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Global Chemical Industry Analysis: Sustainability Industry Report Spring 2013

Executive Summary & Industry Overview:

Through the analysis of the various chemical and manufacturing companies, there was a common theme of sustainability addressed. The global chemical industry generates revenue of about $3 trillion and produces precursors and intermediates for most other consumer industries. The chemi- cal industry is highly regulated with major contributing regions being Europe, North America, and Asia. With new regulations such as REACH, the industry framework is changing to adapt to innovative solutions. The main constraints on the global chemical industry are energy costs, feedstock changes, labor costs and regulations. Despite these limitations, the industry is expected to grow at a fairly high rate over the next five years and thereafter. While many of these companies have extensive sustain- ability plans they are still lagging behind other industries.

The global chemical industry consists of a very diverse and complicated range of products. In terms of revenue, it is one of the world’s largest markets. The majority of consumer products that are used every day have at least some tie to the products of the chemical industry. There are a few large players with a lot of smaller, specialized, companies.

Across the chemical industry, expected worth is estimated to be around $3 trillion per year with relatively flat revenue growth in the EU and US. The compound annual growth rate (CAGR) over the five years spanning 2006-2010 has been 5%. At the low end, Europe only grew at about 1% in 2010 with Asia representing the region with the largest CAGR at 10% in 2010. From the years 2010-2015, the chemicals market is expected to gain momentum and is forecasted to grow at a 8% compound annual growth rate.

The chemical market is recognized as being divided into five distinct segments; base, con- sumer, pharmaceutical, specialty and fine, and agriculture chemicals. The base chemicals segment consists of the largest of the five with 41% of the total value. A far second, pharmaceuticals comprise of about 28%. The remaining 31% is split between the remaining three segments.

The segmentation of the geography of the chemical industry overwhelmingly resides in the Asia-Pacific region. In 2010 the Asia-Pacific accounted for 46% of the industry. The remaining is split mostly between the Americas and Europe with 28% and 25% respectively. Very little is found in the Middle-East.

The majority of the raw materials, or ingredients, in the chemical industry are derived from oil and natural gas. Therefore prices of the products fluctuate greatly according to the supply and demand of these inputs. The threat of substitutes is very low because the buyer typically needs a very specific chemical composition that is not available everywhere. However, in the base chemical markets, margins are rather thin as these products are very commoditized and available from multiple market players. The industry has high barriers to entry and exit primarily due to the large costs of production plants.

The global chemical industry is very large and competitive. It is expected to grow at a considerable rate in the future, especially with the development in the Asia-Pacific. The market for chemical products is very diverse and is seen as an input in almost all industries.

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