4 GLOBAL MARKET FOR SPECIALTY CHEMICALS

57 Pages·2017·1.36 MB·English

Handbook - 45/2017
Increasing Exports from Gujarat – 4
GLOBAL MARKET FOR SPECIALTY CHEMICALS
Suhayl Abidi
Editor, Foreign Trade Update
GOG-AMA Centre of International Trade
GoG-AMA Centre for International Trade
Increasing Exports from Gujarat - 4
GLOBAL MARKET FOR SPECIALTY CHEMICALS
Compiled by
Suhayl Abidi
For any queries, please contact: [email protected]
First Published: March 2017
Published by
GoG-AMA Centre for International Trade
Ahmedabad Management Association
Torrent-AMA Management Centre
Core-AMA Management House
ATIRA Campus, Dr. Vikram Sarabhai Marg, Ahmedabad 380 015
Phone: [phone] • Fax: [phone]
Email: [email protected] (cid:129) Website: www.amaindia.org
Contents
Introduction 1
Global Specialty Chemicals Market 3
Indian Specialty Chemicals Industry 23
Gujarat Specialty Chemicals Industry 32
Future Strategies for Gujarat Specialty Chemicals Exports 40
Robust Infrastructure for Gujarat Specialty Chemicals Exports 46
Specialty Chemicals Technologies and Innovation Trends 52
Introduction
Specialty chemicals are produced by a complex, interlinked industry. In the strictest
sense, specialty chemicals are chemical products that are sold on the basis of their
performance or function, rather than their composition. They can be single-chemical
entities or formulations whose composition sharply influences the performance
and processing of the customer’s product. Products and services in the specialty
chemicals industry require intensive knowledge and ongoing innovation. Therefore,
they face strict market entry barriers and command higher prices.
Commodity chemicals, on the other hand, are sold strictly on the basis of their
chemical composition. They are single-chemical entities. The commodity chemical
product of one supplier is generally readily interchangeable with that of any other.
Industrialization and urbanization have driven significant changes to trades and
economies. The rising population and their increased dependency on textiles, food
additives, consumer goods, and infrastructures are ensuring a flourishing growth
for specialty chemicals. The wide range of chemicals used in the production of
adhesives, agrochemicals, lubricants, cosmetic products, flavours and food additives,
fragrances, textiles, and construction materials are earning significant revenues for
the industry.
Examples of specialty materials include materials or additives that extend shelf life
or preserve product quality, lightweight materials that reduce fuel consumption or
other energy costs, antimicrobial materials that reduce the risk of infections, and
ballistic resistant materials. Other examples include performance enhancing or
eco-friendly additives that provide differentiated colours or effects, such as consumer
applications that glow in the dark, change colour in light, provide colour
harmonization, or unique performance or process enhancing characteristics
(antistatic, antioxidant, anti-sticking, flame retardant, resistant to UV light, etc.).
Some specialty materials can be engineered to provide enhanced structural or
functional performance (e.g., noise reduction) or deliver enhanced design or visual
aesthetics. Specialty materials can also be applied to traditional materials such as
steel, wood, vinyl, polyester, aluminium, and others to enhance the properties of
these materials, providing improved weatherability, weight characteristics, durability,
colour retention, stain or scratch resistance, flame retardancy, chemical resistance,
or gloss control. Due to their superior attributes, specialty materials are increasingly
being used across a wide range of end markets.
The largest specialty chemical segments in 2015 were construction chemicals,
specialty polymers, electronic chemicals, and surfactants. These accounted for 37%
Global Market for
Specialty Chemicals Introduction 1
of the industry’s global sales. About half of the world consumption of specialty
chemicals goes into only four end-use industries—soap, cleaning, and cosmetics;
food and beverages; construction; and electrical and electronics. Other important
end-use industries for specialty chemicals include motor vehicles, oil and gas mining,
and paper and pulp. The adhesives, paints, and coatings products generate the
highest percentage of revenue compared to other types of products.
