By John Baker
A new set of buzzwords is sweeping across chemical company boardrooms and out through their communications channels: urbanisation, climate change, energy and resource efficiency, water, the ageing population, health and nutrition.
These are the so-called megatrends that the major players in the industry have alighted on and on which they are placing their hopes for accelerated growth and sustainability.
The argument runs simply thus: the chemical industry is innovative and can provide solutions for society’s urgent and pressing needs. By focusing innovation on these megatrends, companies can gain access to huge, global markets if the right products and solutions can be developed.
But there are one or two slight issues with this method of attack. One is that most of the major companies have over the past year or so identified the same set of megatrends on which to focus. And another is that, more significantly, many of them do not have the existing products and capabilities on which to build a solutions offering.
“Five years ago, the trends were much more specific,” says Alasdair Nisbet, a managing director in the UK of Lazard bank. “China for market growth and the Middle East for advantaged feedstocks. But the helicopters have gone up in the past five years.”
Leading players, he implies, have seen the competitive landscape afresh and have refocused their business thrust.
Take energy. In the past the chemical industry has offered solutions in terms of energy conservation - through lighter-weight automotive components and insulation in buildings. Now the emphasis is changing, and there is new focus on energy capture and storage. “The major chemical companies are less well positioned in these two areas,” he says.
It's true, he adds, that some smaller players have positions in solar energy, through polysilicon and thin film technology, and some have offerings in battery technology, such as lithium hydride and fuel cells. “But on the whole these are not the top 10 companies in the industry but more specialist players like Rockwood, FMC and Umicore in batteries or Dow Corning and Wacker in solar cells.”
The same can be said for wind energy technology, which requires carbon fibre and glass fibre reinforced resins. The leaders in these fields are generally, Nisbet points out, smaller companies.
Thus, “the energy story is intriguing”. It is a different group of companies that are positioned to capitalise on this trend, rather than the majors that have identified it for their megatrend focus.
The same can be said for biofuels and bio-feedstocks, where much of the development work is going on among small start-ups rather than at the large majors. However, there are several leading exceptions in this case and Nisbet believes these have clearly differentiated themselves in this respect.
“The next decade will see bio-produced chemicals and biomaterials technology become much more important with the major players entering the field either through investment in innovation or via acquisition of small biotech companies,” he says. This has happened already in the pharma and agchem sectors and seems likely to repeat itself in the chemicals arena.
“Biomaterials have been available but insignificant for 10-15 years, but within another 10 they will represent a more important part of the market. But companies have to get the manufacturing cost base down significantly for this to happen," Nisbet says.
“The Middle East will always dominate the C2 carbon chain area [due to advantaged gas feedstocks], but for longer chains bio-based raw materials are an interesting potential technology,” he adds.
However, biomaterials are something of an exception.
On the whole, reiterates Nisbet, the leading players espousing the megatrend pathway may not have all the answers in their current portfolios.
Plenty of innovation and portfolio management is called for before potential markets become reality.
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