BASF | Sector Overview

CHEMICALS

sector Overview:

Traditional investment in the chemical sector has been in mature, industrialised countries but increased globalisation now means there is substantial activity taking place in Asian economies. Because commodities still have a significant share of the product portfolio, companies increasingly focus on innovation to stay ahead and provide a healthy financial return. Firms such as Dow, DuPont, BASF and Bayer are being increasingly challenged by changes in feedstock availability and price, rises in labour and utility costs, differential rates of economic growth and environmental pressures. While Europe still accounts for roughly two thirds of global chemical production and exports to China have been rising, this trend will probably reverse soon as the full Asian production capacity comes on line.

Instrumental in the changing structure of the global chemical industry has been the growing participation of regions such as the Middle East, South East Asia and specific developing markets such as Nigeria, Thailand and Venezuela. The driving factor for this is a desire for improving profitability by reducing production costs and an increasing demand for core product supply to be convenient to core future markets. Companies now choose location for a specific operation based on the levels of trade between adjacent countries and high competition for market share.

At the same time, the need for improved profitability from reducing production costs is being further driven by sustainability issues especially for those companies operating with Kyoto complying countries which have been facing the costs associated with decreasing their CO2 emissions. Lastly, the ever-mounting pressure for chemical companies to explore more sustainable feedstock alternatives and correspondingly enable a shift from the current dependency on petrochemicals has led to an increase in focus on white or industrial biotechnology solutions.

ONES WE ARE WATCHING

Dow Chemical
US based Dow has a strong focus on science and technology in the areas of plastics, chemicals and agricultural products which continue to make it a formidable player in the chemical industry. The company’s Innovation Team serves as the focal point and driver for Dow's innovation portfolio. With recent innovations in areas such as water purification, automotive, nutrition and construction Dow has successfully embraced the drive for sustainable solutions.

DSM
DSM has been pursuing a journey of transition over the years with notable success. As it first moved from coal and fertilizers on to performance chemicals, it saw the future challenges and has subsequently evolved into life-sciences and biomaterials. Now, through a combination of additional internal innovation, selective early-stage acquisition and venture activity, DSM is aiming to increase innovation output from €300m in 2007 to €1bn by 2010.

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