CHEMICALS INDUSTRY: A LOOK INTO 2020 AND BEYOND
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TABLE OF CONTENTS INTRODUCTION
The State of Chemicals Industry
SYNTHETIC LATEX POLYMERS
High-Tech and Environmental Profile SLPs Will See Greater Demand
TOP TRENDS HI&I
Top Ingredient Trends to Watch in Household, Industrial & Institutional Segment Commercial Laundries Favor Cold Water over Green Chemicals Foodservice Cleaning Embracing Green Trend Floor Pads Reducing Use of Floor Cleaning Chemicals Specialized Wipes for Healthcare Market Focus on Disinfecting and Sanitizing
PHARMA CHEMICALS AND EXCIPIENTS
Major Global Trends in Oral Solid Dosage Form Excipients Growing Opportunities in Biologics Sensation Bringing Topicals Create Opportunities Growing Importance of Dietary Supplements Drives Excipients in Nutraceutical Space
PERSONAL CARE INGREDIENTS
Consumer Driven Cosmetics and Personal Care Ingredients
INDUSTRIAL SURFACTANTS
Early View Of Growth Expectations Per Region
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INTRODUCTION The chemicals industry is shifting toward more carbon-neutral operations implementing circular economy initiatives to more energy-efficient processes while looking into better ways of reducing CO2 emissions.
al capacity are expected to be lower compared to the past couple of years. Tightening environmental legislation and government initiatives to take inefficient capacity out of the market have had a dampening effect on the chemical output in China, and export opportuThe need for sustainability will continue to drive in- nities to North America are seriously affected by the novation, while in some of the consumer markets for current trade conflict. While historically, chemical marspecialty chemicals, the need for sustainability goes ket local growth has been outpacing GDP, we expect further. This creates increased demand for natural in- local chemical demand to start lagging GDP growth in gredients, renewable materials, and processes that re- China. Overall, this will mean a much less favorable sult in improved social responsibility. production climate for chemicals in China. Industry 4.0 is driving efficiency improvements in plant construction, operation management, maintenance scheduling, as well as procurement and sales processes. Digitalization allows interconnectivity, machine learning, and real-time data to be used to increase transparency across the value chain. Kline consultants recognize EPC firms and technologists have developed predictive maintenance programs, and some specialty chemicals producers are developing purchasing platforms for customers to directly place purchase orders and product needs.
Following are some specific growth trends that have been uncovered by Kline’s market research staff in a number of the specialty chemical and material markets that we track on a global basis.
While sustainability and digitalization have recently been among the major drivers in the chemical industry, it is the global economic situation that could become a key demand restraint. Economic uncertainty has been fueled by trade wars, Brexit, and social conflict, leading to a market slowdown. The European chemicals industry is changing, and M&A activity continues to thrive, with PE firms driving strong multipliers. In 2019, we witnessed AkzoNobel exiting specialty chemicals, BASF exiting from the pigments and construction materials business, Clariant exiting pigments and masterbatching, Lonza planning to sell its LSI business, and Lanxess divesting Arlanxeo and the chrome chemicals business. The North American chemical industry is expected to continue to have a competitive advantage, driven by low shale gas prices. However, due to global economic uncertainty, future investments in new or addition-
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SYNTHETIC LATEX POLYMERS DRIVEN BY END-USE INDUSTRIES
High-Tech and Environmental Profile SLPs Will See Greater Demand As for many other segments of the chemical industry, it is environmental concerns that play an important role in the evolution of the demand for latex polymers globally. The switch from solvent-based to water-based paints and adhesives formulations has fueled the growth in the consumption of waterborne latex for years. On the contrary, digitalization, and more specifically the switch from paper marketing to digital marketing, had a strong negative impact on the latex consumption in paper.
idly, driven by the development of high-tech sectors such as new energy, automotive, high-speed railway, aerospace, and other emerging industries.
The coatings market, which accounts for about a quarter of the global synthetic latex polymers demand, continues to grow in the East, with Asia accounting for more than half of global consumption. BASF has invested to build capacity in China to position itself in this growing market. In India, the paints and coatings segment is growing strongly due to the rapid urbanization, and paint manufacturers continue to add to their plant capacities, consequently driving the SLPs’ consumption in that segment.
In North America, environmental concerns have also played a positive role in the recent market developments. Automotive manufacturing has been the driver in the OEM coatings segment, with growing demand for environmentally friendly coating formulations with low-VOC and APE-free profiles.
Furthermore, Internet retailing has resulted in increased demand for pressure-sensitive adhesives for labels and bar codes. Moreover, there is a preference of low-VOC products in the adhesive and sealant industry, due to the implementation of stricter regulations.
Overall, polymers with the best environmental profiles, such as VAE and VA VEVA, are expected to witness strong growth.
