INSIGHT: Global megatrends help define new landscape

16 April 2010 16:57  [Source: ICIS news]

By Nigel Davis

Solar shinglesLONDON (ICIS news)--Look at where the world-leading chemical companies are spending their money and you can catch a glimpse of a future competitive landscape.

In difficult times, firms have identified areas for long-term growth and kept plugging in resources to make headway in markets that they believe will be driven by global “megatrends”.

Clean energy and sustainable development essentially doing more with less  stand out as the main drivers for most materials-based producers.

“At Dow, we’ve long viewed our commitment to sustainability and the development of clean technologies as not only good corporate citizenship, but good business,” said Jerome Peribere, CEO of Dow Chemical's advanced materials division, in mid-March.

“We are uniquely positioned to drive change by delivering innovative chemical solutions that contribute to human progress and the growth of our business,” he added at the Jefferies Global Clean Technology Conference on Friday in New York City.

Jeffries is a mergers and acquisitions (M&A) and restructuring advisory firm.

Dow eyes more than $20bn (€14.8bn) in “market opportunities” aligned with megatrends in the areas of energy, consumerism, transportation and infrastructure, and health and nutrition. Its recent M&A activity and “asset light” strategy align with those goals.

The company’s solar shingle has been introduced to tap into 30% growth in the solar industry. Its much older Styrofoam brand insulation (the product has been around for 60 years) will help many reduce energy costs.

Producers have a slightly different take on market-creating trends relative to their own current portfolios and areas of expertise. DuPont, for instance, suggests that megatrends driven by population growth are likely to have a significant impact on the global political and economic agenda.

It reckons the megatrends are increasing food productivity; decreasing dependence on fossil fuels; protecting lives and the environment; and “capitalising on growth in emerging markets”.

Given its portfolio, DuPont comes somewhat late to emerging market growth, particularly in Asia. But it sees the geographical basis of its sales changing fast.

DuPont is one of the major spenders on research and development (R&D) in the industry but says it applies almost 80% of its annual $1.4bn R&D budget at “megatrend-targeted innovations”.

BASF says it addresses questions related to global megatrends in what it calls five “growth clusters”. These are plant biotechnology, white (or industrial) biotechnology, raw materials change, energy management and nanotechnology.

In these clusters, the focus is on markets and technologies of the future.

BASF’s plant biotechnology work with Monsanto on drought-tolerant corn, for instance, should yield results in the US from 2012. Work on white biotechnology has produced an animal feed additive enzyme that helps make nearly indigestible carbohydrates available for pig and poultry consumption.

Crucially, BASF believes that limited resources are a global challenge for the chemical industry. And that is why it is looking at alternatives to oil for its product chains, including renewables and natural gas. It is developing dehydration technologies, for instance, for the production of propylene and butadiene. DuPont is developing a biobutanol for biofuels process with BP.

The BASF research work extends to catalysts and other materials for better performing batteries and nanotechnology for electronics. “We innovate for growth,” the company says, and it is investing €1bn in these areas alone between 2009 and 2011.

The downturn has focused minds in corporations worldwide on just where future growth will come from. Pressure on traditional businesses has also given added weight to this search for new growth.

Chemicals producers know they are ideally placed to help customers in many markets do more with less or, eventually, with something different.

($1 = €0.74)

For more on BASF, Dow Chemical and DuPont, visit ICIS company intelligence
To discuss issues facing the chemical industry go to ICIS connect

By: Nigel Davis
+44 20 8652 3214

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