% from CA). About 31% of all chemicals imported from China are from a related party. (this compares to 56% for US total from all partners). In 2017, the US imported $505 billion in goods from China. At this point, there are additional tariffs on about half of all goods imported from China. About 37% of all US chemicals exports to China are to a related party. (this compares to 40% for US total to all partners) *Many of the goods facing additional tariffs are capital goods and intermediated goods but, remember, that: Nearly all imports, even consumer goods, are inputs for US firms, retailers and factories (acc to Brookings Institution, about 30% of what the US imports from China is intermediate goods) As you think about supply chains and customer industries: **All industries within the US mfg sector make intensive use of intermediate inputs and source at least 10% of these internationally… for certain industries and firms where it is harder to substitute with domestic counterparts, then they are likely to have a significant impact on the function of US manufacturers (St Louis Fed. How Could Higher Tariffs Affect American Manufacturers? 7/12/18). Source: ACC, June 2019

5. What about Europe: Latest changes?

EU Trade Flows with China: Latest changes

EU Trade Flows with US: Latest changes

6. Where the global chemical business stands today

Global chemicals output was 2.4% above the previous year’s level Global chemicals output in Q1-2019 was 2.4% above the previous year’s level. Compared to Q4-2018, output grew by less than 1%. . Global production trend of the chemicals business continued to lose momentum

Globally: the chemicals business 2.4% above the previous year’s level China China is still growing significantly (5.2% above the previous year’s level), Good start of the year 2019 with 3.7% growth compared to Q4-2018. Output in Q1-2019 was 5.2% above the previous year’s level. The Chinese government has lowest its economic growth target to 6 to 6.5% in 2019. Industrial production and infrastructure investment are losing importance. Service and private consumption are drivers of the economy US The US chemicals output was 3.1% above the previous year’s level, The US industry showed a robust development. Late 2018 shows that momentum continued to come mainly from the automotive sector (+2.7%) and metal products (3.3%). The steel industry, too ended the year with a market improvement Brazil and South Korea are in (technical) recession. The EU, China and India are in the “recovery” phase. The USA, Japan & Russia showed negative trend in Q1-19. Brazil GDP Brazil weak Q1-2019 (slowdown of trade conflicts) impacted by US-China conflicts. Leading indicators for Brazil show recovery. The truck and car sales in Brazil are quite good. Brazil and South Korea are in (technical) recession. The EU, China and India are in the “recovery” phase. The USA, Japan & Russia showed negative trend in Q1-19.

Chemicals* sales broken down by sub-sector *Chemicals excluding pharmaceuticals (Nace 20)

Chemicals* Output– Latest Trends *Chemicals excluding pharmaceuticals (Nace 20), production figures on chemicals sectors are not comparable; they did not have the same degree of country coverage,

Chemicals* Prices– Latest Trends *Chemicals excluding pharmaceuticals (Nace 20), prices figures on chemicals sectors are not comparable; they did not have the same degree of country coverage,

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