Trends in the U.S. specialty chemical products industry

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  • Published date: March 19, 2021
    • Bahadurgarh, Haryana, India
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Chemical producers across the U.S. are slowly and steadily moving away from commercialized and price sensitive chemicals to small volume, high value and high profit specialty chemical products. The more value added, the greater the profit. Although daily chemicals continue to dominate, in the future, specialty chemicals will become the pillar of the whole chemical industry. The large-scale expansion of specialty chemicals brownfields throughout the United States is undoubtedly an indicator of this new trend.

After several years of depression, the U.S. chemical export industry is recovering. This is good news for purchasing and logistics. Overall, the US chemical industry has been growing since 2016, supported by the solid performance of the specialty chemicals sector. Looking ahead, the industry is expected to achieve a growth rate of about 4% with the support of the special and performance chemicals industry. This has led to a shift in the trend of more and more manufacturers turning to the production of specialty chemical products and gradually moving away from commercialization. A major advantage for the United States is that they have an advantage in obtaining cheap and abundant natural gas supplies, which will continue to offset significant resistance in the value chain.

Although basic chemicals in the United States benefit from the advantages of shale gas, they are restrained by the weakness of manufacturing and export markets. However, with new capacity for olefins and other basic commodities coming into operation soon, it is expected that by the end of 2019, production will grow by about 4%, more than 6%, which may lead to overcapacity.

Special chemicals are niche chemicals with special functions to improve performance. They found applications in several industries, such as oil and gas, water management, paint and coatings, textiles, agriculture, chemical formulations and electronics.

By the end of 2017, production of specialty and performance chemicals is expected to grow by about 3%, compared with less than 1% before 2015. The recovery of the oil and gas industry will be a major demand boost. With Trump's new policies in favor of domestic manufacturing in the United States, the United States will continue to be a place for enterprises to invest.

According to the latest statistics, in the past seven years, nearly 85 billion US dollars of new projects have been launched in the United States, and another 90 billion US dollars of investment is in the pipeline in the next five years. From a demand perspective, many specialty chemicals manufacturers are facing increasingly complex issues as customers need niche products that are suitable for specific downstream uses and / or comply with local regulations.

What does this mean? It will affect the customer's purchase demand. At the same time, specialty chemical products manufacturers need to find the right way to operate their asset heavy and stubborn production systems in a profitable way to adapt to the changing demand environment. In addition, the change of demand pattern also promotes the new strategy of special chemicals. According to the latest benchmark data, only 6% of the chemical enterprises in the world are considered as purchasing leaders, while 85% of the enterprises have room for improvement in purchasing. This means that less than one in 15 chemical enterprises take procurement seriously.

Overall, we expect 2017-2022 to be a strong period for specialty chemicals in the United States. Building chemicals and specialty polymers will be the growth pioneers, followed by the demand for high-performance chemicals widely used in the electronics industry. These market segments will account for nearly 40% of the market share. In some market segments, there will be some high growth areas, while the bulk chemicals market will shrink. However, on the whole, these five years will be very positive for the chemical industry in the United States, both from the domestic and export perspectives.

For special chemical enterprises, procurement expenditure will continue to account for 40-60% of the total sales revenue, while for bulk commodity enterprises, procurement expenditure will continue to account for 60-80% of the total sales revenue. Price fluctuations will continue to affect profitability, and uncertainty will continue to become the new normal.

From the supplier's point of view, the next few years will be full of commercialization, volatility and M & A challenges. The three specific issues that will dominate the supply market space are business mix collaboration, productivity / efficiency and innovation, and the need for enterprises to move towards digital maturity.

From the buyer's point of view, the commodity market will become cheaper, while specialty chemical products will continue to become more expensive in the long run. Finally, the market will shift from localization to globalization.

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