Sustainable Value Creation in the Fine and Speciality Chemicals Industry

R. Rajagopal

• Publisher: Wiley
• Year: 2014
• Print ISBN: 9781118539675
• eBook ISBN: 9781118677896
• Edition: 1
• Topic: Physical Sciences
• Subtopic: Industrial & Technical Chemistry

The global fine and speciality chemicals industry is a vital segment within the chemical value chain,
catering to a multitude of societal and industrial needs. Regulatory, sustainability and consumer forces have been constantly shaping the business fundamentals of this industry. Developing value creation strategies, which embed economic, environmental and social sustainability components, will need a comprehensive assessment of business, scientific and technological challenges facing the industry.

Sustainable Value Creation in the Fine and Speciality Chemicals Industry assesses sustainable value creation options against the backdrop of global mega trends that are defi ning the present and future course of the industry. It discusses innovative strategies in feedstocks, R&D, technology, manufacturing, resource management and the supply chain as well as the significance of the bio-based chemical economy in enabling sustainable value creation in the fine and speciality chemicals industry.

Topics covered include:

• Transformation in the fine and speciality chemicals business
• Sustainable management: evolution, transitions and tools
• Research and technology directions
• Resource optimization strategies
• Bio-based chemicals, specialities and polymers
• Sustainable practices in the fine and speciality chemicals industry
• Sustainable value creation strategies

Sustainable Value Creation in the Fine and Speciality Chemicals Industry presents a comprehensive
overview of strategic options for sustainability management in the global fine and speciality chemicals industry. It will be a valuable resource for chemists and chemical engineers involved in the design and development of economically, environmentally and socially sustainable practices for the future.

1
Transformations in the Fine and Speciality Chemicals Business

1.1 Fine and Speciality Chemicals Industry Structure

Rapidly changing demographics, global trade and labour patterns, increasing technological obsolescence combined with stringent environmental regulations and consumer pressures pose both short and long term challenges for the fine and speciality chemicals industry. Globally four macro trends influence the course of this industry – global population, climate changes, urbanization and food security. The demographic changes and the shift of power from West to East have also led to a different set of realities. The chemical industry and, in particular, the fine and speciality chemicals industry is passing through a challenging phase with margin squeeze, loss of consumer market and economic slowdown in Asia Pacific, Latin America and South Asia – some of the fastest emerging markets.

The end-use markets are today subjected to a wide range of global and regional regulations and product protocols. Across diverse segments of economy – oil and gas, life sciences, electronics, information technology (IT), construction, materials, energy, mining and agriculture – there is a high dependence on fine and speciality chemicals. The value proposition that these performance chemicals offer is equally matched by growing concerns about their manufacture, use and disposal in a safe manner.

Technology and market shifts within the end use segments are radically influencing the way fine and speciality chemicals are being designed, developed and taken to the market place in sustainable ways. Through the last decade rapid technology obsolescence and advances within the end use markets have been matched by innovative responses by from the fine and speciality chemical industry in product development, operational models and business structures. However, these have come at a high cost for the industry due to high costs of energy, feedstocks security, research and development (R&D) and, more importantly, the prohibitive costs related to meeting climate change and sustainability mandates. Notwithstanding its importance to all sectors of the economy and significant progress made, the chemicals industry still faces a real concern over a shrinking resource base and increasingly negative climate change impacts.

These factors have been pushing the chemical industry and, in particular, the fine and speciality chemicals industry to seek new growth options. At an operational level the industry has resorted to rationalization of cost structures across diverse business functions through integration of new technologies, manufacturing models and novel feedstocks. Leveraging the potential of newly emerging chemical technologies while aligning with global sustainable development mandates has been a guiding force for the industry.

1.1.1 Global Chemical Industry Trends

The world chemical industry value chain from oil and gas in the ground to high value specialities in our personal lives has witnessed defining changes in business, financial, technology, manufacturing, marketing and supply chain models. Since the 1990s the industry structure has been continuously changing due to shutdowns, consolidation and mergers and acquisitions (M&A). To a great extent these shifts have been driven by slowly falling margins, volatility in oil and gas prices, increasing energy prices and shifts in market geographies. These have been complemented by shifting consumer preferences for environmentally benign products and stringent regulatory mechanisms.

