‘Globalisation and sustainability to impact APAC chemical companies’ reports Frost & Sullivan

20 February 2012

Demand for the global chemical industry will be impacted by the EU debt crisis, sluggish economy in the USA and credit restrictions in China while increasing crude oil process will impact its margins.

According to Balaji Capaloor, principal consultant for Frost & Sullivan’s Chemicals, Materials & Food practice, most of the chemical companies in Asia cater to domestic demand; the majority of products are focused on domestic consumption. "The state of the USA economy and EU debt crises will not have significant impact on the operations of Asian chemical companies,” he said.

Revenues of the top 35 global chemical companies increased on average by 11.3% in the 3rd quarter, 2011 yr-on-yr and for the first nine months increased by 17.8%. Comparatively, revenues for these companies in Asia increased by 12.9% and 18.6% in Q3 and for the first nine months in 2011 yr-on-yr.

"While revenues for global and Asian chemical companies in the third quarter have softened compared to the first half of the year, the double digit growth is mostly due to the increase in price as chemical companies have passed on the increase in cost of the raw materials. Volume growth was around 5% on average,” explained Balaji.

Key global chemical companies have aligned their long term growth strategy based on trends that have impacted them, globalisation and sustainability.

"Globalisation positively impacts Asian chemical industry with more companies shifting their production to Asia. It also provides the opportunity for Japanese and Korean chemical companies to acquire assets in the USA and Europe,” said Balaji.
The continued focus on sustainability provides opportunities for chemical companies through high growth markets such as photovoltaics, wind turbine and biofuels as well as the growth of biochemicals and bioplastics markets.”

Around the Asia Pacific region:

Singapore: Revenues of the chemical industry are dependent more on the demand from the Asian countries than from Singapore. Growth in demand for chemicals from China, South East Asian countries especially Indonesia and India, is a key driver for growth.

Japan: As the Japanese yen continues to strengthen, Japanese companies are considering relocating production to other regions. The key challenge for the Japanese chemical companies will be to move their production nearer to their customers.

Thailand: Floods have disrupted the end-user industries as well as the demand for chemicals. However, it is expected to smooth out by Q2, 2012. Architectural coating and plastics for moulders of electrical and automotive components will experience an increase in domestic demand as consumers replace and repair products damaged by floods.

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