Global Chemical and Material Industry Analysis: Materials Use to Increase with Infrastructure Development

 Published Date: 2019-05-31   |   Views: 70   |  Chemical & Material  

For several centuries, the chemical industry has been a constitutive element of the global economic landscape. Almost all regional economies of the world witness the vital role played by the chemical industry in their development. The chemical industry is considered to be important for reaching some of the global targets mentioned in the 17 Sustainable Development Goals set by the United Nations. Furthermore, it has impressively contributed to the proper global management of chemical substances. In addition, it has provided a decent number of employment opportunities to people around the world.

Analysts Expect Stability in Prices of Metal and Mining Commodities

The chemical and material industry includes key sectors such as rubbers and plastics, paints and coatings, glass and ceramics, construction materials, metal and mining, and packaging materials. According to industry analysts, Asia Pacific is expected to attain considerable growth in the rubbers and plastics sector. Manufacturers are anticipated to introduce new rubber and plastic products using 3D technology. The demand for paints and coatings is predicted to increase in lucrative end-use industries including construction, electronics, and automotive.

Upsurge in the construction of residential and commercial sites due to improving disposable income and aggressive growth of the middle-income population group is foreseen to create opportunities in the global construction materials market. As for the prices of metal and mining commodities, they are expected to remain stable over the next couple of years, according to the Industry Top Trends 2019: Metals and Mining report of S&P Global Ratings. The demand for glass and ceramics is foretold to increase on the back of the modernization of existing infrastructure, development of the construction industry, and application in medical and electronics industries.

Key Trends of Chemical Industry in 2019

Traditionally, the chemical industry has been a bit lethargic when it comes to technological investment. However, the times have changed, and chemical manufacturers are observed to adopt aggressive and coherent business models while shifting from retrenchment and spending cuts. Companies are now able to quickly and efficiently meet consumer needs and shape purchases through accelerated technological development.

    Business Model Innovation: Chemical manufacturers are constantly looking for opportunities to see advancement through the use of digital technologies and digitalization. The chemical industry has been a key contributor to the transformation of innovations and ideas into advanced products such as organic LED, rechargeable batteries, and drones

   Rise in Merger and Acquisition: The US chemical industry in particular is expected to witness a high number of merger and acquisition deals. Analysts say that the use of updated and robust enterprise resource planning (ERP) systems makes a candidate attractive for acquisition, although financial transparency is always a key factor

 Compliance with Government Regulations: This is more of a norm than a trend in the chemical industry. Chemical manufacturers continuously update themselves while closely following GHS, SARA Title III, and OSHA Hazard Communication Standards reports. Changes in regulatory requirements mainly impact transportation, chemical product safety, security, facility process safety, and other factors

 High Focus on Young Demographics: Factors such as easy access to products and services are expected to influence the buying expectations of young chemical customers. Today’s generation of new buyers generally demand personal, real-time access to information, timely responses, and instant communication

    Margin Pressure Management: Frankly, it is not an easy task to handle margin pressure in the chemical industry with multiple variants coming into play. However, improving operational efficiency could be one way of achieving the goal. Supportive business models and chemical-centric ERP systems ensuring efficiency in operations could help with a company’s bottom line

According to UN Environment’s Global Chemicals Outlook II: From Legacies to Innovative Solutions report, global chemical sales, excluding pharmaceuticals, are expected to increase to EUR 6.6 Tn by 2030 from EUR 3.47 Tn reached in 2017. By 2030, Asia is projected to collect nearly 68% of the global chemical sales. By the same year, North American Free Trade Agreement is anticipated to account for almost 14% of the global chemical sales, followed by the Europe with over 13% share, Latin American with 4% share, and Rest of the World with 1% share.



BASF Shows Interest in Developing Countries, Dow Focuses on Capacity Expansion

BASF SE, Dow Chemical Company, Evonik Industries, DuPont, and Air Liquide are some of the key players operating in the chemical and material industry. Leading companies are prophesied to invest in emerging markets because of the availability of a wealth of opportunities arising from factors such as population growth and infrastructure development. In May 2019, BASF launched its first Creation Center in India. Capacity expansion could be another strategy that players could adopt to meet the growing demand in the industry. In April 2019, Dow announced that the expansion of its alkoxylation capacity at its existing facility in Spain.

Strong Link between Economic Growth and Infrastructure Development to Increase Materials Use

Global materials use is prognosticated to show a rising trend because of positive technological and socioeconomic factors. It could be driven due to the strong connection between construction, infrastructure, and investment and economic growth. For the past couple of decades, China has been increasing its use of metals and non-metallic minerals while developing its infrastructure and maturing as an economy at a fast rate. This scenario could be replicated in several African and Asian countries in the coming years.

On the other hand, the lower materials intensity of the services sector compared to the industrial and agriculture sectors is projected to reduce the demand for materials. However, sectors such as electronics and motor vehicles largely use metals, even though their materials intensity is relatively low. This could lead to quick consumption of metallic materials.

The trend of adopting smart building materials is expected to create fruitful opportunities in the material industry. Increasing innovation and research and development of smart building materials could further enhance the rise of the material industry. According to a press release in May 2019, USC’s associate professor of architecture, Doris Sung is working on smart building materials that use a unique, dual-alloy metal called thermo bi-metal having the ability to respond to cold and heat.

Factors Positively Influencing Material Industry

    Accommodative Nature of Central Banks: The global commodities demand is expected to gain support from the easier stance exhibited by the European Central Bank and the Federal Reserve

    Decrease in Use of Austerity Measures: Growth in the material industry is anticipated to improve with the reduction in the adoption of global fiscal restraint measures

   Increase in Infrastructure Building: Rising need for raw materials to build more residential and commercial infrastructures to meet the demand of growing populations in emerging economies is foreseen to bode well

Factors Posing Challenges to Material Industry

    Trade Wars: The global material industry is prophesied to face the brunt of the ongoing trade war between the US and China. Increasing trade disputes are predicted to escalate tensions in the material industry

    Expensive Labor Cost: Lack of skilled labor in certain segments of the global material market is foretold to increase labor cost in the future

    China’s Lowering Demand for Processed Commodities: Once a net importer of steel, China has lately transitioned to a net exporter of the material. The country produces enough materials by itself with the help of its increasing number of production facilities and technological advancement

India and China to Increase Materials Use despite Decline in Material Intensity

According to the OECD Global Material Resources Outlook to 2060 – Economic Drivers and Environmental Consequences report, developing economies are forecast to show significant growth in materials use with the increase in economic activity levels.

In India, materials use is expected to increase from 6 Gt in 2011 to 23 Gt in 2060. In China, it is predicted to grow from 27 Gt in 2011 to 38 Gt in 2060. The rise in materials use in the rapidly growing economies could be witnessed despite the projected decline in materials intensity. Overall materials use in other non-OECD countries, excluding India and China, is anticipated to grow from 24 Gt in 2011 to 67 Gt in 2060. Comparatively, OECD countries are observed to exhibit a fairly stable materials use trend. Their materials use is foreseen to increase from 22 Gt in 2011 to 39 Gt in 2060.

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