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

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 EPCA
With contribution of the INSEAD team, Technology and Operations Management,
and the Editorial Committee
THE EUROPEAN PETROCHEMICAL ASSOCIATION
August 2007

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. INDEX
Note on Competition Law 6
1. Management Summary 9
2. Introduction 13
2.1 European Chemical Industry – A Major Force under Threat? 13
2.2 Clusters & Competitiveness 14
2.3 The EPCA Study 15
3. 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
3.2.1.1 Antwerp subcluster 22
3.2.1.2 Rotterdam subcluster 24
3.2.1.3 Rhine Ruhr subcluster 27
3.2.1.4 Rhine Main subcluster 30
3.2.2 Tarragona cluster 30
4. 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. 4.1.2 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: 65
4
the disposal of treated water

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? 73
5. 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 80
6. 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
benefits
7. Appendix 87
Organization of the study 87
Literature sources 89
Definitions 89
5
Acknowledgments 90

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. Generally
6

7. speaking, competition authorities volved in cooperative agreements
will 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 derived
In addition to assuring themselves from the development of effi-
that a particular course of conduct cient supply chain management
is indeed compatible with com- and strong economic clusters
petition law, companies must also more generally. Ultimately, it is
ensure that their assessments are up to each company to decide
carefully documented. Rigorous individually upon its own best
documentation and document business strategy.
retention policies are therefore
key. Clear records must be kept,
for example, of the reasoning
behind strategies adopted and any
meetings concerning them, the
assessment of the effects of those
strategies and why the company
considers them to be compatible
with competition law. Paper trails
clearly showing the good will and
intentions of the companies in-
7

8. 8

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. 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 in
10 total value-added, many investment and the clusters.
(*) Cefic ‘Horizon: 2015: Perspectives for the European Chemical Industry’ Brussels, March 2004.

11. Information sharing is key.
The interviews have shown that many
opportunities to benefit from chemi-
cal clusters are missed because each
cluster stakeholder (producer, Logistics
Service Provider (LSP) or authority) has
only a partial view of the flows proc-
essed. Compared to chemical clusters
in the rest of the world, it is surprisingly
difficult to obtain even basic aggregate
information on European chemical clus-
ters. Consequently, initiatives to build
cluster-wide infrastructure solutions or
even merge shipments from different
companies are very difficult to under- r
take. Without a certain level of structured
and available information accessible
to all partners, firms will value invest-
ments in the cluster with a higher risk or
might even invest in the wrong alterna-
tive. Thus, to ensure that the competi-
tive forces still work to the benefit of all
cluster members, information sharing is
key and should go beyond exchanging
forecasts between business partners.
Clearly, any information exchange must
be done in full compliance with competi-
tion rules.
A flexible discussion platform
is required to organize
information sharing and
coordinate cluster initiatives.
Considering the constraints of the chem-
ical industry with respect to competition
law as well as the fact that firms operate
independently, we recommend the 11

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. 2. INTRODUCTION
2.1 European Chemical Industry – and generated 2% of Europe’s gross
A Major Force under Threat? national product (Source: Eurostat,
2007). Recent studies performed in the
From 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 CLUSTERS
cals, the chemical industry plays a domi- in the chemical industry creates three
nant role in today’s national and global additional jobs in the chemical-related
economies. Developing and sustaining a sector.
local chemical industry, able to compete
on a global scale, has both economic Since 1990 the European chemical
and political importance as the chemi- industry has been growing at an average
cal industry supplies the full spectrum rate of 2.8% per year, outstripping the
of Europe’s manufacturing industry with European manufacturing industry which
intermediate 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 41.0
comprised 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. 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. The report observed that Europe enjoys collaborative relationships, as a way of
the benefit of a limited number of raising the bar on performance, without
strongly 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 fact
through ports, refineries, and pipelines is that Europe has well-established and
of prime importance, as well as the op- effective clusters in place, supported
portunity to develop derivative products by highly sophisticated logistics service
at the lowest possible logistics cost. providers and supportive public authori-
ties, further benefits would be obtained
It should be clear that the continued by engaging all stakeholders in enhanc-
global competitiveness of European ing the linkage between clusters.
chemical manufacturing is closely
linked to the efficiency of its clus- In this context EPCA took the initiative
ters. Chemical clusters are all about of conducting a more in-depth study of
the supply chain at work. European chemical clusters.
The port and pipeline infrastructure
facilitates upstream supply chain 2.3 The EPCA Study
operations and economics. The high
level of integration and interconnectivity Since European manufacturers cannot
between the cluster participants creates differentiate themselves through a cost
significant opportunities to benefit from advantage on feedstocks (versus Middle
efficiencies through reduced transporta- Eastern producers), the integration of
tion intensity (i.e. lower freight costs, energy and intermediate raw materials
reduced 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 CEFIC
efficient use of working capital. have shown that 37% of the value added
created by chemical companies can be
The inevitable tension between com- spent on transforming, storing, and mov-
petition and collaboration has probably ing products.
limited the full exploitation of these
opportunities in the past. However, there The EPCA-CEFIC Think Tank Reports
is evidence of an increasing willingness issued in 2004 and 2005 concluded
to explore the scope and benefits of that a huge potential can be achieved
15

