12 July 2010 17:30 [Source: ICIS news]
By Nigel Davis
Yet are those structures, of physical and human capital simply up to current challenges - let alone those to come?
Chemicals tend to lead where other business and sectors follow. Its products provide the raw materials for others to drive local export-led or domestic development.
But the global recession and its aftermath have exposed a fundamental shift in the business landscape - the emergence or, rather, importance of local economies.
So much material has gone into domestic infrastructure projects and also, importantly, into fast-growing domestic consumer markets.
More automobiles were produced in
Rapid infrastructure development is driving demand for construction materials and not simply in
The head of BASF’s Construction Chemicals division, Tillman Krauch, made the point in this week’s ICIS Chemical Business, that new construction is mainly driven by the infrastructure and housing needs of countries whose populations are on the move.
Alongside construction materials, the chemical industry supplies a host of intermediates for construction-related businesses, including coatings and adhesives.
And while demand growth in the current major chemical producing and consuming regions is vitally important, demand growth in emerging economies is becoming much more so.
Analysis from consultants McKinsey suggests how multi-national companies might capture more growth from the world’s “emerging middle-class”. Highlights published in this month's McKinsey Quarterly focus on consumer products but there is a clear read-across for materials makers.
“The rapidly growing ranks of middle-class consumers span a dozen emerging nations, not just the fast-growing BRIC countries, and include almost two billion people, spending a total of $6.9 trillion annually,” the consultants say.
“Our research suggests that this figure will rise to $20 trillion during the next decade - about twice the current consumption in the
Some big companies, maybe new names to most, are likely to move to take advantage of these rapidly growing markets and in the process carve out a strong future.
Speed and scale have applied to the way in which established chemical producers have made inroads into the
However, how they might approach market growth in many other parts of the world, where the local or even regional market size is not large enough to justify significant investment, remains to be seen.
If you are an established chemicals producer, do you service such markets from a regional hub or from assets sited where feedstock cost are low?
How do you penetrate, let alone understand, markets that are growing the fastest but very different in nature? Can you successfully adopt a ‘regional’ perspective?
Do you have the internal strengths as well as the asset capability to expand with the market in the face of newly emerging competition?
Can you scale-up adequately with the talent you have or do you need to do something different?
“The rapid growth in emerging markets may make traditional ‘grow your own’ or ‘hire from within’ approaches manifestly inadequate to meet staffing needs”, McKinsey suggests. It also believes that, for the companies it is talking about, the talent question is “perhaps the biggest bottleneck to seizing the emerging middle-class opportunity”.
But talent means a lot in chemicals. As growth slows in the West and real growth opportunities pass to more diverse parts of the world then the challenge for established chemicals producers becomes greater.
A ‘one-size’ approach may not necessarily suit all.
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