BASF, Dow again lead CW specialties ranking

21:38 PM | 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.

Specialties leaderboard
(sales in millions of dollars)
Company specialty sales % chemicals sales Country chemical sales
BASF $42,311 55% Germany $76,655
Dow Chemical 19,674 35 US 56,786
AkzoNobel 18,639 92 Netherlands 20,343
DuPont 14,256 41 US 34,812
Evonik 13,258 74 Germany 18,015
Ecolab 11,839 100 US 11,839
Bayer 11,519 43 Germany 26,880
PPG Industries 11,278 74 US 15,200
3M 10,346 100 US 10,346
Syngenta 10,318 73 Switzerland 14,202
Henkel 10,239 100 Germany 10,239
DIC 7,891 100 Japan 7,891
DSM 7,805 65 Netherlands 12,069
Arkema 6,594 78 France 8,453
Honeywell 6,184 100 US 6,184
Lubrizol 6,100 100 US 6,100
Merck KGaA 5,647 100 Germany 5,647
Clariant 5,627 85 Switzerland 6,611
Solvay 5,291 32 Belgium 16,437
Toray Industries 5,232 29 Japan 18,124
Huntsman 5,142 46 US 11,187
Shin-Etsu 4,969 46 Japan 10,909
Ashland 4,940 60 US 8,206
Wacker Chemie 4,801 78 Germany 6,127
Momentive 4,756 67 US 7,113
Givaudan 4,661 100 Switzerland 4,661
Axalta 4,300 100 US 4,300
Avery Dennison 4,255 100 US 4,255
Sherwin-Williams 4,119 43 US 9,534
RPM 4,079 100 US 4,079
Valspar 3,782 94 US 4,021
Monsanto 3,715 28 US 13,504
Eastman Chemical 3,324 41 US 8,182
Lonza 3,225 75 Switzerland 4,298
Firmenich 3,165 100 Switzerland 3,165
WR Grace 3,155 100 US 3,155
Kansai Paint 3,127 100 Japan 3,127
Mitsui Chemical 3,014 17 Japan 17,546
Johnson Mathey 2,896 100 UK 2,896
FMC 2,678 71 US 3,748
Based on exchange rate of $1=€0.75654, 0.91332 Swiss francs, and £0.6185 as of 31 December 2012. $1=¥94.3 as of 31 March 2013. Source: CW, Company reports.