Facts & figures

Role of the chemical industry in ESTONIA

1. Description of the priority status of the Chemical sector in relation to the overall industry sector ranking of the regions

Estonian chemical industry is a small but export-oriented, well established and specialized subsector of Estonian industry. The overall industrial activities account for 21% of Estonian GDP. That share is higher than the European average, but at the same time well in-line with EU´s 20/20/20 strategy, which in addition to well-known energy, recourse and climate goals, sets a target for raising industry’s contribution to EU GDP from 15.2% to 20% by 2020.

In 2012, Estonian gross domestic product (GDP) was €17.42 billion in current prices.

The processing industry accounts for 73.2% of the whole industry sector.  Chemicals and chemistry products account for 5.2% of the processing industry and contribute about 0,8% to GDP.

It must be noted that the Estonian Statistics Office considers the production of shale oil under the “fuel oils production” sector and therefore shale oil contribution to GDP is viewed separately from chemicals. However, all shale oil producing companies in Estonia need to comply with EU chemical´s regulatory framework and are therefore members of the Federation of Estonian Chemical Industries (FECI).

The chemical industry has a high growth potential and is one of the most competitive industry sectors in Estonia. Traditionally, the export share of Estonian chemical companies’ sales has been high and accounted for 87% in 2012. Based on turnover, the productivity and output rate per worker are among the highest compared to other industry sectors.

 

2. Situational Analysis of the Chemical Industry in the Member State

Estonian chemical industry is characterized by strong territorial concentration, as more than half of the chemical industry is located in one county: East-Viru. This results from tradition and development possibilities of that region.

Two important chemical sub-sectors are characteristically specific to the Estonian chemical industry: oil shale chemistry and the producing of rare earth metals and their oxides. Industrial production of Estonian shale oil was started in 1924. Producing oil from oil shale is a long-term tradition in Estonia, but a unique process in Europe. It makes a remarkable contribution to the economy of the country.

Estonian economy is characterized by a large share of small businesses, but the vast majority of sales are generated by the minority of big companies. This pattern is reflected by the chemical industry as well.

According to the Estonian Statistics Office, a total number of businesses in 2012 in Estonia was approximately 66 000 and among those, there were 80 companies in chemical industry, of which only 2 companies had more than 250 employees. The number of employees in chemical industries was 2487, which accounts for 2.4% of the number of people employed in processing industry, at the same time, the sales account for 5.4%. The overall turnover of the chemical industry in 2012 was 549 million €.

Again, it must be mentioned that the profile of FECI members is somewhat different than the national chemical industry defined by the statistics office. To that end, FECI has 50 member companies that employ approximately twice as many workers as the national chemical industry.

The export success comes mostly from East-Viru County, where the main export articles are shale oil and –phenols, benzoic acid, sodium benzoate, and plasticizers, rare earth metals and their oxides; production of urea fertilizers has ceased.

Producers of construction chemicals, namely sealants and construction adhesives, play a big role in chemical product exports. Export volumes of applied chemistry are more modest, but Estonia has a long experience in producing cosmetics and applied chemistry such as home care products.

Table: Overview of exports and imports

 

Export, € million

Import, €  million

Year

2010

2011

2012

2010

2011

2012

Goods in total

8743

12013

12518

9268

12671

 13848

Goods of chemical industry and related sectors (includes pharmaceuticals and explosives)

395

565

 645

735

962

 1134

Share of chemicals exports/imports in total exports/imports

4.5 %

4.7 %

5.2 %

7.9 %

7.6 %

8.2 %

Source: Estonian Statistics Office; www.stat.ee

Estonian chemical industry co-operates closely with research institutions as the main universities in Estonia engaged in offering chemical and engineering education have appointed representative facilities that are direct members of the association (FECI).

 

3. Strengths and Weaknesses of the Existing chemical industry base

Strengths:

Success in niche markets;

Unique experience and knowledge as the only European manufacturer of rear earth metals and their oxides;

Leading producer of polyurethane foams globally;

Estonia has a unique natural resource in the form of oil shale and concentrated, un-matched know-how in shale oil production – in addition of serving as an excellent export article, this industry branch significantly contributes to keeping Estonia one of the few energy independent countries in EU and to enhancing R&D by creating needs and appliances;

Opportunity-offering location: port connections to Europe; borderline of Europe and wide Russian market;  

Good quality-cost relationship of the workforce.  