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 study
16

17. 3. PRESENTATION OF
THE ARRR AND TARRAGONA
CHEMICAL CLUSTERS
3.1 Definition of chemical clusters Langen, 2004), a cluster is defined as a
“geographically limited concentration
Links between a specific industry and of mutually related business units,
a geographic location can be easily associations and public or private
observed 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 CLUSTERS
world. For example, financial services economic focus”. This definition will
are related to the city of London, fashion be extended in the following chapters to
to Milan and Paris and high-technology match the specificities of the chemical
electronics to Silicon Valley. The chemi- industry.
cal industry could be associated with
the area of Rotterdam, Antwerp and the A chemical cluster, like other industrial
Rhine/Ruhr region, strongly sustained by clusters, is characterized by a high
the presence of 3 important ports (the 2 concentration of manufacturing compa-
seaports of Antwerp and Rotterdam and nies and service providers operating in
the inland port of Duisburg) and by the the chemical business. But the cluster
dense network of logistics interconnec- population consists also of associations
tions in place. and public or private organizations that
participate in and are co-responsible for
The phenomenon of regional industry creating a vibrant environment in terms
concentration was explored by Alfred of productivity, innovation and creation
Marshall as early as the 1920s (Marshall, of new businesses. For example, in the
1920) with respect to the progressive chemical clusters examined by the Think
concentration of firms making and ma- Tank the relevant port authorities attract
chining 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 business
on this phenomenon has continuously development in addition to dealing with
increased since then, due especially traditional port activities.
to the recognition that such networks
would constitute an ultimate source of In the manufacturing stage of the value
competitive advantage for an economy chain, the products of a company are
(Porter, 1990). the inputs for the manufacturing process
of a company further downstream in
These localized industries that combine the value chain. In addition, chemical
a high specialization with an unusual companies tend to outsource industry-
competitive success in a particular related services and therefore attract
field and a specific geographic location waves of third party investments in
represent what Michael Porter described warehousing, transportation, general 17
in 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. 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. Crude oil
Wilhelmshafen / Rotterdam
ChemSite - 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
150kt
BP Polyethylene Polypropylene
400kt 500kt
Sabic Polyolefine
ChemSite - 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. 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 be
20 Northern Europe self-sufficient. The interconnections

21. Figure 3-3 Overview of cluster interrelationships
between the clusters and surround-
ing satellite clusters include pipeline,
waterways, rail and road, enabling a
sophisticated and highly efficient sup-
ply chain management.
The Antwerp/Rotterdam and Rhine/Ruhr
clusters are connected via ethylene pipe-
lines passing through the SABIC satellite
cluster in Geleen. The propylene pipeline
connection between both regions (EPDC
project) has not taken place for reasons
mentioned in Section 4 (see caselet in
Section 4.1.4). 21

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 encompasses
22 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. C1
C2
C3
C4
C6
C 7,8
CI
Ship, 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. 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 was
24 strategic resource for armies (oil had built to the west of the port; it was 20

