Price and market trends: Services are key for chemical distribution

28 March 2014 09:45 Source:ICIS Chemical Business

To protect margins in a mature market, a focus on certain services is needed

In the chemical distribution sector, developing certain value-added services will be a key part to maintaining and growing margins, the head of the European Association of Chemical Distributors said.

“Value added services, access to emerging markets and the ability to adapt to regulations and complexity are key considerations. This can help protect margins, especially in a saturated market such as Europe,” said Uta Jensen-Korte, director general of the FECC.

Jensen-Korte spoke at the 7th Brazilian Congress of Chemicals and Petrochemicals Distributors (EBDQUIM) in Sao Paulo.

The key value added services chemical distributors should focus on include mixing, blending and formulating; customs handling; and vendor managed inventory (VMI), Jensen-Korte said.

As regional markets develop and mature, so does the nature of its distribution industry, she noted.

“The character of a country’s distribution industry is largely dependent on the position of the overall economy in the market life-cycle,” said Jensen-Korte.

For example, as economies mature, chemical distributors tend to evolve from traders to generalists and then specialists/experts.

Europe’s market is mature, with many regional specialists, but also Pan European generalists – full-line distributors such as Brenntag and Univar – as well as Pan European specialty distributors such as IMCD and Azelis. Europe’s chemical distribution market represents around €42.9bn in sales, or 25% of the global market of €165bn, according to a study by Boston Consulting Group, cited by Jensen-Korte.

Germany represents €8.5bn of the market, followed by France and Italy each with €5.1bn, the UK with €2.9bn and Spain with €2.1bn. This compares with Brazil’s distribution market at around €6.5bn, she noted.

In Europe, ahead of the Reach (Registration, evaluation, authorisation and restriction of chemicals) 2018 deadline to register chemicals between 1-100 tonnes/year in volume, Jensen-Korte is advocating for the “simplification and reduction of the overall [process] costs”.

By Joseph Chang