The specialty chemicals business continues to transition. Historically, North American,
Western European, and Japanese firms have dominated this business. They still do,
but no longer to the same degree. With trade liberalization, the spread of process
technology, the breakdown of numerous economic barriers, the rapid growth of
the newly industrialized Asian economies, and rising standards of living in many
developing countries, the centre of gravity of the global chemical industry is shifting
toward the Middle East, where cheap petrochemical feedstocks are available, and
Asia, where labour costs remain relatively low and economic growth is high. Chinese
and Indian manufacturers have become key players in several specialty chemical
markets. However, the concept of China as a low-cost producer is gone since the
country is shifting away from an export focus to meet growing domestic needs for
higher-value, downstream products. As competition increases and mature products
become commoditized, innovation remains one of the few sources of competitive
advantage.
The Fine and Speciality Chemicals industry in India represents a US$30 billion
market, which is growing at 10-12% annually – faster than the chemical sector as
a whole. The industry not only serves the local market, but also the global one and
is globally competitive in many sectors, including China.
According to P&S Market Research global specialty chemicals market is expected
to grow at 5% CAGR during 2016-2022.
The factors driving the growth of the global market include large base of end-use
industries, high demand from Asia-Pacific, increasing demand from automotive
industry, and technological advancements in the global specialty chemicals market.
The growth of the global specialty chemicals market is largely driven by high demand
for specialty chemicals agriculture and construction industries. The growing
construction activities in Asia-Pacific and development of environment friendly
products offer ample revenue generation opportunities to the manufacturers of
specialty chemicals.
Among the various types of specialty chemicals, the agrochemicals segment held
the largest share (15.9%) with the market size of US$131.4 billion in 2015 in the
global specialty chemicals market. The construction chemicals segment is anticipated
to witness the highest growth at a CAGR of 6.8% during the forecast period. The
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construction chemicals segment in the global specialty chemicals market was valued
at US$79.3 billion in 2015, and it is anticipated to reach US$125.6 billion by 2022.
The high growth in the construction chemicals segment is attributed to the increasing
construction activities in Asia-Pacific, and increasing focus on buildings renovation
in developed economies and government initiatives for green buildings.
In 2015, Asia-Pacific held the largest share (39.7%) in the global specialty chemicals
market with a market size of US$340.4 billion. The specialty chemicals market in
the region is anticipated to witness the highest growth at a CAGR of 7.2% during
the forecast period. The major reasons behind the growth of the specialty chemicals
market in the region include increasing infrastructure investment, and high demand
in major end markets, such as construction, automotive, agriculture, packaging,
textiles, and personal care. In addition, the high demand for specialty chemicals in
China and India are creating ample growth opportunities for the Asia-Pacific specialty
chemicals market. The specialty chemicals market in India and China are expected
to grow at a CAGR of 14.6% and 7.3% respectively during the forecast period.
The global specialty chemicals market is extremely fragmented with the presence
of many international, regional, and local vendors. Though the market is dominated
by the global players, several regional and local vendors control the market by
providing profitable and high-specialty chemicals for niche applications. The
competitive scenario in the market will become more intense in the coming years
with the increase in technological innovations and product development.
International players are likely to grow inorganically by acquiring regional or local
players during the forecast period.
This sector provides technocrats a wide range of business choices in small and
Medium Enterprises (SMEs). The aim of this handbook is to provide an overview of
the entire specialty chemicals sector to enable SMEs in Gujarat state to set and
expand industries in various sub-sectors of specialty chemicals sector with a view
to, not only service Indian costumers but also move aggressively in the vast global
market arena.
Global Specialty Chemicals Market
The scope of the entire specialty chemicals market is expansive and encompasses
several end-user industries in it. According to analysts at Allied Market Research,
the industry is set to reach an impressive US$233.5 billion by 2020. The competitive
landscape of the entire industry is vibrant, as many key players are collaborating
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with different industries to pool their resources and market their products. This is a
testimony to the immense potential of the entire industry to scale new heights
with the advent of time.
Rapid population expansion has elevated food security concerns in underdeveloped
and developing countries due to improper storage infrastructure and food grains
distribution. This as a result, leads to increasing high yield-enhancing agrochemicals
demand owing to propel specialty chemicals market share over the forecast
timeframe. According to the World Bank, farmers may have to upscale their yield
by 50% per hectare by 2050 owing to boost agrochemicals, such as fungicides,
demand by 2024.
