INSIGHT: Regional strength can lead to global influence

20 September 2010 16:05  [Source: ICIS news]

By Nigel Davis

LONDON (ICIS)--The big names in chemicals may be well known by some at least but not, perhaps, the largest regional players. Yet these latter firms are becoming increasingly influential in what is, in reality, a multi-regional world.

Industry giants may give the semblance of striding across the globe. Their regional counterparts are doing so across continents.

As part of its Top 100 series, ICIS Chemical Business (ICB) has taken a look at the principal regional players in chemicals. The listings make fascinating reading.

They highlight names that may not be universally known but which regionally are significant. And given the importance of chemicals markets in some of the fastest growing parts of the world, and their equivalent in the feedstock rich regions, they pinpoint some that may become the new industry giants.

Take Asia, excluding Japan, as an example. Not surprisingly, China’s Sinopec leads this list of companies with $31bn of sales in 2009. It lies in fourth place in the global Top 100 listing and is growing fast. Sinopec is expected to bring close to 2.5m tonnes of cracking capacity on line in the next four years.

The chemicals businesses of Reliance Industries, second in the Asia-excluding-Japan Top 10, are hugely influential in the sub-continent but Reliance has yet to make its mark on the global scene.

Reliance itself is a big company with opportunities for growth - not just in petrochemicals - and has yet to do the deal which takes this part of the company onto another level.

Perhaps surprising is the impact of consolidation in the chemical industry in South Korea, which has led to the creation of an important regional player: LG Chem, SK Energy and Honam Petrochemical are examples.

Honam Petrochemical’s sales nearly doubled in 2009 following the merger with subsidiary Lotte Daesan Petrochemical. It is acquiring Malaysia’s Titan Petrochemicals as part of a plan to lift sales to won (W) 40,000bn ($34bn) by 2018.

And it is all about growth and influence. Take the Latin America Top 10. Braskem has plans to be among the top five global petrochemicals companies by 2020. Currently, it easily leads the Latin America Top 10 listing with 2009 sales of $8.9bn.

The company will undoubtedly consolidate that position in the 2010 listing. It merged with Brazilian rival Quattor this year and acquired Sunoco Chemical of the US. It has expansion projects in Brazil, Mexico, Venezuela and Peru and is set on becoming the regional giant.

The Middle East and Africa Top 10 demonstrates the devastating impact of the global downturn on chemical company fortunes in 2009.

SABIC is by far the largest regional chemical company and is now an important global player, lying in seventh place in the Top 100. Its sales shrank by 32% in 2009 and profits more than halved as recession gripped its petrochemicals and more specialised chemicals businesses worldwide.

Other regional players were hard hit in an extraordinarily difficult year. Yet new plant start-ups had an influence on the league table, with South Africa’s Sasol’s turnover in chemicals, solvents and polymers up healthily, driven by its new Arya Sasol Polymers complex in Iran and somewhat higher solvent sales.

Sasol particularly demonstrated that even last year, in exceptional regional circumstances, it was possible to buck the severe downward trend. In future years it will be investment-led growth in the right place at the right time that continues to sort the global leaders from the rest.

And as the ICIS Top 100 listing and analysis for 2009 published at the start of this month demonstrated, it is the leading players who are able to consolidate and grow the most.

Even last year, the top 10 global giants maintained their share of the Top 100’s combined sales at about 36%. “This is larger than the second tier of about 50 players by around 70%,” ICIS said. It came at a time when total Top 100 sales were down close to 20%.

($1 = W1,161.05)

Bookmark Paul Hodges’ Chemicals & the Economy blog
Read John Richardson and Malini Hariharan’s Asian Chemical Connections blog
For more on Top 100 companies visit ICIS company intelligence
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By: Nigel Davis
+44 20 8652 3214

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