Insights into the
Global Trends that Shape Tomorrow's Chemical Industry
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A snapshot of the emerging trends in the global chemical industry –
With multiple emerging regions now steering the course of the global chemicals
industry, their internal dynamics will likely determine how the industry shapes
up in the near future.
Having grown at a momentous pace over the last two decades, global
sales of chemicals were valued at US $ 5.21 trillion in 2013, according to the American Chemistry
Council. We have long moved out of the age where traditional markets exercised
an authoritative influence over the chemicals industry.
With multiple emerging regions now steering the course of the
global chemicals industry, their internal dynamics will likely determine how
the industry shapes up in the near future. Here is a snapshot of the key trends
in important chemical trading regions across the globe:
United States: Chemicals
Industry Gathers Steam
In 2013, the United States’ chemicals industry reported sales
amounting to US $ 811.6
billion. The US contributes to over 15 per cent of the global chemicals trade,
and has traditionally been a hub of innovation with about 17 per cent of all
patents registered in the US being related to chemistry. Light vehicles and
housing are the two largest markets for the chemicals industry in the US, and
with both markets reporting an uptick after a slump, the future looks
promising.
The US surplus in chemicals trade will surpass US $ 77 billion by 2019,
driven notably by polymers. Going by the acceleration in the end-use markets
mentioned above, the American chemicals industry will report strong growth in
organic chemicals, specialty chemicals, synthetic rubber and plastic resins.
Canada: US Shale Gas Boom
Augurs Well for Canadian Chemicals
The country is a key source of C1 and C2 chemicals including:
Polyethylene, MEG, styrene, urea and ammonia. Canada also trades extensively in
PTA and butadiene but relies on imports of C4 rubbers and polypropylene. About
76 per cent of all chemicals from Canada are exported to the US; it imports 60
per cent from the US.
The Chemistry Industry Association of Canada estimates that by
2023, the Canadian chemicals industry could see new investments to the tune of
$10 billion as the current boom of shale gas proves to be a game changer.
Canada will continue to remain a strong contender in the bio-based chemicals
trade, thanks to its repository of readily-available biomass feedstock.
Mexico: Rejuvenation
Expected with Favorable Hydrocarbon Laws
The country is a vital supplier of polyethylene, para-xylene,
styrene, polycarbonates, polypropylene, polyether polyols, and vinyl chloride
monomer (VCM). However, growth in the Mexican petrochemicals sector has
remained sluggish because investments were few and far between in the Mexican
oil and gas industry. But 2014 saw an overhaul of the hydrocarbon laws in
Mexico, and this could spur a fresh cycle of growth.
Growth in the Mexican chemicals industry will result from robust
demand from three industries: Automotive, plastics, and agriculture. The
Etileno XXI project—a mega petrochemicals complex in Mexico slated to begin
operations by the end of 2015—will help close the current polyethylene
production gap.
Brazil: Unattractive Market
Scenario to Keep M&As on Hold
Brazil is regarded as a key supplier of styrene, polyether
polyols, sodium hydroxide, and diammonium phosphate (DAP). However, the
weakness in the Brazilian economy is already having a cascading effect on the
chemicals industry. Major end-used industries such as housing and automotives
are finding it increasingly difficult to shake off the effects of the slump.
The market for construction chemicals, especially, looks
uninspiring over the next few years (despite the 2016 Olympics Games in Rio).
The attractiveness of the Brazilian chemicals industry is currently low, and
this will impact M&A activity over the remainder of the decade.
Europe: Regulatory
Environment Impedes Growth
The European region is important for chemicals such as PVC, TiO2,
styrene, butadiene rubber, ethylene copolymers, polyether polyols, and acrylic
polymers. The region is also a key supplier of urea, ammonia, benzene
butadiene, and para-xylene. The recent downward plunge in oil prices has proven
beneficial for the European chemicals industry, which was conceding ground to
stronger players in the US and the Middle East.
The loss of energy, cost-competitiveness and the extremely
stringent regulatory environment here is gnawing at the European chemicals
industry; and this needs to be overcome at the policy level. Germany, the
biggest market in Europe, is expected to register 1.5 percent growth in its
chemicals industry in 2015.
China: Investor Sentiment
to Remain Positive About China
The world’s biggest chemicals market, China has hundreds of small,
medium and large companies that supply MEG, PVC, polycarbonates, styrene,
polypropylene, caprolactam, PE and polyether polyols. China is a prolific
producer of industrial and agricultural chemicals. But as the country’s GDP now
struggles to hover above the 7 per cent mark and overcapacity leads to deferred
purchase decisions, the basic chemicals industry in China will feel the heat.
Yet, as the market steers towards more technologically-advanced
sectors, and moves away from commodity segments, international investors are
optimistic about the prospects of the chemicals industry in China.
The agricultural chemicals industry is expected to remain dynamic
thanks to the M&A scenario here. China’s automotive market will register an
estimated 5 per cent growth per year to 2020, keeping up a steady demand for
ancillary chemicals such as synthetic rubber, lubricants, and plastics. With a
drop in the construction sector in China, the demand for construction chemicals
such as concrete admixtures, asphalt additives, coatings, sealants and
adhesives will slow down.
India: Chemicals M&A
Scenario to Remain Busy over Next few Years
India is a key destination for chemicals such as phenol, DAP, and
acrylonitrile. It is also an important source of dye intermediates and
dyestuff. The third-largest economy in Asia is expected to register a healthy
growth in GDP, accentuating the attractiveness of the Indian chemicals industry
for foreign buyers. This will consequently lead to a busy M&A scenario in
the Indian chemical sector through the remainder of the decade.
The Indian Chemical Council has pegged chemical sales to hit US $ 150 billion in 2015.
Companies— both domestic and international— are more willing to pump in
investment into the Indian market in the backdrop of the new government where
100 per cent FDI has been approved in the chemicals sector.
Editor:
Anuradha Wadhwani / Dominik Stephan
23SEP16 PROCESS
WORLDWIDE
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