The automotive industry is one of the most lucrative industries for the specialty
chemicals market share. These are used as polymers and plastic additives, paints
and coatings and adhesives and sealants in the automotive. China, Japan, India,
South Korea and the U.S. lead the global automotive sector by accounting over
55% of production global cars and commercial vehicles production in 2015.
Increasing middle-class population and increasing automotive appeal have
prompted car manufacturers such as Audi AG, Mercedes Benz and BMW AG in
America and Europe to enter Asia with small cars that are especially designed to
meet requirements in Asian automotive industry. Furthermore, global personal and
commercial vehicles production in 2015 was roughly around 90 million. This
consequently will drive specialty chemicals market size owing to its widespread
application across automobiles. In addition, lubricants use in the automobiles to
maintain engine smoothness will further complement industry growth.
Surge in Demand for Eco-friendly Specialty Chemicals
Majority of specialty chemicals are synthetic which may have adverse effects on
the environment, thus affecting flora and fauna. Therefore, environmental protection
agencies have imposed various environmental regulations on the synthetic chemicals
usage due to their toxic nature, which may hinder specialty chemicals market size
over the forecast timeframe. For instance, the European Union has banned atrazine
and acetochlor herbicides. Also, in June 2015, France and Denmark banned
glyphosate for usage in lawns and gardens.
A large number of environmental concerns and conscious efforts by industrialists
and governments to reduce carbon footprint has propelled the demand for eco-
friendly products.
Regulatory bodies and governments of various nations are raising concerns over
the extensive use of industrial chemicals. The limelight has shifted from effective
chemical usage to eco-friendly chemicals that do not pollute the environment and
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have less carbon footprint. Apart from creating finished products that follow the
green protocol, these chemicals also have less toxic effluents after the manufacturing
process. Regulatory bodies are putting in collaborative efforts with governments
and approving grants and subsidies for manufacturers who use green chemicals in
their processes.
There are many manufacturers who are teaming up with chemical companies and
adopting a sustainable approach to their production process by cutting down on
toxic chemicals. One such example is India’s Vikas Eco Tech Ltd. (VEL) who has
recently signed a tie-up deal with Prince Pipes and Fittings Ltd. The collaboration is
meant at supplying the entire range of specialty chemicals offered by VEL. The
focus of the deal is on organotin heat stabilizers as a replacement for the plastic
synthesizer.
Cost Benefit Proposition of Specialty Materials Continues to Improve
The superior performance, structural, and processing attributes of specialty materials
(which include composites, elastomers, high performance plastics, specialty
chemicals and coatings, and exotic metals and alloys) have long been recognized
by manufacturers across industries. The substitution of specialty materials for
traditional materials has been limited to date by the relatively high cost of these
materials. However, over the past several years the cost benefit proposition of
using specialty materials has improved on both sides of the equation. As the cost
benefit proposition for specialty materials continues to become more favourable,
we expect further substitution of these materials for traditional materials.
In terms of benefits, specialty materials manufacturers continue to achieve
incremental improvements in weight reduction, durability, fire retardancy, colour
retention, noise reduction, antimicrobial properties, and heat and electric insulation.
Specialty materials manufacturers have also made advancements in their ability to
customize materials to meet the exacting specifications of specific end uses. The
cost side of the equation has seen significant improvements as well. Plummeting
oil prices over the past year have significantly reduced input costs for many specialty
materials. Manufacturers of these materials are also achieving per unit cost
reductions due to increased volumes and improved efficiencies in their production
processes. In addition, these materials can often reduce the all in cost of end
products due to reduced manufacturing and operating costs through “light-
weighting,” reductions in waste, parts consolidation, faster manufacturing cycle
times, and/or extended shelf lives.
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High Growth and Strong Margins Attract Broad Based Interest
Specialty materials companies typically can offer faster growth, greater product
differentiation, superior pricing power, higher margins, and lower earnings volatility.
