SCUP Report

Table of Contents

Abstract

In 2010, the world's five largest specialty chemical segments—pesticides, specialty polymers, industrial and institutional cleaners, electronic chemicals and construction chemicals—had a market share of about 38%; the ten largest segments accounted for 62% of total annual specialty chemicals sales. Each specialty chemicals business segment comprises several subsegments, each with individualized product, market and competitive profiles.

Specialty chemicals are produced by a complex, interlinked industry. In the strictest sense, specialty chemicals are chemical products that are sold on the basis of their performance or function, rather than for their composition. They can be single-chemical entities or formulations (combinations of several chemicals) whose composition sharply influences the performance and processing of the customer's product. Products and services in the specialty chemicals industry require intensive knowledge and ongoing innovation.

The following pie chart shows world consumption of specialty chemicals by region:

The global chemical industry—including the specialty chemicals subsector—resumed growth in 2010. During the punishing economic downturn of 2008–2009, overall chemical production contracted—in many cases severely—as demand from major end-use markets like automotive, electronics and construction evaporated. The global economy began to recover in mid- to late 2009 and continued to improve in 2010. Despite the revival, however, production of chemicals (and most other manufactured goods) remained below prerecession levels.

Specialty chemical producers generally achieved higher sales volumes and revenues in 2010 but production costs also rose. Many firms reaped the benefits of cost-cutting and portfolio restructuring actions taken during the downturn. Others strengthened key business segments through acquisitions, expansion of operations in fast-growing regions, and new product introductions.

The outlook for 2011 is generally positive, despite some gray clouds on the horizon. All regions of the world expect positive GDP growth in 2011; China and India, in particular, anticipate double-digit or near-double-digit GDP growth. End-use markets for specialty chemicals continue to recover. Cautionary factors include rising crude oil prices, unrest in the Middle East and North Africa, the depressed U.S. housing industry, ongoing concern about sovereign debt levels in Europe, and the as-yet-unquantifiable impact of the March 2011 earthquake, tsunami and nuclear crisis on the Japanese and global economies.

Growth prospects for several specialty chemicals segments—notably mining chemicals, specialty polymers (high-performance thermoplastics and specialty films), emission control catalysts, and electronic chemicals (IC process and PCB chemicals)—are favorable because the outlook for the corresponding end-use industries has brightened. Segments such as cosmetic chemicals, flavors and fragrances, and nutraceutical ingredients owe their auspicious prospects to rising levels of disposable income in the developing world and renewed (if less than robust) consumer spending in North America, Western Europe and Japan.

Automotive catalyst consumption will grow faster than actual automobile production in both developed and developing regions during the next five years as a result of more-stringent emission control legislation and an increased number of catalyst bricks in the catalytic converter, needed to comply with new legislation. The market for heavy-duty diesel (HDD) catalysts used in trucks and construction equipment is expected to show substantial growth over the next decade.

The Specialty Chemicals Update Program provides 38 individual studies on mostly market- and functional-directed specialty chemicals, covering the 31 segments discussed in this report. Most of the SCUP reports are updated on a three-year cycle, depending on client interest.

The Overview of the Specialty Chemicals Industry report is published annually as a summary based on the individual reports. In contrast to the individual reports, the Overview update is done in a top-down approach including additional events and information from the previous year and adjusting market estimates since publication of the individual reports.