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Ross Pilling PACIA Board Member - 'PACIA's Strategic Industry Roadmap' - 6 June 2013

PACIA Board Member, Ross Pilling, addressed the PACIA National Conference 2013 in Melbourne to launch 'PACIAs Strategic Industry Roadmap'.

Launch Speech: Adding Value – The critical, enabling role of the chemicals and plastics industry for Australia’s future

A strategic roadmap for the Chemicals and Plastics Industry

Ross Pilling

PACIA Board Member
Chairman & Managing Director, BASF Australia & New Zealand

PACIA National Conference

The Langham, Melbourne, Thursday 6 June, 2013



Thank you for the kind introduction.

My name is Ross Pilling. I am Chairman and Managing Director of BASF for Australia and New Zealand. Today, I speak to you as a PACIA Board Member and a representative of the association.

The chemicals and plastics industry makes products that are part of nearly everything we consume. Our products are in the clothes we wear, the cars we drive or the trains we ride, the homes we live in, the food we eat, the water we drink, our health, hygiene, workplaces almost every aspect of daily life.

Our industry feeds essential inputs to every sector of the Australian economy, including manufacturing, construction, mining, agriculture and healthcare.

Supplying so many downstream industries means that our innovations have a large multiplier effect across the broader economy.

We directly employ 60,000 people, turnover about $40 billion per annum, contribute more than $11billion to Australia’s GDP and supply essential inputs to 109 of Australia’s 111 recognised industries.

Our industry has been in decline over recent years.

Before considering potential futures and introducing our Strategic Roadmap, let me bring some perspective to our opportunities and challenges.


In 2050, nine billion people will live on this planet, placing huge strains placed on the world’s resources.

Chemistry is uniquely well placed to contribute sustainable solutions to many of the challenges the world faces today; including solutions that reduce greenhouse gas emissions and increase energy efficiency.

This will create unprecedented demand for chemicals and plastics in the decades ahead – particularly in the Asian region.

But today’s global chemical industry does not have sufficient production capacity for the future. New chemical plants will need to be built to meet the growing demand; many of these plants will be built in Asia.

Australia has an opportunity to build on our competitive advantages and develop a sustainable, export-based chemicals and plastics industry. 


We face a simple choice:

We can continue down the “business as usual” road and inevitably face industry contraction.

What will follow is an increased reliance on imports, a steady decline in local production and a steady loss of highly skilled, well-paid jobs.

With an increasing reliance on imported chemicals and plastics, strategic supply chains become longer and more vulnerable to disruptions, as you have seen from the recent shortage of diesel fuel in Victoria.

Our innovative capacity will be diminished. Australia’s strategic industries – agriculture and food, mining, building and construction, recycling and healthcare – will have to import innovation to support their improvement and growth.

Or, we can choose a different road – a road to sustainable growth.

By adopting policies aimed at sustainable industry growth, we can create a path that will transform the Australian chemicals and plastics industry.

It would see us using high-end technologies and Australia’s abundance of natural resources to grow and add value; becoming a vibrant and sustainable industry, providing the building blocks of a modern economy and central to the country’s economic, environmental and social wellbeing.                  

As an industry, we believe that Australia must be more than a commodities exporter and value-added products importer. 

The road to sustainable growth will not be easy or simple, but we are prepared to work hard to achieve it.


Over recent months, we have developed a Strategic Industry Roadmap – a roadmap which is the result of extensive, independent consultation and analysis by the CSIRO.

We have looked at what needs to be achieved in the short, medium and longer term to not only sustain existing investments and capabilities but to also establish the policy and regulatory settings that will set our industry on the path to a sustainable, growing and competitive future.

Clearly, the Roadmap is not a silver bullet.

But it identifies and focuses on the areas in which we can work together with our stakeholders to create an environment for sustainability, growth and economic prosperity.

The Roadmap identifies fundamental requirements to put the industry on the path to sustainable growth


We need to be valued and trusted as an important part of the community; this is our social licence to operate.

Unfortunately, community awareness of our industry’s contribution to everyday life is not as high as we would like.

We are taking action. We set up Community Advisory Panels in our neighborhoods as forums for open and honest dialogue with our communities.

We encourage an interest in education and science among our young people.

We make sure that our products are safe and do not pose a danger to people or the environment when they are used responsibly and in the manner intended.

As an industry association, we encourage all companies that work with chemicals & plastics to commit to the PACIA Sustainability Leadership Framework and Responsible Care® programs.


Our industry is one of the strongest drivers of innovation in the economy. We must continue to innovate to be competitive on the world stage.

Chemistry has always been at the forefront of innovation. Looking at Australia’s history of innovative chemistry, one can understand its contribution to our economy.

Perhaps the most ubiquitous example of Australian chemical innovation is Polymer Banknotes. This technology has been exported to many countries around the world, creating more secure and durable currencies. This technology also has other applications such as flexible, printable photo-electric cells where Australia is a world leader.

Smart Packaging is another Australian innovation. Used with foods, pharmaceuticals and other products, to help extend shelf life, monitor freshness, improve safety, and improve convenience.

