Chemical Watch Forum

With respect to the comment above, I believe that the classic Economic theory of Supply and Demand is being somewhat misused in this example.

In example number 1, an overseas producer of a "reasonably common solvent." has not completed a Registration. The following sentence states "This chemical may now see a shortage with resultant price hikes.” The premise and supporting facts of the argument however, does not support the conclusion.

If the solvent is "reasonably common" and the demand remains consistent then an existing or alternative supplier will fill the void. What is being confused here is a shortage of "Supply" vs. a shortage of "Suppliers". While a shortage of "Supply" can logically lead to price increases where demand remains constant, a shortage of "Suppliers" does not necessarily produce the same impact. In fact, when supply can be consolidated to fewer, larger Suppliers importing and selling more volumes, price savings can in most cases be realized due to increased efficiencies through economies of scale.

The second example references a SME (Small-to-Medium Enterprise) not registering one of their smaller products. Firstly, if this company was already a small-to-medium sized company to begin with and it was one of their smaller products, the overall economic impact on the EU as a whole would likely be negligible. Secondly, a competitor could likely easily fill the void and import the substances thus negating any reduced Supply.

In both of the examples cited a reduction in “Suppliers” is being confused with a reduction in actual “Supply”. This is not to say that REACH Registration requirement cannot lead to a temporarily reduced supply as supply chains realign, but the arguments used in the examples do not support the conclusion.

Any increased costs due to “REACH” are more likely to come from the cost of compliance as opposed to a lack of supply.

To clarify Keith, my post was speaking directly to the original comment and cited examples. The example you bring up is different from the 2 given in the original comment.<?xml:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />

Your comment talks about a product being completely removed from the market. This is not something I referred to as it was not cited in either of the examples (as I understood them).The original examples referenced a reduced supply, not a complete withdrawal of a substance from the EU market.

If a product is completely removed from the market due to REACH Registration costs, then its demand is too price elastic to support the additional costs. This is not a supply issue (ability to supply) but a product cost issue. In your example, the added cost of REACH compliance for the supplier makes the product too expensive for the downstream users to absorb. They will no longer buy the substance if these Registration costs are passed on to them by the supplier and the supplier therefore decides that they will no longer sell the product in the EU (as in the example you cite from experience in your industry).

In the example above, the downstream users have either found a replacement substance for their products or the final product has many suitable alternate products. The end user may have switched to a product unaffected by price increases due to REACH Registration or maybe even ceased using the product altogether. I also stated in my second to last paragraph that REACH Registration costs could lead to a temporary disruptions in supply - maybe this is the case for your industry.

Again, there may be price increases but the increase in price to downstream users would be due to an increase in cost of compliance for suppliers not a long-term shortage of supply. To summarize, I understand the first comment to basically state that there will be shortage of supply due to REACH Registration costs which will increase the cost of substances in the EU. My counterargument is that there will not be a shortage of supply but that the cost of supplying the substances has increased due to REACH. This is an extremely important differentiation since a temporary increase in cost of supply (such as a 1 time REACH Registration cost) would not permanently affect a supply chain whereas an overall decrease in available supply would.

There could conceivably be substances that are completely removed from the European market but these substances would then be replaced by alternate substances. If there is a substance that cannot be replaced and is used in products that cannot bear the cost of REACH Registration and therefore are completely removed from the European market, they must be both extremely niche and a non-necessity.