The global chemicals industry registered decelerating growth in 2009 due to recession. Production contracted, as demand from major end-use markets such as construction, automotive, and electronics dropped drastically. Faced with declining demand, chemical producers slashed production, while several plants were either shut down or operated at lower rate to cut costs. Though the economy began recovering from late 2009, chemical production continues to be far below the pre-recession levels.

Developing economies fared better compared to the relatively mature economies during the recession. The recession led to a distinct structural shift in the global chemicals industry, as production units moved towards Asian countries and new growth markets emerged. As a result, future growth is anticipated from chemical producers in Asia, Middle East and Latin America, in particular China, Brazil, India, and Korea. Several European and US companies are increasingly setting up or transferring production bases to low-cost locations. The change is also driven by the increasing emphasis of US, Japanese and European companies on speciality chemicals rather than bulk/commodity chemicals segment, as part of efforts to compete with low cost manufacturers by moving up the value chain.

The chemical industry is home to an assorted group of players ranging from petroleum companies to consumer product companies. The industry is increasingly becoming globalized and concentrated with a few but large producers. The recession’s impact was also felt on the global chemical majors, with the leading 10 chemical companies witnessing negative or flat revenue growth during the period 2008-2010. The industry is witnessing intense consolidation, as players look to establish economies of scale in supply-chain management and operations.

While chemical companies from emerging markets focused on transformational M&A transactions, established players opt for transactions that facilitate portfolio optimization. China is emerging as a major player in the global chemical industry primarily due to the large affluent middle class population, rapid urbanization trend, and supportive government policies. The country is becoming a favored destination for global and regional chemical majors due to its manufacturing capabilities and low cost of labor.

The Middle East is another potential growth region, which is presently witnessing enormous investments, new capacity additions, and intense M&A activity. The region holds an edge due to the low cost of hydrocarbon feedstock resulting from its widespread access to crude oil reserves.

Specialty chemicals segment is expected to report substantial growth in near future. Factors such as emergence of new end-use applications, expanding scope of various applications, and emphasis on innovations for producing safe and efficient chemicals favor segment growth. The market however faces challenges due to environmental concerns, rising raw materials prices, and regulatory issues. Specialty chemicals market is predominated by the presence of the large players with vast portfolios and modern technology, such as Dow Chemicals, DSM, DuPont, Akzo Nobel, and BASF, among others. These players are focused on M&A strategy to gain multi-chemical capabilities. In majority of the specialty chemical markets, price decline is being witnessed due to the growing volumes and shifting of production facilities.