Globalisation Trends and Their Impact on the Chemical Industry

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Globalisation Trends in:
Transportation
Utilities and Construction
Health, Nutrition & Personal Care

and their Impact on the Chemical Industry

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Globalisation Trends and Their Impact on the Chemical Industry

  1. 1. Globalisation Trends and their Impact on the Chemical Industry by Frost & Sullivan's leading Chemicals & Materials analysts: Brian Balmer, Robert Outram, Leo Dokos and Chris Shanahan
  2. 2. Focus Points <ul><li>An Overview of Globalisation Trends impacting the Chemicals & Materials Industry </li></ul><ul><li>Globalisation Trends in Construction & Utilities </li></ul><ul><li>Globalisation Trends in Transportation </li></ul><ul><li>Globalisation Trends in Health, Nutrition & Personal Care </li></ul><ul><li>Conclusions </li></ul>
  3. 3. An Overview of Globalisation Trends Putting &quot;Global&quot; in Context
  4. 4. Globalisation in Context Frost & Sullivan's assessment of the key megatrends for 2010 Globalisation Health & Wellness Low Carbon Economy Functionality & Performance
  5. 5. Globalisation in Context What did our clients say?
  6. 6. What is Globalisation? Geographic expansion opportunities for Western companies and brands Population movements - in particular Urbanisation Global Demographic Change New competitors from Asia The increasing need for food and land on which to produce it Intensive & unsustainable agriculture causing desertification Pressure on land use e.g. to build homes on flood plains Global Competition Global Communication Population growth Global aspiration to live to &quot;Western&quot; standards
  7. 7. Globalisation Statistics 3% of the world's population lived in cities in 1800 47% in 2000 67% forecast for 2025 (UN) Total population in 1900: 1.65 billion In 2000: 6.1 billion UN's &quot;Medium&quot; 2050 forecast: 8.9 billion Africa's population to more than double between 2000 and 2050
  8. 8. Chemical Industry Regional Shifts in the Balance of Power <ul><li>Past decade has seen some movement in the base of the companies in the global top 25 of chemicals producers </li></ul><ul><li>Main change in this time has been the growth in a few specific companies: </li></ul><ul><ul><li>Sinopec: 25 th to 8 th </li></ul></ul><ul><ul><li>Sabic: 26 th to 7 th </li></ul></ul><ul><li>US and European companies have in the same period massively increased their presence in Asia and other regions </li></ul>
  9. 9. What does it mean for Chemicals? <ul><li>Health, Nutrition & Personal Care </li></ul><ul><li>Will the growth markets of India & China continue to crave &quot; Western &quot; luxuries such as personal care and cosmetic goods? </li></ul><ul><li>Will their ethnicity affect the design and formulation of these products? </li></ul><ul><li>Transportation </li></ul><ul><li>Will the auto industry move production to global centres such as Chennai? </li></ul><ul><li>Will global trade patterns change the way other raw materials and consumer goods are shipped around the world? </li></ul><ul><li>Construction & Utilities </li></ul><ul><li>How can we maintain a healthy urban environment as cities get bigger and bigger? </li></ul><ul><li>Will electricity distribution become globalised as centres of sustainable energy generation are linked to large urban centres of demand? </li></ul>
  10. 10. Globalisation Trends in Construction & Utilities and their impact on Chemicals & Materials
  11. 11. Challenges and Barriers to Globalisation Globalisation Global Market Challenges Energy Security Climate Change & Global Warming Safe Drinking Water Barriers to Globalisation Fiscal Legal Cultural Infrastructure & Operational Intellectual Property Cost Competitiveness & Demand Pattern Housing & Infrastructure Growing Global Marketplace
  12. 12. Globalisation and Global Challenges Energy Security <ul><li>Indigenous supply that hedges against geopolitical risks </li></ul><ul><li>Addresses growing global energy demand – 45% increase by 2020 </li></ul>Climate Change & Global Warming Cost Competitiveness & Demand Pattern <ul><li>Kyoto Protocol: CO 2 emissions to reduce by 5.2% of 1990s level by 2012 </li></ul><ul><li>EU: 20% of renewable energy by 2020 </li></ul><ul><li>USA: 22 States with 10% to 20% RPS (Renewable Portfolio Standards) mandates </li></ul><ul><li>China: 100,000MW from renewable energy sources by 2020 </li></ul><ul><li>India: 10 States with 2% to 10% RPO (Renewable Purchase Obligation) mandates </li></ul><ul><li>Further cost reductions are required </li></ul><ul><li>Stable lifecycle power costs </li></ul><ul><li>Demand pattern for chemicals and materials in Construction & Utilities has changed the last 10 years </li></ul>Housing & Infrastructure <ul><li>Affordable residential housing </li></ul><ul><li>Energy efficient buildings </li></ul><ul><li>Infrastructure development in emerging regions and countries </li></ul>Safe Drinking Water <ul><li>Provision of safe drinking water (and wastewater treatment) </li></ul><ul><li>Competition with other industries for the use of raw materials and chemicals </li></ul>