Consumers demand products that are ever faster, smaller, lighter, more efficient, more sustainable and safer. To keep up with the unprecedented demand for new and better solutions, we must continue to innovate.

Besides our products, we must also improve our processes, resource use and productivity in our plants.

To drive innovative solutions, effective collaboration with partners (including SMEs) along key value chains, between industries, consumers and researchers is critical.

Of course, any competitive advantage we have only stands if we have a robust intellectual property protection system that is rigorously enforced. Something we should all be vigilant about.


It goes without saying that we exist to serve our customers.

By innovating and developing solutions that help our customers to overcome their own challenges, we help build a stronger customer base.

The CSIRO Report “Elements in Everything” identified that technological advances, changing environmental regulations, shifting consumer preferences and social trends have the potential to open up new growth areas for the industry.

To capitalise on these opportunities, we need to focus on specific market-based technologies and align our innovative capacity with Australia’s key strategic growth industries.

In particular, we need to focus on solutions in areas such as:

  • Agriculture and food
  • Mining
  • Building and construction
  • Materials recycling; and
  • Healthcare and wellbeing.


Any senior executive will tell you that a company is only as good as its people.

We need a highly skilled and productive workforce to ensure the sustainability of our industry.

Technological advances, changing environmental regulations and social trends will change the way we work.  We must continually develop our workforce to build skills and improve productivity.

Our industry needs to work with state and federal governments to match future skill requirements to training priorities. This is fundamental when you consider the age profile of our existing workforce.

Manufacturing needs to be seen as a career of choice – a career that is well-paid and offers personal and professional development opportunities.

The whole manufacturing industry has a responsibility to reach out to the communities we operate in and tell the positive story we have to our young people.


We need an efficient and effective regulatory environment that provides our communities, our industry and the wider business community with the confidence that allows us to perform our daily work effectively and safely.

Let me be clear, the Australian chemicals and plastics industry wants good regulation.

We need a regulatory system that has clearly defined and understood institutional roles and responsibilities. We need good regulation that is balanced and enabling. 

In 2003, Gary Banks, then Chairman of the Productivity Commission said:

“To be good, regulation must not only bring net benefits to society, it must also:

  • Be the most effective way of addressing an identified problem; and
  • Impose the least possible burden on those regulated and the broader community”

In Australia, regulation of our industry has been inconsistent, complex and costly, creating perverse outcomes

While poor regulation might annoy us in our daily operations, I believe it is also causing businesses to reconsider investing in Australia.

We need a balanced system of chemical regulation to give our economy access to chemicals, products and technologies that meet current needs and deliver solutions for the future.

Climate change, water shortages, population growth and resource constraints can all be assisted by more effective and efficient regulation and the use of new and innovative chemicals.

COAG and the industry have been calling for meaningful reform of the Australian regulatory regime for many years, even identifying chemicals and plastics as a ‘hotspot’ in the national reform in 2006.

Although COAG agreed to implement regulation and competition reforms under the National Partnership Agreement to deliver a seamless national economy back in 2008, I am sad to say that five years later, many of those reforms are still to be delivered and the process has stalled.

The area of greatest regulatory concern to the industry is the National Industrial Chemicals Notification and Assessment Scheme, known to us as NICNAS.

The lack of regulatory reform has prevented or delayed the introduction of newer, better and safer chemicals, products and technologies. It has also impacted investment decision-making, innovation, productivity and potentially outcomes for public health, worker safety and the environment.

By leveraging off the investments made in regulation and testing by other countries under a system of mutual recognition with, for example the European Union, Canada and the United States, we could eliminate duplicate efforts, reduce costs and speed up regulatory approvals. This does not happen under current chemicals regulation.

Our industry is happy to work with government to deliver a nationally consistent regulatory system that supports innovation, investment, trade and competition.

All we ask is that there are no more reviews but that action is taken. We are seeking accountability and transparency and, above all, achievement of outcomes that have been dreamed of for years by COAG and our industry.


We need a competitive environment for capital that will allow companies to invest and make a good return on investment.

We all know that Australia is a great country and offers a very high standard of living. But Australia has also become one of the most expensive countries in the world to do business.

Businesses face many investment opportunities; there are always more opportunities or projects than there is capital available.

As all businesses – large or small, Australian owned or MNCs –have to decide which project gets their capital, Australian projects compete with investment opportunities overseas.

To be successful, any project needs to be the most attractive opportunity available.

To attract capital to Australia, we need to work more closely together as industry and with governments leverage our strengths.

Governments need to look at their planning rules to ensure the industry can invest appropriately. They should also look at incentives, such as accelerated depreciation to attract investment.


We need a highly competitive domestic gas market where transformation of gas is seen as vital to the national interest. This is the biggest opportunity and the biggest threat to our industry.

Let’s start with the opportunity…

Natural gas is a key feedstock (or raw material) for the chemicals and plastics industry. We transform natural gas through chemical reactions into high value chemicals, such as advanced engineering plastics, preservatives for animal feed, ingredients for detergents or crop protection chemicals, or materials for use in pharmaceuticals or advanced textiles.

