Overview of the Specialty Chemicals Industry
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Published: May 2013
During the last ten years, the specialty chemicals industry has experienced slower growth and lower overall profitability within a more competitive environment than in the preceding period. The predicted growth rate for the 2012–2017 period is 1.7% for the United States, Western Europe and Japan, and 3.7% on a global basis. Major growth areas for the specialty chemicals industry are in emerging regions, primarily China and Other Asia (excluding Japan), where average annual volume growth rates of 8.4% and 4.7%, respectively, are forecast through 2017.
After three years of recovery from the Great Recession, global demand for specialty chemicals weakened again in 2012. Manufacturing industry activity globally slowed significantly and specialty chemical demand fell away as a consequence, mainly because of the crisis in the eurozone, doubts about the sustainability of the US economic recovery and the cooling of emerging-market growth rates, especially in China.
In 2012, the world's five largest specialty chemicals segments—specialty polymers, industrial and institutional cleaners, construction chemicals, electronic chemicals, and flavors and fragrances—had a market share of about 36%; the ten largest segments accounted for 62% of total annual specialty chemicals sales. Each specialty chemicals business segment comprises several subsegments, each with individualized product, market and competitive profiles.
Growth prospects for several specialty chemicals segments—notably mining chemicals, specialty polymers (high-performance thermoplastics), emission control catalysts and electronic chemicals (IC process and PCB chemicals)—are favorable because the outlook for the corresponding end-use industries has brightened. Segments such as cosmetic chemicals, flavors and fragrances, and nutraceutical ingredients owe their auspicious prospects to rising levels of disposable income in the developing world and renewed (if less than robust) consumer spending in North America, Western Europe and Japan.
Comparison of 2012–2017 volume growth rates for selected specialty chemicals segments worldwide and in the three major regions (North America, Western Europe and Japan) is instructive. World growth rates are invariably higher, reflecting robust demand growth in China, Other Asia and other developing nations. This demand growth is due to the ongoing expansion of mining and manufacturing activities—notably automobile and electronic production—in these countries. (In many cases, these activities are contracting in the three major regions as operations shift to nations with lower labor costs or other advantages.) Construction chemicals and engineering thermoplastics have noticeably better growth prospects worldwide than in the three major regions.
Conditions for the global specialty chemicals industry are expected to remain below normal long-term growth rates, mainly because of ongoing recessions in Europe and Japan, combined with inventory imbalances and a slowdown in growth being predicted in China.
The risk of a serious global slowdown is alarmingly high, with the eurozone already being in a recession, as a result of the sovereign debt crisis. Prospects for North America are more optimistic with the shale gas–based move toward energy independence. Policymakers have tried stimulus and liquidity programs, as well as tax cuts and austerity packages but have largely failed to boost the economy.
While developed nations are expected to grow only slowly, constrained by debt, adverse demographic factors and tighter fiscal policies, emerging markets offer more dynamic prospects as a result of rising consumer-driven economies and industrialization. On a demographic level, the global population is still growing. However, because of higher life expectancy in all world regions, a shift toward older generations is occurring. Since older people consume less, this results in reduced spending and consequently in a slowdown of the global economy.