There have been some defining changes in the global chemical industry with new feedstocks, both renewable and fossil based, forcing a rethink on the future of the chemical economy. The Middle East (ME) region with oil reserves dominated the 1970s to 1990s, while the last decade saw a shift of chemical hubs from the ME to the Americas and other parts of the world with shale gas finds. This shift is bound to alter the dynamics of global chemical and fine chemical industry in several ways. With a new-found edge in feedstocks coupled with tremendous technology capability across the entire spectrum of the chemical businesses the West is bound to emerge as a major force in the future and in the process alter the industry structure.

It has been a story of rapid growth for the chemical industry which was once valued at US$171 bn in 1970 to a staggering US$4.2 trillion in 2010 (Davis, 2009). Such growth has been mainly driven by the rapid expansion of the Chinese chemical industry from US$100.4 bn in 2000 to US$900.3 bn in 2010. During the 2000–2010 period while India grew at around 14% and China at around 24% respectively, growth had levelled out at 5–7% in Japan, the United States and Germany (American Chemical Council (ACC), 2011a). According to the Organization for Economic Co-operation and Development (OECD) projections, developing nations will account for 30% of global production and 33% of consumption by 2020 (OECD, 2001), which is in alignment with projections by the American Chemical Council for China at 10% y/y and India at 8%, in contrast to growth rates of under 4% in the United States, Canada and Europe (Swift et al., 2011). Between 2000 and 2010 BRICS (Brazil, Russia, India, China and South Africa) saw a doubling of chemical sales from 13 to 28% of global sales. This period also saw mega scale chemical facilities and infrastructure being set up in China, India and Brazil (OECD, 2011). Africa is poised to make its mark in the global chemical arena with increasing growth from the sub Saharan and North African regions. With a rise in living standards, governance and investment in oil and gas sectors the signs of emerging chemical markets are clear. Demand for pharmaceuticals, speciality consumer chemicals, electronics, clothing, etc., are likely to drive growth (Manda and Mohamed-Katererem, 2011).

1.1.1.1 Macro Trends Shaping the Fine and Speciality Chemicals Industry

Growth in the end-use industries, novel applications, focus on innovations and sustainability remain the key drivers for the fine and speciality chemicals market. The global fine and speciality chemical industry is governed and driven by macro level determinants, which are likely to shape the industry in the coming years (see Figure 1.1).

Figure 1.1 Mega trends influencing the fine and speciality chemicals industry

Meeting these needs will need companies to look for innovative and sustainable options in R&D, manufacturing, supply chain and business strategies. Newer opportunities from energy, materials and health care are likely to emerge. These will call for multitechnology and market platforms. Investments in new products, global service platforms and in innovative R&D programmes are poised to increase in the next few years.

With Asian growth slowing down Western firms that had invested for a long time in Asia have been facing a tight margin crunch. Operational models that were easy to adopt in developed nations needed a lot of modification to synergize with Asian regional realities, leading to customized region or country specific models (Verity et al., 2013).

1.1.1.2 Consolidation Continues

The fine and speciality chemicals industry is a complex and dynamic industry that is always in a state of perpetual transition. Uncertainties abound in this sector due to ever changing business structures and market fundamentals. Besides the impact of sharp decreases in sales and profits, producers have been grappling with challenges of demand shifts, margin squeeze and product protocols in regulated markets. These trends are compounded by the slowdown in life sciences, automotive, construction and other user segments that have a high level of fine and speciality chemicals comp...

Table of contents

• Cover
• Titlepage
• Copyright
• Dedication
• Contents
• Foreword
• Preface
• Acknowledgement
• About the Author
• 1 Transformations in the Fine and Speciality Chemicals Business
• 2 Sustainable Management: Evolution, Transitions and Tools
• 3 Research and Technology Directions
• 4 Resource Optimization Strategies
• 5 Bio-Based Chemicals, Specialities and Polymers
• 6 Sustainable Practices in the Fine and Speciality Chemicals Industry
• 7 Sustainable Value Creation Strategies
• Index