Specialty Chemicals Market Is Generating Revenue Of 3.9 billion by 2027

Posted by pooja on December 1st, 2020

The COVID-19 outbreak brought the world to a stop for months as many countries used nationwide lockdowns as a measure to prevent the spread. The impact of the spread and imposed lockdowns can be seen across all the sectors around the globe. Among those sectors is a small yet a very important sector, specialty chemicals. Specialty chemicals is a vital part of chemical industry. The share of specialty chemicals in chemical industry is significant and the industry was growing exponentially as it had increased demand from various end-use sectors. However, the COVID-19 has impacted the growth for the same. There are some specialty chemicals such as disinfectants that saw increased demand for urgent need all over the world. But same cannot be said for other uses of surfactants that are used in building and construction industry.

From last few months, the chemical industry was going through a lot that includes, coping with safe work practices, supply chain disruption, financial obligations, and so on. Due to the nature of the industry being an essential part of the daily life, the production for many chemicals continued. The basic necessities that involved use of chemicals became the reason for the production houses to continue. Many international and local manufacturers increased production capacity of urgent products such as sanitizers, disinfectants, and PPE kits. There were even donations made by several organizations. The major players in the specialty chemicals industry are BASF SE, Dow, Inc., Solvay SA, SABIC, Evonik Industries, Tata Chemicals, Mitsubishi Chemical corporation, Lanxess AG, LG Chemicals, Clariant AG, Bayer AG, AkzoNobel N.V., Huntsman Corporation, Croda International, Gujarat Fluorochemicals, Dupont, Sumitomo Chemicals, and many others.

Impact of COVID-19 on several industries in context with Specialty Chemicals

Specialty chemicals are used in many industries such as packaging, food & beverages, building & construction, electronics, health care, personal care, automotive, cleaning, agriculture, cosmetics, paper, and others. Packaging industry saw a decrease in the demand in the initial stages of lockdown, however with permissions for essential goods and services, the demand gradually increased and thus the impact of COVID-19 on the packaging industry is considered in context to specialty chemicals. According to Chemical Activity Barometer (CAB) an economic indicator created by American Chemical Council (ACC), the global production of specialty chemicals declined by 5.0% at month on month basis for the month of February and 3.0% in the month of March.

Electronics industry saw a huge increase in demand for electronic items majorly due to changed working environments, online teaching and others. However, the imposed shut downs by government for non-essential products did impact the industry. The industry also faced the logistics and manufacturing challenges, but was mostly spared from any large level impacts. The demand of wet chemicals, coatings, and sealants used in electronics has resumed. The electronics industry had a medium impact on specialty chemicals.

Building & construction industry was hugely impacted and still continues to face slow down as the industry has not resumed at large levels. The impact on the construction industry will last for a long time. The specialty chemicals used are surfactants, insulation foams, asphalt emulsion, water-proof coatings, concrete mixes, and others. There has been halt in construction of various projects that involves recreational, sports, entertainment, leisure activities as companies are faced with various financial obligations, and thus investing millions and billions in such projects is declining. Thus, the most impact on specialty chemicals comes from this industry. Same situation is faced by automotive industry. Automotive sector was already in decline before the pandemic. The pandemic caused additional stress to the sector and thus, had huge impact on specialty chemicals.

Personal care, health care, and cleaning industry had a positive impact of COVID-19 as there was increased demand for disinfectants, sanitizers, and cleaning agents. Many companies mass produced these products to meet the sudden and urgent demand for them. The main demand came from healthcare and households. The demand for sanitizers in the month of January alone increased by 1400%. Several companies pledged to donate mass produced sanitizers and disinfectants. Many companies took on the opportunity and entered into the specialty chemicals business. Active pharmaceutical ingredients also saw an increase in demand, thus leaving behind positive impact on specialty chemicals industry.

Expectations from Specialty Chemicals

The economies are slowly and gradually re-opening. The countries are lifting shut down imposition in staged manners to continue several operations with intention to revive the fallen economies and simultaneously maintaining the precautions & minimizing the spread. Some countries have resumed full-fledged operation in all sectors whereas, some countries are still dealing with peaking numbers of positive cases hence, only essential sectors are permitted to operate. Specialty chemicals are used in various sectors that have different range of impacts on the industry. Thus, it is tough to estimate a certain impact. However, it can be said that the correction will take at least 2 to 3 years. There are certain industry sectors that had positive impact but the negative impact is far more in comparison to them. Thus, it can be said that the specialty chemicals industry has low to medium range of impact of COVID-19. In general, the demand for specialty chemicals will rise gradually. However, the sectors that are impacted by macro factors will take longer time to come back to normal. 