A modern, world-scale chemical plant would use about 25 petajoules of gas per year; such a plant would create about 500 direct jobs and up to 1,000 indirect jobs. The capital investment would be in the order of $1 billion.

So, what would the value of such a plant be to the Australian economy?

In October last year, PACIA and Ai Group commissioned a study from the National Institute of Economic and Industry Research on the impact of the structure of the Australian gas industry on the national interest.

One of the key findings of the study was that for every petajoule of natural gas that is shifted away from industrial use to export, $255 million in industrial output was given up for a $12 million gain in export output. That is, for every dollar gained $21 is lost.

So, our modern, world-scale chemical plant would generate some $6.4 billion economic value for Australia, while exporting the same volume of gas would only generate $300 million.

Australia is in the middle of a gas boom and LNG has become a major export. This is great for our nation; and as an industry, we have no issue with the export of natural gas.

We have vast reserves of natural gas; there is more than enough gas to support a vibrant and sustainable chemicals and plastics industry and to meet export demand.

In fact, our world-scale chemical plant would use less than 2% of the output of the three LNG trains under construction at Gladstone.

You may ask “What about bio-based, renewable feedstocks?

Many chemical companies, including some Australian players, use bio-based feedstocks today. But these are still small, highly specialized segments of the industry.

While bio-based chemical production is on the rise, it will be many years before they form the basis of a national industry. So natural gas will be the main opportunity for years to come.

While the resource is plentiful, sensible regulation is in short supply.

Natural gas is being contracted to new export-oriented LNG plants, squeezing domestic supplies and tying domestic prices to the East Asian gas market, the most expensive market in the world.

PACIA members are finding it extremely difficult to secure long-term supplies to underpin their existing investments; many are unable to negotiate contracts for supply beyond 2016.

I’m not talking about contracts for “new gas” but renewals of existing contracts for existing gas, from the same fields, transported down the same pipelines which suddenly attract a price tag determined by export parity pricing. 

As a result, capital investment in new production plants is not coming to our shores.

There is at least one potential billion dollar investment for a modern, world scale plant has already gone offshore because a contract for long term supply of competitively priced gas could not be negotiated.

So, how do we address the problem? 

Clearly, protection is not the answer.

Instead, we urge governments, both state and federal, to take sensible measures to boost production and to establish a transparent, robust and competitive domestic gas market.

In 2012, the Prime Minister’s Manufacturing Taskforce identified that natural gas prices had already risen by 70% and are likely to go higher.

They also recommended that the ACCC should investigate competition in the upstream supply of gas in Australia and that the Productivity Commission should undertake an inquiry into lease provisions and the supply of gas into the domestic market.

As long ago as 2002, COAG identified that the gas industry has avoided certain regulation and recommended change.

PACIA has welcomed the decision by the Minister for Resources and Energy, Gary Gray, to comprehensively review the domestic gas market. We trust that the review will consider the issues raised by the PM’s Manufacturing Taskforce and COAG and act on these measures in the national interest.

Until this review is concluded and effective measures are in place, governments should place a moratorium on the approval of any new gas export plants.


Every day, we hear stories of the decline – or even death – of Australia’s manufacturing industry. Yet, when a PACIA member recently announced a $195 million expansion, securing 450 jobs in Victoria, based on securing a long-term competitively priced gas contract, it received almost no media coverage.

This roadmap is about the chemicals and plastics industry stepping up and identifying the things that must to be done to ensure Australia retains a sustainable manufacturing industry.

Our industry is mature, responsible and pro-active. We have been driving sustainable solutions for years and understand the value of our social licence to operate. We continually work to build and maintain these invaluable assets.

We have a great history of innovation and outstanding innovative capacity within our industry and through collaborations with universities, CRCs and CSIRO. We have a skills and R&D advantage.

Global demographics and megatrends will continue to grow the demand for chemicals & plastics in the decades ahead – particularly in Asia. So we have a geographic advantage!

Australia is endowed with an abundance of natural resources, including gas which could be used as a feedstock for a sustainable chemical industry in Australia. So we have a geological advantage.

We must build on these competitive advantages to be successful in grasping the opportunities that come our way. 

We also must continue to build the skills, capability and productivity of our workforce.

Knowing that investments in chemical production will be made in the Asian region, and knowing that using our geological advantage for chemical manufacture adds 20 times more value than exporting gas for energy, we must fight to bring these investments to Australia and add this value here.

We call on state and federal governments to act urgently and establish an effective policy climate to support a sustainable chemicals & plastics industry in Australia.

Our vision for the chemicals and plastics industry is:

“A vibrant and sustainable industry in Australia, providing the building blocks of a modern economy and central to the country’s economic, environmental and social wellbeing.”

Only by delivering on this roadmap in partnership with our major stakeholders can we achieve this vision.

But time is of the essence – billion dollar investments have already gone offshore.

Thank you.


For more information view report

Media contact: Rachel Black, Marketing and Communications Manager 0428 496 207.

Released 6 June 2013

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