The European Commission is investigating whether Polish state aid of €39 million granted to chemical company PCC MCAA for building a monochloroacetic acid (MCAA) plant was in line with EU rules.

The aid took the form of a direct grant of €16 million and a tax exemption of a maximum €23 million. PCC MCAA is a subsidiary of Germany’s PCC Group and was set up to build and operate the facility in Brzeg Dolny. The 42,000 t/y MCAA plant went online at the end of 2016.

At the time of granting the funds, Poland considered both support measures to be covered by the 2008 General Block Exemption Regulation (GBER 2008), so did not notify the Commission.

However, a direct competitor of PCC complained to the Commission that the first sum of €16 million did constitute state aid and should have been disclosed.

In 2016, the Polish authorities decided to revoke the tax exemption, having concluded that it was in breach of GBER 2008 provisions. However, PCC appealed and legal proceedings are ongoing.

The Commission has taken the preliminary view that both measures were state aid and it should have been notified. It voiced doubts that the measures were in line with EU rules and had the required “incentive effect,” adding that the funds may also have exceeded the maximum level allowed.

In addition, and based on available information, the Commission noted that the MCAA market appeared to be in “absolute decline” when the support measures were granted. As such, it said it “cannot therefore exclude at this stage that the aid measures contributed to a substantial capacity increase by PCC in an underperforming market, leading to possible undue distortions of competition.”

Other leading MCAA producers include Nouryon, Merck KGaA and CABB Chemicals, among others.

In August 2018, PCC announced another MCAA expansion at Brzeg Dolny, lifting capacity by an initial 25%, with further increases up to 100,000 t/y in the medium term in response to strong customer demand.

PCC MCAA claims to have a European market share of around 20%. It added that expansion into markets in North and South America and Asia were also in the pipeline.

Research and Markets forecasts the global MCAA market to expand at a compound annual growth rate of more than 5% for the period 2019-2024, driven primarily by the agrochemicals and personal care sectors. Asia-Pacific dominates the global market with the largest consumption in China and India.