25. Figure 3-6 Port of Rotterdam - graphical overview
meters deep and had three additional As land became scarcer in the port in the
refineries. The logistics facilities kept last few years, more and more co-siting
pace with the construction of several initiatives took place between chemical
tank storage terminals, working both for plants and tank storage companies, es-
the industry and for companies using pecially in biofuel production (BioPetrol
them as entry or exit points for Europe. at a Vopak terminal, Dutch Biodiesel at
Barges, railways, trucks and pipelines Argos and When Biofuels at Koole).
took care of the transport to and from
the hinterland and within the port area. The oil and chemical cluster within
the Port of Rotterdam now comprises
Over time, the port kept on growing an extensive combination of crude oil
westward with more chemical plants and refineries, chemical plants, industrial
service companies, and the decision gases production, tank storage termi-
was taken to extend the port by nals, pipeline connections and all kinds
reclaiming land from the sea. This gave of service companies. In total it covers
birth to the Maasvlakte in 1973 (Figure 2,865 hectares, representing 60% of
3-6). In the nineties, several co-siting the available land in the port, with an
agreements 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 Air
Liquide and Eneco).
25

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 are
26
produced, grey items are not produced in the cluster)

27. Rhine-Ruhr subcluster Most of the chemical sites were run by
one user only (single user sites) until
The German state of North Rhine- the mid-1990s when chemical majors
Westphalia 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, traditional
part and the Rhine area (ChemCo- chemical industry sites with single users
logne cluster) in the southern part. were transformed into integrated multi-
Together these chemical regions form user sites (chemical parks), where many
the Rhine/Ruhr cluster. They are well users benefit from shared material flows
connected by road, rail, pipeline and and infrastructure, making efficient joint
waterway, 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 are
waterways, 180 inland ports and 8,000 mostly still performed by the initial user
km of railways, the region is connected of the site (site operator). This structural
to both the raw material import centers change has created new opportunities,
or feedstock production sites (Rotter- as each site is now even more focused
dam, Antwerp, Wilhelms-haven) and the on attracting complementary partners
German and Eastern European hinter- (manufacturers, LSPs, research centers)
land. to create additional synergies within the
chemical parks.
The chemical industry in the Rhine/Ruhr
cluster emerged in the 19th century In the late nineties, some manufacturers
with the exploitation of the neighboring of the cluster decided to merge their
coal reserves of the Ruhr. In a similar efforts in attracting new companies,
fashion as in Antwerp and Rotterdam, triggered by the vision of the “opened
the development really took off after chemical cluster” idea. The ChemSite
the Second World War when the former initiative was created in 1997 as a public-
chemical group IG Farben was broken private partnership between the German
down into several units and petrochemi- state of North-Rhine-Westphalia and
cal manufacturers installed refineries and chemical manufacturers in the Northern
steam crackers in the cluster (Rheinische Ruhr region promoting the attractiveness
Olefinwerke GmbH in Wesseling, EC of the region. Hüls AG (now Degussa),
Erölchemie in Worringen). This helped which has been operating in Marl one
the cluster to maintain its long-term of Germany’s biggest sites since 1938,
competitiveness by replacing the declin- founded ChemSite together with, among
ing lignite and anthracite reserves by oil others, Veba Oel (now BP Refining & 27
as an input for the chemical cluster. Petrochemicals), Rutgers Chemicals,

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. C1
C2
C3
Polyether polyol, PG
C4
C6
C 7,8
CI
Ship, 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. 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 chemical
30 conveyed by pipeline and barge, over products represent around 50% with a

31. total of almost 18 million tons per year.
Since the 1960s, thirty-four companies
including some major international ones
like Bayer, BASF and Dow, and Repsol,
Spain’s largest petrochemical company,
have set up production sites in the
chemical cluster of Tarragona.
The cluster consists of a northern and
a southern area that are both linked to
the port (Figure 3-11).
North industrial park covers 470 hec-
tares in the municipalities of La Pobla de
Mafumet, El Morell, Constantí and Pera-
fort. It is a refinery and cracker based
integrated petrochemical complex.
The main players are Repsol and Dow
Chemical Iberica.
South industrial park covers 717 hec-
tares in the municipalities of Tarragona,
Vila-Seca and Reus. It is a multi-company
intermediates, polymers and specialty
chemicals site including Repsol, Dow
Chemical Iberica, Bayer, BASF, Basell,
Ercros and Solvay.
In the locations of Flix and Tortosa,
about 100 km south of Tarragona, there
are other smaller Ercros plants, produ-
cing chlorine, formaldehyde and deriva-
tives. Although well interconnected with
the cluster in Tarragona, these plants are
not 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. 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. 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 road
Figure 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

