The specialty chemicals industry is expected to return to growth next year!

This year’s COVID-19 epidemic has affected many segments of the global specialty chemicals industry to varying degrees. According to IHS Markit’s recent Overview of the Specialty Chemicals Industry, the epidemic has led to a contraction in demand for specialty products, which is expected to return to growth in 2021.

According to IHS Markit, North America was the world’s second largest consumer market in 2019, ranking first in the consumption of bactericides, corrosion inhibitors, cosmetic chemicals, food additives, industrial and utility cleaners, lubricant additives, oilfield chemicals, printing inks, surfactants and synthetic lubricants.

Since many industrial and consumer markets rely on specialty chemicals, specialty goods markets are closely related to the rate of economic growth. Before the outbreak, global GDP was expected to grow by 2.5% in 2020, meaning that sales of specialty products would grow by 2.5% to 3.5%. However, the lockdown measures imposed by governments to contain the spread of the epidemic have caused unprecedented damage to the world economy, severely affecting demand, supply chains, international trade and tourism. Global sales of specialty goods are expected to fall 3.5% from 2019 to $593 billion in 2020, according to IHS Markit.

HS Markit said there could be some recovery in the specialty markets in the third quarter, driven by the reopening of some regional economies, but uncertainty remained high. With global COVID-19 cases still rising in late June and July, the risk of a second round of forced shutdowns and reduced consumer spending could cause the economy to contract again this autumn.

According to the report, specialty polymers remain the largest specialty product segment in 2020, accounting for about 9 percent of the global market value of specialty products, followed by electronic chemicals, industrial and utility cleaners. According to the report, the performance of the specialized product market in 2020 will depend mainly on its end-use, and the market for industries essential during the embargo, such as disinfection/cleaning, personal protective equipment and other medical devices, food and beverage and other basic consumer goods, will grow. The report predicts a drop in demand for chemicals in industries such as automobiles, construction and other manufacturing industries, which have been forced to suspend operations in whole or in part by the outbreak.

IHS Markit noted that the sharp drop in crude oil demand will lead to lower demand for specialized products in exploration, production and refining. It is expected that in 2020, the demand for specialized products in various regions of the world will be weaker than that in 2019, but the consumption level will be roughly flat. China will continue to be the largest consumer of specialty goods, accounting for 26% of global consumption, followed by North America, Western Europe and Japan.

IHS Markit expects the global economic recovery after 2020 to drive a return to growth in the specialty goods sector. By 2022, most segments will have returned to historical growth patterns. The report predicts that global specialty products will grow at a CAGR of 3.3% from 2022 to 2025, and their market value will exceed $700 billion in 2025. IHS Markit said electronic chemicals, specialty polymers and nutritional components would be the higher growth segments, with the corresponding end industries expected to grow at a cAGR of more than 3.3 per cent. It is estimated that from 2022 to 2025, China will remain the largest consumer of specialized products, with an estimated annual growth rate of 5.5%.

The specialty chemicals industry is in transition and increasingly undominated by North American, Western European and Japanese companies, the report says. In addition, consumption of specialty products is growing faster in China and other emerging markets in Asia. Manufacturing activities for products such as cars and electronics are also expanding dramatically in these regions.

According to the report, the higher growth rate of specialty products in emerging market regions was driven by trade liberalization, the popularization of processing technology, the breaking down of multiple economic barriers, rapid growth in newly industrialized economies in Asia and the improvement of living standards in these countries. Per capita consumption of specialized goods in emerging markets remains low compared with developed regions. Still, “the center of gravity of the global chemical industry is shifting to the Middle East, where cheap materials for petrochemical production are available, and Asia, where labor costs remain relatively low and economic growth is fast.” Said IHS Markit.

Specialty product manufacturers in North America, Europe and Japan are constantly looking for growth opportunities in developing regions. Many companies have set up production facilities in Asia and elsewhere, and some producers in China and India have become key players in some specialist markets, according to IHS Markit.

As competition intensifies and mature products become universal, innovation remains the key to competition.