 

Weaknesses:

High average age of chemical industry workforce and chemistry researchers in Estonian universities, which makes it necessary to find younger employees and scientists to allow for sustainability;

High and increasing energy prices;

Complex and burdensome EU legislation and a tendency to supplement EU legislation with national fees in the environmental taxation sector is placing additional financial burdens on Estonian chemical industry

High portion of indirect taxes and tendency to make unexpected changes in tax system creates uncertainties and discourages long term investments

Lack and/or fragmented structure of support to SMEs to safeguard that increasingly growing regulatory burden doesn´t hurt their competitiveness and that access to competence in R&D intensive industry branches is available for SMEs

Estonian model of creating added value places a relatively large burden on the environment in terms of CO2 efficiency and material productivity

 

4. Top national strategies (public or private) that are putting the  member state in a European/globally advantaged position

Estonia does not have a specific industrial policy. However, the government has an overall economic strategy in place, which should address industry aspects among other sectors of the economy. 

Present and Future Prospects

Due to the depth of scientific research on oil shale and resources of oil shale with good quality, this branch of industry should be the key sector for the development of the Estonian economy. In order to cope with increasingly stringent European Union environmental regulations and to ensure a competitive chemical industry for Estonia, a supportive economic environment is needed.

Additionally, there is a need for the preservation and development of the scientific potential of chemistry; preparing and educating needed chemists and specialists on chemical safety; and development activities of the chemical industry through new technologies and processes. These measures would ensure the preservation of production and export capability of chemicals and chemical products, and would improve the employment situation. It is necessary to acknowledge the key role of the chemical industry as a developer of "traditional" and "new economy" in Estonian society. It is impossible to develop the economy and a whole society without knowledge of chemistry and the chemical industry.

In Estonia the smart specialization strategy is compiled by the Ministry of Education and Research as well as the Ministry of Economic Affairs and Communications. Monitoring and analysis of smart specialization is carried out by Development Fund. As a first step, eight economic sectors were selected based on the created added value. As a follow-up the selection was narrowed down to 3 areas of growth. FECI played an important role in securing that chemical industry is recognized as an area with high growth potential.  Three areas of growth were selected as a result of Development Fund´s analysis: 

Information and communications technology (ICT) horizontally via other sectors;

Health technologies and services;

Enhancement of resources.

The sub-sectors under the last growth area include: chemical industry (more efficient use of oil shale) and industry involved in enhancement of materials.

Next actions are under development by the relevant ministries and the Development Fund. FECI will continue to co-operate with the mentioned institutions and to provide expert insight to the needs, potentials and opportunities of the chemical industry. 

Facts and figures 2012

Data*
* originates from the Estonian Statistical Office public database

 

Information below is taken from the Estonian Statistical Office (last update Oct. 2012). The data of 2011 may change due to the addition of new data. It is also important to note that the „chemicals and chemical products production“ does not include shale oil data, as the Statistical Office classifies shale oil into mineral fuels sector, not into the category of chemical industry. In addition to that, chemicals production doesn´t usually include neither pharmaceuticals nor explosives, unless noted otherwise.

 

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Statistics 2010

Information below is taken from the Estonian Statistical Office (as at June 2010). The data of 2009 may change due to the addition of new data. It is important to note that the following statistics related to the production of shale oil is not reflected here, as the Statistical Office classifies shale oil into mineral fuels, not into the category of chemical industry and into production, related with it.
 
In 2008 the gross domestic product of Estonia and gross national income at current prices was 248 149 million EEK (15 859.6 million EUR) and in 2009 214 828 million EEK (13 730 million EUR). The growth in 2007, in comparison with 2006, was 16.1% (in 2007 of 229,361 million EEK, i.e. 14,659 million EUR, in 2006 197,486 million. EEK, i.e. 12,622 million EUR), and in 2008 increase compared to 2007 was 3.8% and decrease in 2009 in comparison with 2008 was 13.3%.
 
The contribution of chemical industry into the gross domestic product was 0.7% in 2008. In value-added businesses and other data the productivity per worker in chemical industry is the highest, much higher than the average of all the other activities together. Thus, the corresponding figure in 2008 in all activities was in total 272 thousand EEK, in manufacturing industry 259 thousand EEK and in producing chemicals and chemical products 675 thousand EEK. It indicates that chemical industry is one of these branches of economy where the future of Estonian economy may be hidden.
 

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