Madrid’s inaction blocks BASF’s €30m investment in Tarragona

BarcelonaBASF’s General Manager for Spain, Carles Navarro, couldn’t be clearer: “it is essential for the railway line to get to Tarragona”. He refers to the project to build an intermodal railway station in BASF’s Tarragona facility, which would prompt a €30m investment by the German chemical giant. This is hardly news, though. BASF announced their investment plan back in 2013. A year later, they set up the firm which is meant to shoulder the project with a number of partners located in Tarragona’s chemical industrial estate. All technical surveys and viability studies have now been completed and the companies behind the project are still keen to go ahead with it, but they require a connection with the European gauge railway line in Tarragona, a public work that has been delayed due to the disinterest of Spain’s Infrastructure Ministry, which has put off the construction of the Mediterranean railway corridor.

Speaking to this newspaper, Carles Navarro stated that these days “the investment is in the hands of the Spanish government”. He added that “all we can do is to emphasise the need for this investment, start an open dialogue with the authorities and lobby within the law”. His predecessor and BASF’s current vice president for Spain, Erwin Rauhe, complained that the Spanish authorities did not seem to understand the “strategic value” of the works and noted —tongue in cheek— that “cargo trains cannot vote”.

The so-called third string (that is, the building of a third dual-use railway line for both European and Spanish gauge trains) is key to the future of the investment. The project is part of the Mediterranean railway corridor and the construction of line that will run from Tarragona to Castellbisbal was supposed to start in 2013 and be completed in 2015. The latest completion estimate provided by acting Infrastructure Minister Ana Pastor is some time in mid-2017, but the sector remains skeptical.

The proponents of the intermodal station wish to have an infrastructure that is open to all companies, even if they are not located in Tarragona’s chemical industrial estate, so that cargo trains can travel uninterruptedly through to central and northern Europe. At present this is impossible due to the existing Spanish gauge track, which is different from Europe’s.

Navarro believes that the new station would bring in an operations increase of about 140,000 containers per year and eight full cargo trains would run every day between Tarragona and Europe.

Fewer opportunities

The lack of this infrastructure has a negative effect on Tarragona’s chemical industry because it makes it less attractive to investors. BASF’s Spain Manager has no doubts about it: “If we had the third string, we would be more competitive”. His statement must be understood from the perspective of a multinational company whse subsidiaries in different countries compete with one another to draw investment from the business group. “With the European gauge —says Navarro— we would clearly be on a par with other sites when it comes to wooing BASF investment. It would be an important advantage”, he claims.

Navarro explains that BASF’s facilities in Tarragona are competitive on low-volume specialist goods which also require little energy to manufacture. Fungicides are a case in point and, as a matter of fact, this year BASF intends to complete a €21m investment in a new formula line of such products, which will create thirty new jobs. But for greater volume products, high energy costs and the lack of infrastructures such as the Mediterranean corridor are “a handicap from the start” because of their competitiveness. According to Navarro, energy is 30 per cent more expensive than the European average for large volume products and you cannot make up for this loss of competitiveness elsewhere. It is with lower volume, specialist products where it is possible to remain competitive.

Navarro took over BASF’s Iberian business only two months ago —prior to that he had managed the firm’s subsidiary in Canada—. With the multinational’s new structure, the Spanish subsidiary will enjoy greater freedom, particularly in sales, even though investments will still be decided in Germany.

A sluggish Mediterranean Corridor

A priority for Europe, Catalonia and Valencia.

The Mediterranean Corridor is a priority for Brussels, which has included it in its European transport plan until 2030. The governments of Catalonia and Valencia also see it as a priority, especially for connecting their ports with central and northern Europe.

The Spanish government is more interested in fast passenger trains (AVE)

The Spanish authorities have continued to prioritise building a radial network of fast passenger trains (AVE) that converge in Madrid. In 2016 €4bn has been budgeted for railway works, but only a third of that will be spent on the Corridor, whereas the rest is earmarked for AVE line (except 4 per cent, which is to be spent on regular railway lines).

Works underway, but with controversy

Spain’s acting Infrastructure Minister said just over a month ago that every segment is under construction. But some initial controversies have led to delays, such as the layout itself and the use of the Spanish gauge for some stretches.