Asian demand of latex in adhesives & sealants applications is also an important part of the local demand of latex. As China holds the world’s largest packaging industry, adhesives and sealants is the largest application there. An interesting fact is that traditional adhesives markets such as textile are slowing down, while demand for high-performance, high-quality, and specialty adhesives is growing rap-
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The SLP competitive landscape has not been immune to change either. The year 2019 saw Synthomer spend $824 million to strengthen its global position in synthetic latex through the acquisition of Omnova. This development might prompt other producers to evaluate their latex portfolio over the course of 2020.
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CLEANING TRENDS IN HI&I
Top Ingredient Trends to Watch in Household, Industrial & Institutional Segment The green & sustainable megatrend is the most important when it comes to understanding market dynamics within the ingredients for HI&I cleaning applications.
counting for more than 75% share in ingredient sales value, is driven by convenient formats and sustainable products that are efficient.
Within this segment, the household sub-segment, ac-
The industrial and institutional (I&I) sub-segment is more price-sensitive compared to household applications; therefore, cost in formulation is a key factor when it comes to the choice of ingredients.
washing to save energy and reduce water usage. This continues to shape new product development within the laundry care application and is affecting the ingredients usage in the industry. Let’s look at some trends that influence the industry from the end use side.
Laundry care is the key HI&I application, accounting for close to a 60% share in total ingredients value, followed by hard surface cleaners and dish care applications. Laundry care is shifting toward lower temperature
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Commercial Laundries Favor Cold Water over Green Chemicals Commercial laundries are looking for ways to reduce their costs and impact on the environment without sacrificing their quality of service. New, green laundry technologies have emerged that are making commercial laundry operations more affordable and environmentally friendly.
While green cleaning is still a modest trend in laundry chemicals, water reuse/recycling systems are slowly being mandated by more municipalities. There is increasing interest in efficacious cold or warm water chemicals to save energy costs. The newest technology on the market, ozone systems - detergent less laundry solutions, may lead to reduction or elimination of chemicals usage. These systems are not yet widely accepted or deployed, with many pros cited by system manufacturers and cons cited by chemical manufacturers.
In a survey by Kline, commercial laundries were asked the importance of various emerging trends, and 55% rated energy saving/conservation as very important. Washing machine servicing is very important to 47% of commercial laundries. New sources of revenue from more rental activity is rated third, with 45% giving it very important ratings. Cold water washing is aligned with energy savings and is rated fourth in importance.
Foodservice Cleaning Embracing Green Trend During the past two years, several markets have emerged as powerhouses in the foodservice cleaning industry, balancing lower-performing segments and driving general growth. These high-growth areas are restaurants (fast-casual in particular) and lodging establishments.
ment of greener products. Eco features that resonate with end users in the region include sustainability, reducing energy consumption, and packaging with lower waste, along with products that are effective and safe for employees to use.
The trend toward ecological, greener, and more sustainable products is growing in the EU, although chemical-based cleaning products are still the most used and maintain their level of demand. There is a slow shift in the needs of end users for environmentally conscious cleaning, which is strengthened by EU authorities and regulations that seek eco-sustainability and developwww.Klinegroup.com
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Floor Pads Reducing Use of Floor Cleaning Chemicals In a recent survey, we asked more than 500 decision makers at commercial end uses about usage of floor pads, mop pads, and cleaning tools and how the usage of floor pads has impacted use of floor finish chemicals. Most end users in all market segments indicate they have reduced or eliminated their use. This varied by flooring type and market segment, but on average, 33% of end users with hard surface floors, 52% of end users with concrete floors, 36% of end users with wood floors, and 35% of those with resilient floors are no
longer using floor finish chemicals because they have substituted floor pads to keep floors clean and maintained. Furthermore, from 26% to as high as 52% of end users note use of floor finish chemicals has been reduced as a result of floor pad usage, depending on the type of flooring they are cleaning. These trends are significant for producers of floor finish chemicals and also for those that make floor pads.
% of End Users, no Longer Using Floor Finish Chemicals Due to Floor Pads, by Floor Type
52%
with concrete floors
36%
35%
with wood floors
with resilient floors
33%
with hard surface
Specialized Wipes for Healthcare Market Focus on Disinfecting and Sanitizing Wipes are seen as an increasingly attractive product segment because end users—especially those in tight labor markets—appreciate the convenience wipes offer, better understand the risks of cross-contamination, and seek a cleaning solution that does not require lots of time or training to use effectively. Sales of these products grew over 5.0% in 2019 in the United States.
especially disinfectants and sanitizer wipes—and is expected to continue driving sales in the next four to five years. Manufacturers are developing specialized wipes for healthcare that combine efficacious chemicals for broader sanitizing or disinfecting claims, are specific to different areas of a healthcare facility, have shorter dwell times, can clean a wider range of surfaces and materials, and are more convenient for end users.
Among the end-use segments, healthcare has been the key segment crucial for driving growth of wipes— www.Klinegroup.com
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THE PHARMA CHEMICALS AND EXCIPIENTS
Major Global Trends in Oral Solid Dosage Form Excipients Sustainability has less of an impact in pharmaceutical chemicals, but Asia remains a key growth area in this segment. Oral Solid Dosage Forms remain the most important segment, even if their position is challenged by the emergence of large molecules (and notably biologics) that are difficult to formulate into an OSDF product.