There are certain geopolitical instabilities that affects the industry. For example, China met over 35% of global demand for specialty chemicals. However, the origin of the virus and failure of the Chinese government to control the spread initially led to disruption in demand supply chain globally as major parts of end-user depended on Chinese manufactures owing to imposed lockdowns. The sudden disruptions and huge impacts on various economies led the companies to rethink the dependence on China and thus, many companies announced shift from Chinese manufacturers to other countries. For example, Indian and Brazilian specialty chemicals manufacturers saw an increased demand. Moreover, the rising tension across line of actual control (LAC) between India and China will also impact the market as both are major economies of Asia and have significant role in global specialty chemicals industry.

The companies across the globe are rethinking about the manufacturing bases, investment markets, feasibility of markets, favorable government policies, and others factors to shift the production bases, raw material suppliers, and other supply chain factors. Moreover, chemical companies grow through various strategies such as business expansions, and new ventures but there will be reduction in such activities as the companies will delay investments in large project. Moreover, the companies will invest towards strengthening supply chain by minimizing dependencies on outer sources. The digitalization will certainly grow in the specialty chemicals industry.

The companies need to invest in downstream activities to decrease dependency. Maintaining strong relationships with the customer by offering technical supports and meeting specific demands will help companies to survive the current situation. Specialty chemicals industry require a strong R&D base which will further help in the post-pandemic situation. Moreover, new application of the chemicals will open a new segment and market for the industry creating great opportunities.  

In conclusion, the specialty chemicals industry suffered medium to large impact of COVID-19. The companies involved will need to be prepared and cope-up with drastic changes that have come with the pandemic. The changes in working methods, work environment, supply chain stages, and uncertain market situations will challenge the companies on various levels. Government bodies across the world have also announced various measures to help the sectors with many relaxations and investments in order to revive the industry.

Post COVID-19 Scenario

The industry will undergo several structural changes in context with cleanliness & hygiene, sustainability, raw material sourcing, manufacturing, supply chains. Moreover, the companies are engaged in improving liquidity, manage working capital, manage expenditures, and such. Focused implementations regarding safety and health of the employees across all domains is need of the hour. The management is faced with tough decisions during the pandemic times and go on making fundamental changes. Also, the company needs to be clear about the changes being made are to be temporary or permanent. However, the industry is expected to undergo several changes that will remain for long time.

Strategies such as end market positioning, regional positioning, supply chains, and liquidity. The companies need to find new applications for the various specialty chemicals and offer customized products to fulfil the specific requirements. The companies need to reposition and re-establish themselves in various regional markets to strengthen their presence. Also, increasing product depth in the product portfolio can be a way to sustain the post-COVID impact. Agriculture, packaging, healthcare, cleaning, water treatment, personal care, and consumer electronics sectors will drive the industry towards positive growth.

Recent News in the Specialty Chemicals Industry during Pandemic

Rossari Biotech, that made a stellar listing in July this year, reported a 14.4 per cent (y-o-y) drop in the overall topline numbers in the first quarter of FY21. This was because about 53 per cent of the company’s product portfolio comes from textile specialty chemicals and animal health and nutrition segments. In the June quarter, these segments reported a 67.8 and 31.1 per cent decline (y-o-y), in revenues, respectively.

In a recent news, Petronas Chemicals Group Berhad (PCG) signed a deal to acquire 50% in PCC SE’s Malaysian subsidiary for jointly producing specialty chemicals.

Aceto Corporation acquired Syntor Fine Chemicals which offer specialty fine chemicals for pharmaceuticals and other life sciences.

Rusmar Inc. a subsidiary of CCR Specialty Chemicals, LLC acquired NCM Odor Control, Inc.

SK Capital Partners, LP signed an agreement to acquire the specialty polymers business from Baker Hughes.

Solenis LLC acquired completed its acquisition of Chemsystems’ paper business.