  13. 13. Globalisation: 2009 was a Difficult Year for Renewable Energy Worldwide… <ul><li>2009 was a difficult year for renewable energy exhibiting a slowdown due to: </li></ul><ul><ul><li>financial turmoil curbs investment </li></ul></ul><ul><ul><li>high interest rates </li></ul></ul><ul><ul><li>shattered investor’s confidence </li></ul></ul><ul><li>A repeat of the 1970s and 1980s scenarios when investment in the renewable energy ceased after the oil prices collapsed is highly unlikely: </li></ul><ul><ul><li>oil prices are unlikely to fall to the 1990 level </li></ul></ul><ul><ul><li>renewable energy is much more mature now than 20-30 years ago and is able to deliver power nearly at the same cost as the conventional power sources </li></ul></ul><ul><ul><li>renewable energy is a major tool in curbing the CO 2 emissions and many governments around the globe have reiterated their will to support the industry through the hard times </li></ul></ul>Positives Negatives Lower raw materials and equipment prices (steel, other metals, polysilicon) Difficulties in obtaining credit and turning to public markets; high interest rates Project valuations back to reasonable levels, good time to invest or buy Tighter budgets, slowdown in asset finance Strong players get stronger, trim costs, enhance their proposition Fiercer competition, price wars, shrinking profits
  14. 14. Globalisation: The Demand Pattern is Changing… <ul><li>The US and Europe were the only two major global markets for chemicals and materials in construction and utilities in 1990 </li></ul><ul><li>China, India, South Africa and Brazil were important regional markets but on the global landscape the volumes sold never came close to the EU and US </li></ul><ul><li>As a result Western companies did not focus heavily on that region </li></ul><ul><li>China has become one of the leading markets for chemicals and materials in construction and utilities importing raw materials </li></ul><ul><li>The global demand for chemicals and materials utilised in the construction and utilities sectors is no longer concentrated in the West </li></ul><ul><li>Western preferences no longer solely drive demand and greater attention needs to paid to the individual specifics of each regional market </li></ul>Rapid evolution of China as an importer 1985-2005: Stock-piling of raw materials Developing-country share of the global economy will rise in coming years
  15. 15. <ul><li>North America </li></ul><ul><li>Global leadership in IT integration </li></ul><ul><li>Growth in green buildings (driven by LEED), but challenging construction market </li></ul><ul><li>Major investments in fuel cell markets </li></ul><ul><li>Solar power, driven by support at state level </li></ul><ul><li>Smart grid investment and interest booming since 2007/8 </li></ul><ul><li>Latin America </li></ul><ul><li>High growth in fast evolving economies (e,g, Brazil) driven by growth in energy demand </li></ul><ul><li>Historically favoured low technology, but sophistication of buildings is increasing </li></ul><ul><li>Small and medium scale biomass waste to energy microgeneration is widespread </li></ul><ul><li>Asia Pacific </li></ul><ul><li>Unprecedented energy demand growth </li></ul><ul><li>High-tech cities emerging in China, Vietnam and India </li></ul><ul><li>Small hydroelectric market in China and India </li></ul><ul><li>Fuel cell market in Japan exhibits global leadership </li></ul><ul><li>Europe </li></ul><ul><li>Growth opportunities in Central & Eastern Europe driven by EU legislation and enlargement </li></ul><ul><li>Green Buildings in Germany, Austria and Scandinavia </li></ul><ul><li>Energy from wastewater emerging across Europe </li></ul><ul><li>Renewable energy in Germany - France, Spain and Italy playing catch up </li></ul><ul><li>Smart Buildings taking off with projects in France and Spain </li></ul><ul><li>Sluggish construction market since 2008, but long term green drivers remain strong. </li></ul>Global Outlook in Construction & Utilities Markets <ul><li>Middle East & Africa </li></ul><ul><li>Massive construction activity in the Middle East </li></ul><ul><li>Solar technology taking off in the Middle East </li></ul><ul><li>Environmental investment accelerating in South Africa </li></ul><ul><li>World-leading levels of building sophistication and technology leverage in Middle East </li></ul><ul><li>Energy demand growth outstrips supply in much of Africa </li></ul><ul><li>Middle East & Africa </li></ul><ul><li>Massive construction activity in the Middle East </li></ul><ul><li>Solar technology taking off in the Middle East </li></ul><ul><li>Environmental investment accelerating in South Africa </li></ul><ul><li>World-leading levels of building sophistication and technology leverage in Middle East </li></ul><ul><li>Energy demand growth outstrips supply in much of Africa </li></ul>
