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Chemical distribution growing faster than consumption

Posted on June 29th, 2017 by in Chemicals Industry News and Analysis

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Chemicals distribution sector growth is outpacing chemical industry consumption, itself growing at rates above global GDP, and this is expected to continue until 2022.  Specialty chemicals growth is also outpacing commodity growth and this is set to continue over the same timeframe, according to Udo Jung, a managing director at Boston Consulting Group.

“An outsourcing trend will gradually increase going forward, we see a sustainable and continuous increase in chemical distribution,” said Jung, speaking at the Fecc conference in Warsaw, Poland.

Sales in the chemical sector through distribution increased by 9.7% in 2008 and 10.8% in 2015 and around 12-13% expected by 2022, as shown by forecasts by Boston Consulting Group.

There is a drive for producers to bundle expertise and knowledge through a centre of excellence for third party distribution, he added.

Distributors also provide added value in the supply chain, whether through focus on a specialty chemical portfolio, supplying a specific end-market, or offering a combination of specialty and commodity chemicals, he said. A number of distributors have also diversified their business to include production and distribution, he added.

There is increasing regulation in the chemical industry and this is also promoting experienced distributors and as the chemical industry is fragmented, there is also a need for third party distribution.

Distributors provide an important and coherent part of channel management, said Jung.

Despite healthy growth forecasts in the distribution sector in the mid-term, “it does not mean that every distribution company will grow above the market,” said Jung.

He went on to say that there are short term factors which can impact growth in the distribution sector, such as regional demand cycles and specific end market cycles.

He also encouraged distributors to be transparent about their cross-selling and multi product capabilities and to see “digital [platforms] as an opportunity for distributors to strengthen their position.”

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All opinions shared in this post are the author’s own.

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