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The core of the specialty chemicals market is a combination of innovation and customer service. Environmental concerns and evolving customer needs will force the industry to innovate even further with novel solutions.

Specialty chemicals are generally defined within the chemical industry as niche chemicals and polymers with unique functions to enhance performance. They are used in a variety of industries, including waste water treatment, textiles, agriculture, oil and gas, electronics, and consumer goods.

Specialty chemicals are usually at the higher end of the chemical value-chain, and are used in smaller amounts compared with commodity-grade chemicals as only minute quantities are required to provide specific functionality and enhance performance.

Asia presents a unique challenge to the industry to keep up with the changing landscape of the market. The region recently displaced North America as the world’s largest specialty chemical market. It now accounts for more than 30 per cent of the global market and, according to market intelligence firm Datamonitor, was worth more than US$260 billion in 2010.

The core of the specialty chemicals market is a combination of innovation and customer service. Environmental concerns and evolving customer needs will force the industry to innovate even further with novel solutions.

Changing Face of Asian Chemicals Industry

New Asian consumer segments will create opportunities for chemical companies to expand and customise their offerings.

The importance of Asia to the specialty chemical industry cannot be underestimated. Asia’s large and growing middle class demands better crop yields, more consumer goods and electronics, and improved water treatment, all of which involve the design of advanced, cost-efficient chemical systems.

The continuing industralisation of Asia has also seen the rise of the manufacturing sector. This sector demands huge amounts of specialty chemicals to produce electronics, machinery and a vast assortment of other products both for use within Asia and for export.

These drivers mean that the Asian specialty chemicals industry could be worth more than US$360 billion by 2015.

China and India’s fast-growing chemical markets
According to The Economist, construction, car manufacturing, computers and cosmetics are thriving in China, and each relies on chemical inputs. At this rate, China could bypass the United States to become the world’s largest chemicals market as early as next year. As it stands, China already accounts for more than half of Asia’s chemicals sales. Datamonitor predicts that the market value of China’s specialty chemicals will increase by 44 per cent to US$81.6 billion from 2009 to 2014.

While base substances, such as petrochemicals and polymers, currently comprise the bulk of China’s chemicals market share, local demand for specialty products is rising exponentially. However, this demand is currently met mainly by multinational firms, rather than Asia-based companies. The vast majority of domestic companies are small firms producing one or two chemical products for consumption locally.

India holds equal potential and promise in the specialty chemicals sector. Exports of specialty chemicals from India are expected to grow to US$13 billion in 2013. The annual growth rate is 15% – almost double the growth of the global speciality industry. For the industry to succeed there, global consulting group McKinsey suggests that the sector needs to develop local products at the right price, use mergers and acquisitions and partnerships to grow, and build a strong value proposition to attract talent, among other factors. The global consulting agency has also urged the government of India to help facilitate success of the specialty chemicals industry.

These include:

  • Encouraging specialty chemicals companies to set up plants in Petroleum, Chemicals and Petrochemicals Investment regions
  • Upgrading chemical industries to address the talent shortfall and
  • Upgrading industrial training institutes

China and India, while not the most advanced Asian countries in terms of the specialty chemicals market, are becoming its largest consumers. These countries’ population sizes and economic growth have tremendously increased the use of specialty chemicals.

Asia’s advanced chemical markets: Japan and Singapore
Japan currently has one of the most advanced specialty chemicals industries in Asia. Flat screens, solar cells, and cell phones are contributing to Japan’s current success. Electronic-quality monosilane is particularly in demand in Asia for an increasing number of applications in thin-film photovoltaics, flat screens, and semi-conductors. Japan is also currently the most sophisticated single market for high-quality bio-plastics in the world and consumption there is expected to grow at a Compound Annual Growth Rate (CAGR) of nearly 50 per cent by 2015.

The outlook for specialty chemicals is also ripe with potential in Singapore. Singapore currently plays host to over 100 leading players such as 3M, Huntsman, DuPont and Evonik Degussa. Other notable industry leaders in Singapore include Clariant, a world leader in colours, surfactants and performance chemicals, and DSMY Dyneema, the global supplier of an Ultra High Molecular Weight Polyethylene (UHMW PE) fibre with versatile applications across industries.

As specialty companies move from developing products to solutions, Singapore’s ability to leverage its various research institutes for cross disciplinary research makes it a conducive location for R&D. The Institute of Chemical and Engineering Sciences (ICES), for example, is an autonomous national research institute that promotes industry relevant R&D through collaboration with companies. ICES works closely with companies to develop new products and innovative solutions to their problems.

Many specialty chemical companies are also strengthening their presence in the region, leveraging on Singapore’s well-developed capabilities and facilities. These include the country’s leading position in logistics, IP protection, access to global talent and fundamental R&D capabilities.

Innovating for Asia
The core of the specialty chemicals market is a combination of innovation and customer service. Environmental concerns and evolving customer needs will force the industry to innovate even further with novel solutions.

Specialty chemicals must handle the complex challenges of taking into account the needs and budget of the customer, while at the same time producing chemicals that comply with increasingly stringent regulatory and environmental standards. The safe manufacture, use and disposal of various types of chemicals is a growing concern among local, regional and national governments, and will continue to be a key concern for the specialty chemicals industry.

Demand for environmentally friendly solutions has also opened new opportunities for speciality chemical firms. The growth prospects for emission control catalysts is strong as automotive catalyst consumption has the potential to grow faster than actual automobile production in both developed and developing regions. More-stringent emission control legislation and an increased number of catalyst bricks in the catalytic converter, has spurred this demand. The two big waves of energy efficiency and climate control have also contributed to positive demand for specialty chemicals in the development of products such as photovoltaic solar cells, electrode materials, insulating materials and chemicals that reduce water intensity and improve energy efficiency of production processes.

Demand from end-user industries has increased growth prospects for several specialty chemicals segments in Asia – notably mining chemicals, specialty polymers, and electronic chemicals. The demand for oilfield chemicals is also increasing because of the fast-growing upstream activity in Asia. Specialty chemicals used during oilfield operations have a major impact on well performance and ultimate reserve recovery. Customized products that provide innovative solutions to problems encountered throughout the lifetime of a field are in high demand.

Asia’s growing middle class has also demanded greater variety, customisation and innovation from suppliers. New Asian consumer segments will create opportunities for chemical companies to expand and customise their offerings. From a company that used to produce in Asia for export to Western markets, DuPont has now stepped up production for local markets. In 1999, it acquired a South Korean firm that makes a product similar to Lycra that suits the South Korean market, and formed a joint venture with Japan’s Toray Industries to build three Lycra plants in Singapore to supply Asian consumer demands.

Understanding the importance of innovation, more companies are establishing R&D facilities in Asia in order to be closer to the growing markets they serve. Clariant and DMSY Dyneema both have innovation centres located in Singapore. Clariant relocated its global textile application technology laboratory to Singapore, to develop new solutions based on sustainable chemistries. With more than 60 per cent of global textile production in the Asia Pacific region, the senior Textile Chemicals management team will be located in Singapore to strengthen customer relationships and oversee the company’s strategic priorities. Clariant’s Singapore head office also hosts the SAP Competence Centre for Asia. Another industry player, DSM Dyneema, launched a S$8.9 million APAC Technical Centre in Singapore in 2011 to house the region’s first independent ballistic-testing centre with technology that will drive DSM Dyneema’s innovation activities in Asia-Pacific.
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