  16. 16. Globalisation Trends in Transportation and their impact on Chemicals & Materials
  17. 17. OEM Re-positioning : Chinese Manufacturers will Overtake the Koreans, Renault-Nissan to be the 2nd Largest Manufacturer, Tata Group to Grow at a CAGR of 10.2% Source: JD Power Forecasting; Frost & Sullivan Analysis Global Light Vehicle Sales Across OEMs (World) , 2008 – 2015 Fiat + Chrysler combined entity is expected to propel sales of the group beyond 5 million units Restructured GM will be a smaller company with Cadillac, Chevrolet, Buick and GMC; Chevrolet expected to be largest Romanian Dacia and Russian Lada brands expected to grow at more than 8% CAGR, constituting 25% of sales in 2015 Hyundai-Kia is expected to join the league of 5 million cars in global sales, with sales almost doubling in China and Europe Excludes Volvo CAGR Million Units 0.6m 1.2m +10.2% Tata Motors – One of the fastest growing companies organically 4.2% 4.4% 3.7% -1.5% 2.3% 12.2% 4.1% 4.0% 2.7% 3.6%
  18. 18. The Middle Range Car Sector is Being Polarised Between Low Cost Models and the Luxury Sector “ People just want a clean and cheap method to get from A to B. This is driving the market towards cheaper, more basic, vehicles” Source: DSM Engineering Plastics Low Cost End Luxury End Squeeze
  19. 19. More Than 4.3 Million Cars to be Produced in Asia by 2015 – India to Emerge as the Low-cost Car Production Hub Low Cost Car Production Volumes – by Country (World), 2005 and 2015 Note: CAGR calculated for 2005 to 2015; All figures are rounded; the base year is 2008. Source: Frost & Sullivan Unit Shipments in 2015 3.8 m Units 7.1 m Units 2005 – 2015: CAGR : 7.1 % Units (Million) 0.25 m 3.44 m 1.87 m 0.24 m 1.1 m 0.23 m Vehicle Segment Price Range ($) Region Model Name Ultra LCC US$ 2,500 – 3,000 India Tata Nano, Renault Bajaj LCC < US$ 7,500 China Chery QQ3, Changhe Ideal LCC <US$ 10,000 Eastern Europe Renault Logan
  20. 20. Regulations: Three Key Areas are Regulated and Will Go Global in Nature Growth in use of plastic materials increasingly driven by legislation in the next 13 years Regulations on CO2 emissions and vehicle fuel consumption Light weighting vehicles is regarded by the industry as the main way to reduce fuel consumption <ul><li>EU, Japan and Korea to meet target of 120 g/km CO2 per car by 2015 </li></ul><ul><li>US: CAFE reform and EPA to legislate on compulsory measures by the end of 2008 </li></ul>End of life recycling regulations More plastics used, especially thermoplastics <ul><li>EU: ELV legislation current 80% recyclability rate raised to 85% in 2015 </li></ul><ul><li>Japan and US : recycling laws render manufacturers responsible for the recycling of their own vehicle </li></ul>Regulations on Safety Technology switches and increase in plastics use, especially composites <ul><li>Euro NCAP tests </li></ul><ul><li>Pedestrian Safety Legislation (EU legislation effective from 2012) </li></ul>Global Standards The legislative trends affecting the use of plastics is increasingly uniform worldwide <ul><li>UN’s World Forum for Harmonization of Vehicle Regulations is aimed at creating uniform set of regulations covering vehicle safety, environmental protection and energy efficiency </li></ul>Source: industry participants; Frost & Sullivan analysis
  21. 21. <ul><li>North America </li></ul><ul><li>Light weighting and technology upgrade </li></ul><ul><li>Export market for fuel efficient vehicles </li></ul><ul><li>Dieselisation </li></ul><ul><li>Latin America </li></ul><ul><li>Biofuel powered cars </li></ul><ul><li>Europe & Japan </li></ul><ul><li>Innovation and Design centre </li></ul><ul><li>Electric vehicle production </li></ul><ul><li>Asia Pacific </li></ul><ul><li>Hub for low cost manufacturing </li></ul><ul><li>ULCC </li></ul><ul><li>Russia & Eastern Europe </li></ul><ul><li>Low cost car manufacturing of mid-range models </li></ul><ul><li>for supply into Europe </li></ul>Globalisation – Leveraging Cultures & Economies Chemical Supply Strategy Will Change by Region
