Key Issues for Specialty Chemicals in the Next Five Years


Dec. 4 2020, Updated 10:53 a.m. ET

A brief history

Despite being characterized as an industry that sells differentiated products, when it comes to innovation, a quantum shift is no longer a reality in specialty chemicals and materials (VAW). When the industry entered its mature phase in the mid-1990s, innovation was more and more being characterized by incremental change rather than a quantum leap. This was accompanied by Asia gradually replacing North America as the fastest-growing region and by North American companies deriving more and more of their revenues outside their home markets. But while we continue to see a continuation in some of these trends, some new trends have also caught on.

Article continues below advertisement

Growth in Asian countries

Rapid industrialization in large economies like China and India in the past two decades has given a spurt in demand for specialty chemicals from end markets in the automobile, electronics, machinery, and other manufacturing industries. Given the size of the region’s population, its rising middle class, its high percentage of younger demographics (especially in India), and its consumer’s appetites for consumption, Asia is frequently touted as the region with the highest growth potential for the specialty chemicals industry (XLB).

That said, while China and India are voracious consumers, these regions cannot be described as advanced producers. Therefore, advanced specialty chemical companies have been collaborating with local end markets and producers in order to capitalize.

Rising M&A

The number of deals and volumes of transactions have been rising consistently since 2012, driven by the consolidation of existing market position and investments in private equity and regional expansion plans. Within the United States, activist investors such as Nelson Peltz for Dupont (DD), Dan Loeb for Dow Chemicals (DOW) and Barry Rosenstein for Ashland (ASH) have played key roles in portfolio restructuring exercises, resulting in the divestment of businesses not seen as the core of these companies.

In the next and final part of this series, we’ll look at the role of environmental regulations in the business of specialty chemicals companies.


More From Market Realist

    • CONNECT with Market Realist
    • Link to Facebook
    • Link to Twitter
    • Link to Instagram
    • Link to Email Subscribe
    Market Realist Logo
    Do Not Sell My Personal Information

    © Copyright 2021 Market Realist. Market Realist is a registered trademark. All Rights Reserved. People may receive compensation for some links to products and services on this website. Offers may be subject to change without notice.