As a result, the specialty materials sector is drawing increasing attention from
investors and both strategic and financial acquirers. In particular, strategic acquirers
are seeking to increase their existing exposure to specialty materials or fill holes in
their product portfolios. The mega trends of increased light-weighting, especially
for auto makers to achieve fuel efficiency standards, and demand for higher
performance materials also create compelling investment opportunities for financial
sponsors. In addition to these mega trends, the specialty materials industry exhibits
several other characteristics that make the sector particularly attractive to financial
buyers. Specialty materials companies tend to have highly defensible businesses
because of their unique materials, technologies, and/or processing capabilities.
Relative to other industrial companies, specialty materials businesses tend to exhibit
higher margins and stronger cash flows. This strong margin profile is especially
true for specialty materials suppliers to the aerospace and medical end markets. As
a result, specialty materials companies generated intense interest from both strategic
and financial acquirers in 2015.
Cosmetic Ingredients Manufacturers Collaborate for Market Strengthening
The cosmetic industries account for a considerable amount of chemical outsourcing.
They require performance chemicals that can adhere to strict healthcare protocols
and used in beautification products for hair and skin. The cosmetics market is
booming and the use of organic chemicals that do not cause harm to the appearance
of a person are gaining swift popularity. It is not uncommon to see manufacturers
teaming up with chemical providers to strengthen their business relations and
outsource chemicals for use in products.
For instance, the Japanese chemical giant, Nikkol Group recently joined with Amyris
to expand its customer base in the personal care ingredients segment. The joint
venture between the two allows Nikkol to buy 50% of the Amyris business for
US$20 million. The companies expect to strengthen each other’s marketing
strategies, innovative technologies, and development synergies through the deal.
“Nikkol is an ideal partner for this joint venture and is the leading channel partner
for our squalane business. This agreement aligns with our strategy of focusing our
business on partnering with the world’s leading companies to accelerate our product
sales growth while lowering our operating costs,” said John Melo, president and
CEO, Amyris. The collaboration is aimed at giving the companies an edge over
other competitors and help establish a market leadership position.
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Extremely Lucrative Market in the Asia-Pacific Region
The specialty chemicals industry has established its presence in various economies
and regions. While the North American and European market are saturated with
industries that rely on performance chemicals, the Asia-Pacific region is expected
to exhibit a significant growth in the immediate future. This is mostly due to the
rising investments by governments in the setting up of various production units.
Developing economies, such as India and China has governments who are actively
creating a conducive environment for manufacturing units in their nations. Even
suppliers of chemicals are cashing in on the encouraging initiatives and doubling
their production volumes to cater to a wide range of applications.
The construction materials, water treatment, paint and coating additives, textiles,
oil and gas refineries, and pharmaceuticals are the largest importers of chemicals
for diversified purposes. With such an upsurge in the demand for formulation
chemicals, the global companies engaged in specialty chemical production are
eying the region for market expansion. By setting up new production units and
facilities in India and China, the companies are striving to expand their customer
base and earn greater revenues. The Asia-Pacific region is witnessing an industrial
overhaul, and the specialty chemicals market has much to gain from it.
Acquisitions: Part of Smart Market Moves
The competitive landscape for specialty chemical market players is appearing very
vibrant in the current scenario. With no dearth of verticals to cater to, the
manufacturers and developers of chemicals have expanded the scope of their
operations to meet the needs of various end-user industries. Apart from extensive
R&D projects taken to develop industry-specific requirements, the players are looking
for better opportunities to reinforce their market leadership across various regions.
Spending significant amount of resources on research, expanding their customer-
base, and including innovative, eco-friendly products in their offerings are some of
the major dynamics of this industry. Acquisitions and collaborations between
chemical producers are smart moves that players indulge in to stay top-notch in
their game.
For example, German-based Evonik has recently decided to buy JM Huber
Corporation’s silica unit for US$630 million for widening its specialty chemicals
business. The deal is expected to widen the customer base of Evonik from just tire
manufacturing to toothpaste, animal feed and paints. This move will give the German
company more access to Asia-Pacific region. By buying the Huber unit, Evonik
plans to improve its cost efficiency and add to sales benefits. This is expected to
eventually enhance its core earning per year and establish its stability in the market.
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