Chemical Market

The chemical industry is dominated by the US which has a 20 per cent share of the global chemical market. Europe dominates chemical consumption with nearly 45 per cent of consumption. Asia Pacific has slowly, but steadily, emerged as an engine of growth with a share of nearly 26 per cent of the chemicals consumed worldwide. The US continues to be a dominant force in chemical consumption due to the heavy demand from end-user industries which are fuelling the growth of chemicals. The future growth of the chemical industry is expected mainly from Asia, particularly countries like China, which remains a net importer of chemicals.

USA

The US is the leading producer of chemicals in the world. It accounts for a fifth of the world chemical production. The chemical industry is one of the pillars of the US economy, converting materials such as oil, natural gas, air, water, metals and minerals into over 70,000 different products. The chemical market size in the US is estimated at USD240 billion in 2003, up 5.7 per cent over 2002. In 2003, the growth rate of the US chemical industry moved into positive territory. At the outset, the chemical industry was hoping to increase output by 3.5 per cent with chemical prices expected to rise at a lower rate. The rise in feedstock prices led to chemical companies raising prices sharply, to offset the increase in natural gas prices. Eventually, in 2003, output fell by 1.5 per cent while prices increased by about 11 per cent. Chemicals, while increasing in value terms, recorded a decline in volume terms. Foreign trade did not help with imports outpacing exports.

In 2003, base chemicals accounted for 48 per cent of the chemical sales followed by specialty and fine chemicals at 37 per cent and consumer chemicals at 15 per cent. The chemical market consists of base chemicals such as petrochemicals, inorganics, fertilizers and industrial gases; specialty and fine chemicals including agro-chemicals and consumer chemicals. The petrochemical industry posted a flat growth in 2003 having been badly hit by high and volatile energy prices. Revenues will continue to grow in 2004. Net earnings will also increase, but may struggle to reach the pre-recessionary highs. High natural gas prices could depress earnings growth in the chemical market, and the chemical trade deficit will receive increasing attention as the value of the dollar declines.

Europe (excluding UK)

The European chemical market includes base chemicals (petrochemicals, inorganics, industrial gases and fertilizers); specialty and fine chemicals including crop protection products and consumer chemicals (used in the production of perfumes and cosmetics). The chemical market size in the European is estimated at USD495 billion in 2003, a growth of about 2.1 per cent over 2002. In 2003, growth was not uniform throughout the EU. Overall growth in Europe was mainly from non- EU countries. Major chemical markets in Europe comprise Germany, France and Italy. In the EU, Germany has a share of 25.6 per cent, France 16.2 per cent and Italy 12.3 per cent. According to the European Chemical Industry Council (Cefic), the overall output in the EU chemical industry is forecast to grow by 2 per cent in 2004. With economic and industrial revival likely, a modest improvement is expected for most EU chemicals sectors.

UK

The UK chemical market covers base chemicals, both organic and inorganic, fertilizers, specialty chemicals and consumer chemicals. It manufactures a diverse range of products. It is one of the UK’s largest manufacturing industries and, on a global scale, ranks seventh in terms of consumption. In 2003, the chemical market size in the UK is estimated at USD40.9 billion. The industry is estimated to have grown by 1.7 per cent over the previous year. With the EU expected to post a modest recovery in 2004, the UK chemical market is also expected to do well. It is expected to grow by 2 to 3 per cent during 2004.

Japan

The Japanese chemicals market covers base chemicals, specialty chemicals and consumer chemicals. In 2003, the size of Japan’s chemical industry was estimated at USD176 billion, a growth of 1.6 per cent. The boom in the Chinese economy is benefiting Japan. Japan supplies a large portion of the electronic materials, components, plastics, machinery and engineered goods that China consumes every year. The Asian chemical industry is expected to do well in 2004. General economic and political conditions continue to cause concern however. In Japan, healthy demand growth is expected for speciality polymers and electronic chemicals.

Emerging Markets

The chemical industry in emerging markets is growing at a faster rate than its counterparts in the developed region and this is likely to continue in the future. The outlook for some key countries in this segment, Brazil, China and India are as follows

With the recovery of the Brazilian economy the export opportunities for Latin American producers like Brazil will increase.

To remain competitive smaller Chinese Companies are likely to merge with larger ones which have the technological expertise and financial muscle to accelerate product innovation. The Chinese chemical market is expected to grow at 9% during the next two years.

Today, the Indian chemical industry is at a crossroads. Existing technology needs to be upgraded with the help of foreign partners. The per capita consumption of chemicals in the country is below the global average, demonstrating huge market potential. The industry needs to engage in strategic partnerships both domestically and with foreign partners to realize its latent potential.

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