INSIGHT: Going from regional to global strength

22 September 2008 17:28  [Source: ICIS news]

By Nigel Davis

LONDON (ICIS news)--Where in the world can you find the most influential emerging chemicals players?

This multi-faceted business has, over the past 20 years, become increasingly global. But paradoxically, it has also recently become more regional.

For most companies, regional differences are marked.

Some businesses may be heavily influenced by global drivers - think aromatics and MEG (monoethylene glycol) - but others are driven much more by regional trends.

The world’s polymer markets have distinct regional characteristics. These have driven the London Metal Exchange (LME), for instance, to rethink its global approach to plastics futures.

It has also spawned the development of regional futures offerings from other commodity exchanges.

Some chemicals are shipped easily, so there can be regional arbitrage opportunities. Others are more difficult to move and serve largely local markets.

Against this backdrop some important regional influencers are emerging. Some might be expected, also, to develop an increasingly global outlook.

The chemical industry continues to be shaken up by merger and acquisition (M&A) activity. The just-published ICIS Top 100 listing shows that most, but by no means all, of the well established companies in the industry are getting bigger.

Industry consolidation is widely apparent.

The global analysis also highlights the fact that some of the newer players are gaining greater influence. Largely, and currently, that influence is regional. But it may well develop a more distinct global flavour.

A regionally-based sales and profits analysis from ICIS has focused on the parts of the world where growth in chemicals is arguably the most exciting. Some regional giants are emerging that could exert much geographically wider market influence.

There is most talk about new producers and new capacities in the Middle East but, as the ICIS analysis shows, most regional production growth is tied up in joint ventures.

It is also the influence these new producing companies have on distant rather than local markets that that will be most telling.

The regional analyses reveal more on some important industry trends. Russia’s growth is driving rapid development of its chemicals sector. Just how influential can these fast-growing players become?

The same is true for Latin America. Regional demand growth has been and is likely to continue to be significant. But have regional players learned the lessons of the past – and can they have wider, regional Americas influence? Only time will tell.

“You never see them coming,” says ICB editor Joseph Chang in the latest issue.

“Just as Google dominated the market for search, even in the midst of established media players with solid capabilities, the new top players in any category may stake their claim with surprising power," he says. “Don't be caught off guard.”

“The Western world should look to the emerging regions for the fastest-growing, most innovative and most ambitious players - those that will make a play for their place in history,” Chang argues.

To become a large, influential, global industry player takes many things and, in the past, it has taken time. But the world is changing fast.

Just this past week, the world’s financial markets have come close to meltdown. The fall of major banks and financial institutions in the US will change the way money is moved around the world.

These changes will mean a lot for asset-intensive companies like those in chemicals. The most far-reaching will be those with money and ambition.

Which producers from the ICIS regional listings has the drive and the wherewithal to seek global influence? Which will become more significant global chemical industry players?

“It will pay to watch these players - not for the sake of spectacle, but to realise who will seek to make a name for themselves in the new world order," says Chang. “Don't say we didn't warn you.”

To discuss issues facing the chemical industry go to ICIS connect

By: Nigel Davis
+44 20 8652 3214

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