This is marketing research on the Chemicals – Asia industry and can include information on the background, market structure, definitions, competitors, trends and developments of Chemicals – Asia and is related to agriculture, plastics, oil and resins.

Table of Contents

[edit] Background

In the late 1990s, worldwide chemical shipments of slightly less than $1.6 trillion were up about 0.75 percent from the 1997 level, according to data provided by the Chemical Manufacturers Association. This sluggish growth contrasted with an average annual gain of 4.2 percent in the 1994–1997 period. The softening trend largely reflected the effect of the widespread financial crisis in Asia. Global dollar shipments also were affected by falling prices stemming from oversupply conditions in many principal product categories. Unit shipments to the Asia-Pacific region dropped 2.25 percent in real terms in 1998, including a 4.5 percent decline in Japan.

By contrast, most major markets in western Europe grew at rates in excess of the world average, especially in France and Italy. Boosted by new capacity, chemical shipments to Mexico increased 4.25 percent and shipments to Canada rose 3.75 percent. According to the CMA, the Asia-Pacific region accounted for 31 percent of global chemical shipments in 1998, western Europe for 29 percent, North America for 27 percent, Latin America for 6 percent, and other areas for the remaining 7 percent.

World exports of chemicals totaled about $500 billion in the late 1990s, according to CMA data. With chemicals now manufactured throughout the world, prices are determined by global supply and demand conditions and the discounting tactics used by leading producers to gain market share. According to Chemical Market Associates, Inc. (CMAI), worldwide capacity in base chemicals (light olefins, aromatics, chlor-alkali, and methanol) will expand from about 250 million tons in 1990 to close to 400 million tons in the year 2000. World chemical consumption of 300 million tons in 1998 was divided as follows, according to CMAI: light olefins (ethylene and propylene), 43 percent; chlor-alkali (chlorine and caustic soda), 30 percent; aromatics (benzene and mixed xylenes), 18 percent; and methanol, 9 percent.

[edit] Market Structure

The chemicals industry is also capital-intensive, a large user of energy resources, and heavily regulated, factors that provide high entry barriers to new competition. U.S. chemical companies, for example, consume about 7 percent of total annual U.S. energy output. Most of the industry’s energy consumption involves natural gas and oil, with the balance consisting largely of electricity and coal. Most of the industry’s production consists of commodity chemicals, with demand largely a function of general economic activity in the U.S. market and overseas markets. Industry profitability is determined largely by raw material costs, export demand, pricing trends in world chemical markets, and capacity utilization. Trends in interest rates, inflation, and manufacturing as well as marketing costs also can have a significant impact on profits.

Chemicals are produced from raw materials such as oil, natural gas, metals, minerals, and air, which are further processed into chemical intermediates and industrial and consumer goods. The automobile and housing sectors are key markets, although chemicals find their way into nearly all manufactured products.

[edit] Market Metrics

Source: Trade Stats Express, 2008

There are several sub-sections of the chemicals industry which Asian manufacturers and others compete for.

In one area, demand for PVC, which accounts for close to a third of chlorine production, will be a key driver of chlorine demand over the coming years. The second largest volume plastic, PVC, is used primarily by the housing and construction industries. The PVC market has risen in importance for the chlorine industry in recent years as environmental regulations have affected chlor-alkali use in solvents, pesticides, and chlorofluorocarbons (CFCs). Improving economies in Asia also should bolster this business in the year 2000. Over 40 percent of U.S. vinyl chloride (the raw material for PVC) production is shipped to Asian markets.

Boosted by better foreign markets, worldwide chlorine demand is expected to expand 2.5 percent per year through 2002. By comparison, domestic demand is expected to grow only 1.5 percent in that period.

Soda ash (sodium carbonate) is a naturally occurring mineral whose primary use is in glass production, which accounts for nearly half of total demand. It also is used as a sodium source in chemical production, as a detergent builder, in pulp and paper, and in environmental and water treatment products. U.S. soda ash production dropped 9.8 percent to 10.7 million tons in 1998 as the business was affected by the Asian economic slowdown. Exports constitute a vital market for U.S. soda ash producers, accounting for about 35 percent of total domestic production. With exports to Asia accounting for nearly half of all American soda ash exports, the Asian slump continued to affect this market negatively in 1999, with total production levels not expected to vary appreciably from 1998 levels. A better performance is seen for the year 2000, boosted by economic recovery in Asia and improved demand from the domestic glass market.

Demand for titanium dioxide, the largest-volume inorganic pigment, is expected to be somewhat stronger than that for most other pigments, stimulated by its unique qualities and increased demand from the pulp and paper industry. Used as the primary white pigment in paper and paperboard, plastics, synthetic rubber, and coatings, titanium dioxide has an extremely high ability to reflect light and add brightness to products. After showing annual compound growth of 3 to 4 percent through 1997, production of titanium dioxide slipped 0.1 percent in 1998, primarily as a result of reduced shipments to Asia, which accounts for about 25 percent of world demand. After another indicated modest decline in 1999, demand should grow in the range of 2 to 3 percent through 2003.

Although traditionally dominated by the United States, Germany, and Japan, this sector has had considerable capacity added in recent years from companies in Asia, the Middle East, and Latin America. That trend should continue despite the recent financial crises in Asia.

