Trends in the Specialty Chemicals Value Chain
To create value for all stakeholders and ensure long-term success, Clariant must be agile and resilient in the dynamic specialty chemicals market environment. This is achieved by collaborating with partners to capture opportunities that mitigate the effects of the economic downturn, address the market need for sustainable solutions, and enhance differentiation with products that benefit end consumers.
1. A high-value position in an industry with great responsibilities
Chemistry is the science of transforming matter. Through chemical reactions, the chemical industry converts raw materials into more than 70 000 different products used in all sectors of the economy. The specialty chemicals industry, in which Clariant is a major global player, provides high-value and often custom-manufactured materials with specific performance and functionality and is thus a particularly customer-centric part of the chemical industry. SEE FIGURE 001
In the global industrial sector, chemical manufacturing is one of the largest consumers of energy, making it a significant contributor to greenhouse gas emissions. It also uses significant amounts of oil and gas as feedstock. In addition, the industry handles many hazardous materials. Although this confers great responsibility, it creates opportunities for companies to become industry leaders in sustainable development and thereby capture competitive advantage.
2. Trends concerning raw materials and basic chemical inputs
The chemical industry uses raw materials derived from crude oil, natural gas, metals, minerals, and, increasingly, biomass as a renewable organic feedstock. Basic chemical companies use these materials to make products such as polymers, bulk petrochemicals, and intermediates in large quantities, often in single-product, continuous processing plants.
Currently, these companies are facing lower prices and margins due to the global economic downturn combined with recent increases in basic chemical production capacity. As a result, after higher raw material prices in 2017 and 2018, Clariant as a buyer of these chemicals experienced lower cost pressure in 2019. This trend is expected to continue in 2020.
3. Developments in the specialty chemicals industry
Specialty chemical manufacturing is an entrepreneurial, innovative, and customer-driven part of the chemical industry value chain. To cater to customers’ needs for specific chemical performance or function, specialty chemicals are often manufactured by batch processes, requiring regular changes in raw materials, operating conditions, and equipment. Compared to the continuous processing in basic chemical production, these batch processes tend to be less capital-intensive, require less energy, and result in lower CO2 emissions.
Like Clariant, many specialty chemicals companies are divesting the parts of their businesses that are most impacted by commoditization. In addition, the industry is working to balance the need for cost control to respond to cyclical economic impacts with the necessity to engage in long-term, strategically focused innovation to develop products that meet customers’ sustainability and performance needs.
4. Trends in customer markets
In general, the global economic slowdown is affecting durable products more strongly than consumer products, but customer demand develops differently for each application and market. As Clariant serves a broad mix of industries, the company has a good natural hedge against pronounced cyclical economic impacts. In addition, time-lag effects, such as the increased demand for catalysts due to investments in capacity made by customers several years ago, also decrease Clariant’s exposure to the current economic cycle.
While some customers respond to current market dynamics by focusing on costs, others strengthen their position through differentiation. Whether Clariant products save customers money or differentiate their offerings, value-based pricing helps the company capture part of that benefit. Clariant also works closely with customers, scientists, and other partners to develop more sustainable products in response to increased awareness of climate change, plastic waste, sustainable chemistry, and overall circular economy needs.
5. Changing needs in end-consumer markets
Clariant customers include producers of consumer goods who manufacture the products that end consumers use in their daily lives, such as electronic gadgets, home construction materials, and cosmetics. These end consumers are increasingly seeking more sustainable solutions (such as naturally derived cosmetics or recyclable plastics), convenience products (such as quick-dry home care formulations), or more individualized solutions (such as vegan or ethnic beauty products). These evolving demands are also changing Clariant’s customers’ markets.
6. A strong foundation to navigate dynamic markets
Changes in the business environment create risk, but also opportunity. Responding to such shifts allows companies to differentiate themselves and reduce the danger of margin erosion from commoditization, which is more pronounced in slow-changing industries.
Clariant’s integrated business model, with its emphasis on sustainable innovation, customer collaboration, and excellence in execution, provides a strong foundation for the company to navigate the current market dynamics successfully.
Stakeholders are people or groups whose interests are linked in various ways with those of a company. They include shareholders, business partners, employees, neighbors, and the community. View entire glossary
The value chain describes the series of steps in the production process, from raw materials through the various intermediate stages to the ﬁnished end product. View entire glossary
A substance that lowers the activation energy, thereby increasing the rate of a chemical reaction without being consumed by the reaction itself. View entire glossary
The business model illustrates how a company draws on various capitals as inputs and converts them into outputs, such as products and services, through its business activities. The company’s activities and outputs lead to outcomes that affect the capitals, thus impacting the company and its stakeholders. View entire glossary