  22. 22. European Electric Vehicles – A Huge New Materials Market Battery Materials Laminates Electrodes Electrolytes Casing Transmission Cooling fluids Gear oils Clutch fluids Electronics/wiring High tension cables Charging ports Cable sheaths Passenger comfort Heaters (as no heat from engine) Insulation of interiors Chassis and skins Lightweight plastics Composites Bioplastics Glazing Panoramic roof Side windows Polycarbonates Acoustic laminates Rolling resistance Tyre additives
  23. 23. EU Pedestrian Impact Safety – Asian Exporters Must Comply The European Pedestrian Impact Phase 2 standard comes into force in 2010. Malleable steel, polyurethane foams and other energy absorbing materials are being used in automotive bumper systems to meet pedestrian lower-leg impact requirements. Two competing product approaches. Alloys versus oil based products <ul><li>Valeo Malleable Steel Units </li></ul><ul><li>Bayer Material Science Bayfill(R)Polyurethane </li></ul>Euro NCAP Safety Standards
  24. 24. Globalisation Trends in Health, Nutrition & Personal Care and their impact on Chemicals & Materials
  25. 25. Personal Care and Well-being Research 360 Degree Focus Competitive Trends Global & Regional Focus Impact of the Economy Customer Trends Integrated Industry Disruptive & Emerging Technologies Best Practices Inactive Personal Care Ingredients Natural & Organic Ingredients Packaging Materials Sustainability Active Personal Care Ingredients Cosmeceutical & Functional Ingredients
  26. 26. Personal Care & Well-being Market The Global Market is more than $310 Billion in 2009 <ul><li>The Personal Care and Well-being Market was more than $US 310 Billion in 2009 </li></ul><ul><li>Growth varies by country, product category, but in general, the market is growing at an estimated 5 to 6 percent annual growth rate </li></ul><ul><li>Nutricosmetics and Cosmeceuticals growing at a greater rate than Nutraceuticals and Cosmetics and Toiletries, suggesting an increasing overlap between the two primary market sectors </li></ul>Nutraceuticals Market $US 65 Billion Cosmeceuticals Market $US 11 Billion Nutricosmetics Market $US 1.5 Billion Cosmetics & Toiletries Market (2009) $US 250 Billion Annual Growth Rate (2008 – 2009) > 10% < 5%
  27. 27. Personal Care & Well-being Global Industry Challenges Understanding the Global Marketplace Inside and Out Opportunities and Threats <ul><li>Watch for new players entering the attractive personal care & well-being market place, especially from Asia </li></ul><ul><li>Beyond BRIC  Look for increasing urbanization and economic development in emerging markets, especially in Latin America and Africa, as these are future growth regions for personal care and well-being </li></ul><ul><li>Watch the global regulatory environment as this can either drive or inhibit the use of health claims in personal care and well-being products </li></ul><ul><li>Look for markets/societies that are undergoing dietary changes (i.e. Diets shifting to increased consumption of processed foods and/or corn syrups) as these markets will likely increasingly demand for personal care & well-being solutions </li></ul>The Need for Beautification <ul><li>Anti-aging Solutions </li></ul><ul><li>Culturally-Specific Personal care Solutions </li></ul><ul><li>Superfood Ingredients Growth of Per Capita </li></ul><ul><li>Spending on Cosmetics in Emerging Nations </li></ul>Increased Use of Health Claims <ul><li>Key Health Claims </li></ul><ul><ul><li>Heart Health </li></ul></ul><ul><ul><li>Digestive Health </li></ul></ul><ul><ul><li>Cognitive Health </li></ul></ul><ul><ul><li>Bone & Joint Health </li></ul></ul><ul><ul><li>Detoxification Solutions </li></ul></ul><ul><ul><li>Enhanced Immunity </li></ul></ul><ul><li>General Mistrust Health Claims </li></ul><ul><li>Regulatory Constraints </li></ul>Growth in Weight Management <ul><li>Urbanization and Obesity are Tied Together </li></ul><ul><li>Hunger Control and Satiety Enhancement </li></ul><ul><li>Calorie and Fat Burning Solutions </li></ul><ul><li>Solutions that Assist in Calorie Intake Reduction </li></ul>Segmentation based on Demographics <ul><li>Increasing Demand for Women’s Health Supplement Solutions </li></ul><ul><li>Personal Care for Men </li></ul><ul><li>Supplements for Senior Citizens </li></ul><ul><li>Children’s Health </li></ul>
  28. 28. The Need and Spending for Personal Care & Well-being Solutions Increase with Increased Urbanization Significant Correlation between Spending on Health Solutions and Urbanization Suggests that Growth Opportunities Exist in Regions with Growing Urbanization Correlation between Obesity and Urbanization Points to Opportunities in Growing Cities Need for Beautification Solutions also Increase with Increased Urbanization

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