CHEMICAL DISTRIBUTION
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rate was 4.1 per cent; and for the personal care sector, the growth rate was 4.7 per cent. All these markets grew at “a much higher rate than the commodity chemicals segment, which are used in coatings, wood products and machinery”. “Another major factor which is
helping specialty chemicals succeed over commodity chemicals is the fact that specialty chemicals distributors have a wide range of products which serve many different end customers,” Jaganathan notes. “On the contrary, commodity chemicals prices are more impulsive and move in synchronisation with the underlying macroeconomic growth, such as oil prices and supply-demand balance in the specific markets.” The third-party chemical distribution
GOOD TIMES COMING
ANALYSIS • A NEW REPORT FROM TECHNAVIO EXPECTS THE GLOBAL THIRD-PARTY CHEMICAL DISTRIBUTION SECTOR TO ENJOY HEALTHY GROWTH OVER THE COMING FIVE YEARS
ACCORDING TO A new report from UK- headquartered market research firm Technavio, rapid growth in chemical consumption has driven the overall chemical distribution market, “leading to a striking growth rate of over 10 per cent in 2015”. Moreover, the third-party chemical distribution market is growing faster in emerging economies than in more developed regions. For instance, while Asia-Pacific, the Middle East and Africa are set to achieve average growth rates of around 6.5 per cent during the period 2016-20, Europe and North America will likely witness more modest growth of around 4 per cent. At the same time, “rapid industrialisation in Brazil and Mexico” enabled growth rates
NOT SURPRISINGLY, CHINA EMERGES AS ONE OF THE DRIVING FORCES OF GROWTH IN THE CHEMICAL DISTRIBUTION MARKET
in Central and South America to also surpass those of Europe and North America. Within the Asia-Pacific region, China and India are also predicted to enjoy immense growth, posting annual increases of 7 to 8 per cent during the forecast period, says Technavio lead analyst Chandrakumar Badala Jaganathan. “This high growth is due to the emphasis on infrastructure improvement, construction and more industrialisation.”
HIGH POTENTIAL The study also reveals what Technavio describes as “the high potential growth of specialty chemicals over commodity chemicals”. The speciality chemicals segment, it says, will grow because the distribution of these products “is related to the underlying growth” of their end markets. For example, between 2014 and 2015, the European pharma and medicines speciality market achieved annual growth of 6 per cent; for the food and beverage sector the growth
market is also highly fragmented, especially in emerging regions. Indeed, while in Europe, the three largest players control around 15 to 20 per cent of the total market, the figure leaps to around 30 to 40 per cent in North America. In Asia Pacific, the Middle East and Africa, however, the top three players collectively hold just 6 to 10 per cent of the pie.
MORE CONSOLIDATION To consolidate the third-party chemical distribution market, vendors, Technavio states, are pushed toward growth strategies characterised by mergers, acquisitions and joint ventures. “Key global vendors are acquiring small distributors in China, India and Brazil to reach economies of scale and using their customer base to strengthen their position in the emerging markets,” it says. Meanwhile, global vendors “have technical
expertise”, which is essential for the distribution of speciality chemicals. “These global vendors also provide value-added services to customers by providing them with logistics, transportation, formulation, blending and storage facilities in their warehouses. Therefore, [an] increase in the number of partnerships through inorganic growth strategy will drive the market during the forecast period,” it reasons. Entitled Global Third-party Chemical
Distribution Market 2016-2020, the 79-page report can be bought online at the Technavio website priced $2,500. HCB
www.technavio.com
WWW.HCBLIVE.COM
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