EU Chemicals Regulation REACH To Have Far Reaching Impact

The European Parliament approved controversial new legislation today, effectively putting 30,000 chemicals under regulation beginning next year, with full implementation to be phased in over the next decade. REACH, as the law is known -- stands for Registration, Evaluation and Authorization of Chemicals -- is seen increasing costs not only for the chemical industry, but for any firm involved in manufacturing and importing. Until now, the burden has been on government agencies to test chemicals. From next year however, companies will have to disclose chemicals they use, and if any are on the "dangerous" list (estimated at 1,500 chemicals), possibly have to cease using them and find substitutes. The financial costs of compliance are unknown, but expected to be significant. The Wall Street Journal reports both BASF and Dow Chemical have set aside hundreds of millions of euros. The paper also says many U.S. manufacturers are banking on being considered "downstream" users of chemicals and therefore, not be responsible for disclosure. Reuters reports the European Commission estimates chemical industry compliance costs to total $2.3b euros ($3b) over the next decade, and total industry costs to reach between 2.8b-5.2b euros.
• Sources: IHT-AP, Reuters, The Wall Street Journal
• Related commentary: DuPont All But Guarantees Forward Earnings, DuPont: Modifications Will Spur Growth -- Barron's, Dubai Fund Eyes Stakes in EADS and German Giants
• Potentially impacted stocks and ETFs: BASF AG (BF), Dow Chemical (DOW), E.I. DuPont de Nemours (DD). ETFs: Vanguard Materials (VAW), iShares Dow Jones US Basic Materials (IYM), Materials Select Sector SPDR (XLB)

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