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. 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. Terminal, Tarragona, VOPAK
The discussion of the Think Tank
around these results provided the
occasion to review the history of the
existing clusters with the participants.
The group agreed that there is a virtu-
ous development cycle of a chemical
cluster. Companies move to clusters
as part of natural organic growth
and self interest – not necessarily to
consciously exploit the collabora-
tive opportunities and advantages of
the cluster. First, manufacturers settle
in a region for geographical reasons,
looking for upstream supply synergies
with other manufacturers. LSPs then
settle in the cluster once a critical mass
has been reached, ensuring service
providers a satisfactory revenue stream
mainly from storage warehousing,
handling activities and transporta-
tion within the cluster, and servicing
customers of their customers located
outside the cluster. The critical mass
also applies to the development of
supporting infrastructure like internal
cluster pipelines which can only be
operated with a sufficient guaranteed
throughput. We observe that LSPs
and port authorities often team up to
provide attractive infrastructure for
manufacturers, reinforcing the cluster
dynamics. The MultiCore pipeline in
Rotterdam is a very good illustration
of this situation. It seems that similar
actions initiated by producers are rare.
Pipe rack connection,
Marl Chemical Park, ChemSite
37

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.
CLUSTER
38
Figure 4-2 MultiCore pipeline concept in the port of Rotterdam

39. The competition of LSPs benefits the 4.1.2 Disadvantages of the ARRR
existing base of chemical producers cluster
and signals the attractiveness of the
cluster to potential new entrants. This As a consequence of the development
positive feedback loop might weaken if of the Antwerp and Rotterdam clusters,
the cluster becomes a victim of its own the tonnage leaving both clusters has
success and starts struggling with bot- grown significantly over the last
tleneck issues. 15 years (for instance the container
traffic in Antwerp increased from
Unlike the Silicon Valley cluster, inter- 16.5 million tons in 1990 to 80.8 million
viewees did not view the availability tons in 2006). Unfortunately, chemical
of skilled workforce and marketing producers from Antwerp and Rot-
capabilities in Antwerp, Rotterdam and terdam share their road infrastructure
in the Rhine/Ruhr area as a significant with private users and other indus-
advantage compared to the geographi- tries, thereby creating a bottleneck
cal and infrastructure advantages. that the public authorities will have
Nevertheless, the Think Tank dis- difficulties solving in the short term.
cussions pointed out that a skilled
workforce is needed today and also Manufacturers, LSPs and port
increasingly 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. 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 the
40 logical consequence of a successful

41. Asset pooling between LSPs in the Antwerp
cluster: the Oiltanking/Stolthaven collaboration
In March 2006, Oiltanking GmbH and Stolthaven Terminals BV
announced an Antwerp terminal joint venture called Oiltanking
Stolthaven Antwerp NV, which will operate as an independent
liquid 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 supporting
cluster operations. The terminal will be developed as a “Specialty
Chemical Hub” for the Antwerp and Rotterdam (plus Amsterdam)
clusters, and as a transportation hub to improve the turnaround
and utilization of the Stolt chemical parcel tanker fleet.
Parcel tanker operators can face up to 40% of total vessel time
in port, moving from one jetty to another. The downside of the
cluster may be that there are too many producers and LSPs who
have the critical mass to build their own assets, rather than being
forced by their small size to explore all the opportunities to share
logistics assets inside the cluster.
CLUSTER
The LBC/Ertisa collaboration is another illustration of a logistics pro-
vider (LBC) collaborating and setting up dedicated storage assets
on a customer’s site (Bayer) to serve another customer (Ertisa).
41

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.
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CLUSTER

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