BASF, Dow again lead CW specialties ranking
3:58 PM MST | December 9, 2013 | —Vincent Valk
BASF tops the league tables for specialty chemicals sales in 2012, as the top company in CW’s Billion-Dollar Club once again is the biggest specialty chemicals company. The top-five specialties companies by sales—BASF, Dow Chemical, AkzoNobel, DuPont, and Evonik—remained the same as last year (table).
Further down the list, some changes were afoot in 2012. The acquisition of oilfield chemicals firm Champion Technologies pushed Ecolab past Japan’s DIC to become the largest pure-play specialties firm. Eastman Chemical’s specialties sales nearly doubled year-on-year largely because of the acquisition of Solutia, which closed in January 2012. Meanwhile, DuPont’s divestiture of its automotive coating business pushed down specialties’ sales.
“Industry consolidation accompanied by cost reductions through site rationalization and overhead expense reductions while increasing market shares” are important motivations for M&A, IHS Chemical says. Medium-size pure-play specialties companies, such as DSM and Clariant, “are especially challenged because they cannot compete in cost and vertical integration with larger, back-integrated companies and are vulnerable to inroads by smaller, highly focused companies,” IHS Chemical adds.
The top of the specialties ranking is, once again, dominated by large, diversified chemicals manufacturers—BASF, Dow, and DuPont—and paints and coatings firms—AkzoNobel and PPG. Ecolab, which is focused on institutional cleaning, water treatment, and energy; and Evonik, which is diversified across specialties sectors and has a relatively minor position in commodity chemicals, are the outliers at the top of the list.
Global specialty chemicals sales totaled about $450 billion during 2012, according to IHS Chemical. The industry is expected to grow at an average rate of 3.7%/year globally from 2012 through 2017 and 1.7%/year in the three large markets of North America, Western Europe, and Japan, IHS Chemical says. Those three represent 58%, or $282 billion, of global specialties sales during 2012 and are headquarter most of the sector’s largest companies.
The growth outlook for specialties, however, differs wildly by sector. Mining chemicals, forecast to be the fastest-growing specialty chemicals sector from 2012 to 2017, are expected to see volumes grow by 6.7%/year, IHS Chemical says. Meanwhile, imaging and photographic chemicals’ volumes are expected to decline by 8.1%/year in the same time frame. In addition to those segments, thermoplastics, nutraceutical ingredients, emission control catalysts, electronic chemicals, radiation curable coatings, and construction chemicals are expected to grow at 5%/year or higher through 2017; lubricating oil additives, toner raw materials, printing inks, and specialty paper chemicals are expected to grow at 2%/year or less during the same time frame, IHS Chemical says.
The high-growth segments have favorable outlooks “because the outlook for the corresponding end-use industries has brightened,” IHS Chemical says. “Segments such as cosmetic chemicals, flavors and fragrances, and nutraceutical ingredients owe their auspicious prospects to rising levels of disposable income in the developing world and renewed consumer spending” in mature markets.
In the stock market in 2012, specialty chemical companies did well, although not as well as other chemical stocks. The specialties segment of the CW 75 rose 19.3% during 2012 compared with a 24.8% increase for commodity manufacturers, a 23.9% increase for diversified chemical companies, and a 21.3% rise for the index as a whole. Specialty chemicals shares outperformed the S&P500, however, which rose 11.7% during 2012. The CW75 specialties index reached its 2012 peak at the very end of the year, on 31 December. Along with other chemicals’ shares and the stock market in general, specialties’ shares have accelerated their march upward in 2013, rising 21.3% year-to-date.
Large specialty chemical companies also fared well in the stock market during 2012. AkzoNobel shares were up about 32.6% on the year, and Ecolab shares rose 22.4%. Diversified firms with large specialties businesses, meanwhile, had mixed stock performances last year. BASF shares rose 32%, Dow shares were up 9.9%, and DuPont shares declined 2.3%.
Meanwhile, some specialties sectors are becoming more commodity-like, according to IHS Chemical. Adhesives and sealants, paints, plastic additives, paper and water treatment chemicals, surfactants, and lubricants are behaving more like commodities, with manufacturers raising prices in response to higher raw material, energy, and R&D costs, IHS Chemical says. Sectors such as food additives, flavors and fragrances, and electronic chemicals “can still be defined as classic specialty chemicals” in that “they are sold in relatively small quantities and are protected from pricing pressures because they represent a small percentage of the total cost of the final product,” IHS Chemical adds.
Specialty chemicals are “in transition,” according to IHS Chemical, as commoditization encroaches on some sectors and the growth focus shifts to emerging markets, such as Asia and Latin America. While the sector’s leading companies are still based in the developed regions of North America, Western Europe, and Japan, those companies are focusing on new development in emerging markets and eyeing acquisitions at home and abroad. Meanwhile, new competitors in emerging markets—especially China, which has publicly stated its intention shift its manufacturing emphasis to downstream, higher-value products—are looking to get in on the game. “As competition increases and mature products become commoditized, innovation remains one of the few sources of competitive advantage,” IHS Chemical says.