The global petrochemical industry had a tough year in 1998 as it was beset by worldwide overcapacity, declining prices, and reduced shipments to Asian markets. Although lingering financial difficulties in Asia continued to affect this business in the first half of 1999, substantial price hikes implemented during that year should help top line comparisons in the year 2000. In 1999, international price increases in major petrochemical products were triggered by increases in raw material (naphtha) prices and increasing demand from some markets. The chemical industry is sensitive to changes in oil and gas prices, as both of those materials represent basic chemical feed-stocks and key energy sources that fuel manufacturing processes. With important derivatives uses in plastics and fibers, ethylene is the largest-selling organic chemical. Reflecting higher oil feedstock costs and better supply and demand conditions, ethylene prices rose materially in 1999. According to estimates by SRI Consulting, ethylene feed-stocks should be adequate to meet world demand through 2005 despite projected growth in demand of 4 percent per year and growth of 2 percent in the rate of global production.

After rising for many years, production of industrial organic chemicals dropped 5.7 percent in 1998, largely reflecting the downturn in petrochemical production and the reduced export opportunities caused by recession in key Asian economies. Exports of organic chemicals, a good deal of which are shipped to the Far East, dropped almost 9 percent in 1998. Organic chemical production continued to slide in 1999, although the rate of decline subsided somewhat. With recovery in Asian economies, total domestic industrial organic chemicals production was expected to decline modestly in 1999.

The U.S. organic pigments business also has been hampered by heightened import competition from low-cost overseas producers of colorants. Competition from developing countries, particularly India, China, and other Asia-Pacific nations, has been especially prevalent in the textiles sector, the largest end use for colorants, because of increased organic pigment production in those countries to support their growing textile markets. U.S. producers also have expanded their operations in the Asia-Pacific region to take advantage of lower labor, environmental compliance, and other costs.

World consumption of fertilizers totaled 136.1 million tons in the 1997–1998 growing season, up 1.3 percent from the comparable 1996–1997 season, according to data provided by the International Fertilizer Industry Association (IFA). Nitrogen fertilizers accounted for 59 percent of world fertilizer consumption, phosphate fertilizers for 24 percent, and potash fertilizers for 17 percent.

Nitrogen is the most commonly used fertilizer, with anhydrous ammonia being the principal ingredient in most nitrogen fertilizers. Anhydrous ammonia is produced by combining atmospheric nitrogen with methane. Another related nitrogen fertilizer is urea, a combination of anhydrous ammonia and carbon dioxide. Because nitrogen-based compounds evaporate from the soil, nitrogen fertilizers must be applied each year, resulting in a relatively stable market for this commodity. Phosphate fertilizers are derived from phosphate rock. Phosphate rock is combined with sulfuric acid to yield phosphatic acid, which is further processed into DAP, the most widely used phosphatic fertilizer. Potash is mined primarily from deposits of potassium salts in Canada, Germany, Russia, the United States, and Israel. World phosphate production rose about 3 percent in 1998, according to IMC Global estimates, with U.S. producers accounting for 41 percent of world concentrated phosphate production. The industry’s current phosphoric acid capacity utilization rate is about 77 percent, with utilization expected to remain in that area over the next few years, according to IMC Global. However, by 2005, utilization should reach 85 percent as supply and demand conditions are more closely matched.

Strong demographic growth, rising income levels, and efforts to improve diets and general standards of living in developing areas in Asia, Latin America, and Africa should foster greater production of grains and other produce. This should result in increased use of fertilizers to lift production. The total world population is projected to grow from 6 billion in 1999 to over 7 billion in 2010, with most of the growth occurring in emerging or third world countries. Asia currently accounts for about half of world fertilizer consumption.

The global adhesive and sealant market was estimated to be about $22 billion in 1998. Adhesives accounted for about 82 percent of the total global market, with sealants representing 18 percent. North America accounted for 33 percent of the global adhesive and sealant market, followed by Europe with a 30 percent share. The Far East accounted for 19 percent of the world market, with the rest of the world representing 18 percent.

Although the United States is the largest consumer of explosive worldwide, the market is becoming increasingly globalized. The greatest opportunities for producers of explosives are in the expanding mining and construction industries of southeast Asia, Latin America (e.g., Argentina, Peru, and Bolivia), and Australia. Many U.S. producers therefore are pursuing growth through exports. Explosives exports are expected to outpace imports significantly in the foreseeable future. Besides direct export business, many U.S. explosives firms are entering international markets through direct investment in local industries, joint manufacturing ventures, and technological licensing agreements.

[edit] Recent Trends and Developments

With U.S. markets for commodity inorganic chemicals such as the automobile and housing industries considered relatively mature, most future growth for these products is expected to come from developing nations in Asia and Latin America. Exports account for close to 30 percent of total inorganic chemical production, with domestic markets accounting for the remaining 70 percent. Key U.S. export markets include Canada and Mexico, which accounted for 28 percent of inorganic chemical exports in 1998, followed by western Europe at 23 percent, Japan and China at 22 percent, Latin America at 10 percent, the rest of Asia at 11 percent, and other areas at 6 percent. With depressed economic conditions, particularly in Asia, continuing to affect this market, exports of inorganic chemicals were expected to decline almost 5 percent in 1999, after a drop of over 8 percent in 1998.

Despite the recent downturn in export volumes, long-term business prospects remain favorable. Some improvement in export volume is anticipated in the year 2000, generated by firming economic trends in Japan and other Asian countries. In addition, key export markets in North America have continued to be resilient. The North American Free Trade Agreement (NAFTA) partners Canada and Mexico, along with Latin America, account for about 38 percent of total U.S. inorganic chemical exports, and growth in those regions is expected to remain respectable.

[edit] Sources

• Most current US government sources