LONDON--(BUSINESS WIRE)--Technavio’s latest report on the global third-party chemical distribution market provides an analysis on the most important trends expected to impact the market outlook from 2016-2020. Technavio defines an emerging trend as a factor that has the potential to significantly impact the market and contribute to its growth or decline.
The top three emerging trends driving the global third-party chemical distribution market according to Technavio chemicals and materials research analysts are:
- Emerging economies to drive chemical distribution market
- Growth prospects of specialty chemicals over commodity chemicals
- Increase in number of partnerships
Emerging economies to drive chemical distribution market
Rapid growth in chemical consumption has driven the overall chemical distribution market, averaging 4.5% during the forecast period, leading to a striking growth rate of over 10% in 2015. Moreover, the third-party chemical distribution market in emerging economies is growing more rapidly than the developed economies. For instance, the growth rates of APAC, the Middle East, and Africa averaged 6.5% during the forecast period, which is greater than the global growth rate. These regions were followed by the Americas and Europe, growing at an approximate growth rate of 4%. Rapid industrialization in Brazil and Mexico enabled the growth rate of Central and South America to be more than that of Europe and North America. These statistics indicate slower growth rate of mature markets than the developing economies in the coming years.
Chandrakumar Badala Jaganathan, a lead analyst at Technavio for specialty chemicals research, says, “Within APAC, China and India will show immense growth, posting a CAGR of 7%-8% during the forecast period. This high growth is due to the emphasis on infrastructure improvement, construction, and more industrialization.”
Growth prospects of specialty chemicals over commodity chemicals
The study depicts the high potential growth of specialty chemicals over commodity chemicals, which is also an evolving trend in the market. The specialty chemical segment will grow because distribution of specialty chemicals is related to the underlying growth of the end markets. For instance, between 2014 and 2015, the European specialty market in the pharma and medicine sector grew with an annual rate of 6%; for the food and beverage sector, the growth rate was 4.1% and for the personal care sector, the growth rate was 4.7%. All these markets grow with a much higher rate than the commodity chemicals segment, which are used in coatings, wood products, and machinery.
“Another major factor which is helping specialty chemicals succeed over commodity chemicals is the fact that specialty chemicals distributors have a wide range of products which serves many different end customers. On the contrary, commodity chemicals prices are more impulsive and move in synchronization with the underlying macroeconomic growth such as oil prices and supply-demand balance in the specific markets. growth prospects of specialty chemicals are more than the commodity chemicals,” says Chandrakumar.
Increase in number of partnerships
The third-party chemical distribution market is highly fragmented, especially in the emerging regions such as APAC and MEA. The top three players in these two regions collectively hold 6%-10% of the overall market in 2015. However, in North America, the top three players held a 30%-40% share of the market, and Europe held 15%-20% of the market share in 2015. To consolidate the third-party chemical distribution market, vendors are pushed toward the organic growth strategies of M&A and joint ventures. Key global vendors are acquiring small distributors in China, India, and Brazil to reach economies of scale and using their customer base to strengthen their position in the emerging markets. Global vendors have technical expertise, which is essential when dealing with specialty chemical distribution. These global vendors also provide value-added services to customers by providing them with logistics, transportation, formulation, blending, and storage facilities in their warehouses. Therefore, increase in the number of partnerships through inorganic growth strategy will drive the market during the forecast period.
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