DIRECT COMPRESSION TABLETS
Tablets continue to be the most preferred form of OSDF Direct compression technique drives the demand for directly compressible excipients, such as MCC, anhydrous lactose, etc.
ODTs
Orally Disintegrating Tablets drives the consumption of superdisintengrants such as crospovidone and CCS, as well diluents providing good mouthfeel such as polyols
SOLUBILITY ENHANCEMENT
HIGH POTENCY
SOFT GELS
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Poorly soluble drugs, and advancements in bioavailability enhancement technologies gives rise to demand of solubility enhacement excipients, including polymer and lipid carriers
Increasing number of high potency APIs gives rise to capsule formulations
Rise in soft gel capsules drives lipid excipients and polyols
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Growing Opportunities in Biologics While the OSDF segment has traditionally been (by far) the largest share of pharmaceutical production, it is in biological pharmaceuticals that the growth is the strongest nowadays.
The highest growth in terms of number of drugs is expected for monoclonal antibodies (mAbs), with a CAGR of more than 15% over the coming years. The number of biological vaccines and hormones is also expected to grow at strong rates of 8% to 10%, and 4% to 7%, respectively.
Biologics drug development is an impending opportunity for ingredient suppliers, especially because specialty ingredients are required in not only the formulation of the biologic drugs but also in their production, starting from the upstream cell culture in bioreactors, followed by downstream processing, pre-formulation of the drug, and, finally, the fill-finish. While excipients are mainly used in the later stages of formulation and fill-finish, there is a wide range of bioprocessing ingredients essential to the upstream and downstream stages.
The demand for bioprocessing ingredients is currently dominated by the cell culture ingredients and supplements category. The category is expected to grow at an above-market CAGR of around 10% between 2018 and 2023. Moreover, the consumption of fill-finish and pre-formulation excipients is expected to increase at a high rate with the growth of biologics production. The consumption of biologic excipients is forecast to grow at an average annual rate of 8% to 9% in the next five years. Carbohydrates, polymers, and amino acids are among the particularly fast-growing ingredient groups in this industry.
The biopharmaceutical industry is expected to witness a global growth of 10% to 12% over the next five years in terms of the number of biologic drugs including novel biologics, biosimilars, and bio-betters.
BIOPHARMACEUTICAL TECHNOLOGY TRENDS
MONOCLONAL ANTIBODIES:
VACCINES:
HORMONES:
This are antibodies that are produced from identical immune cells that are all clones of a unique parent cell.
When molecular biology techniques are used during the production of a vaccine, it can be considered as a biopharmaceutical.
They belong to the class of signaling molecules that are produced by various glands in any multicellular organism.
ENZYMES
BLOOD PRODUCTS:
CONJUGATES:
RECOMBINANT PROTEINS
Are catalyst protein molecules in cells, which brings about almost all the chemical reactions required for the sustenance of living organisms.
Can be broadly classified into two categories: fractioned plasma products, and blood grouping and phenotyping reagents.
Are made of a protein bound with another protein, peptide, sugar, or drug molecule; it’s made with an antibody and a drug, or antibody-drug conjugates (ADCs), are the most common.
Products considered under the scope of recombinant proteins include blood factors, interferons, fusion proteins, thrombolytic agents, interleukin-based products, tumor necrosis factors, and other products, which are not separately classified in the above-mentioned classes.
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GROWTH FACTORS: Are the signaling molecules between cells. They are responsible for stimulating cellular growth, proliferation, healing, and cellular differentiation.
Sensation Bringing Topicals Create Opportunities Topical drug delivery continues to gain importance in the pharma industry because it offers several advantages, including ease of self-administration, avoidance of first-pass effect, and prolonged duration of action. Topicals are also targeted, rather than systemic, and they are delivered to localized sites and are therefore safer for, for example, infants or the elderly. Under consumer demand, the topical pharmaceutical formulators are pressed for bringing in better sensory benefits in topical products and thus select excipients that offer these characteristics. --
Several topical pharmaceutical formulations, notably those used for acne treatment, will tend to offer greater cosmetic or aesthetic features. An aesthetically pleasant product is more likely to have patient acceptance. This feature also helps formulators differentiate their products in the competitive topical pharmaceutical market. Natural excipients or excipients derived from natural sources will be a major focus of attention for topical pharmaceutical formulators, as inorganic excipients are likely to face a gradual decline. TECHNOLOGY TRENDS:
CONSUMER TRENDS:
Gels and creams Increasing cases of skin disorders Increasing demand for self-administration and home healthcare devices
Transdermals
TOPICAL PHARMA TRENDS
Growing demand for better touch and feel experience during the application of topical formulations EXCIPIENTS TRENDS:
Nasal sprays, eye and ear drops Upcoming technologies: • Liposomes • Solid lipid nanoparticles • Micro-needles • Microspheres • Nanoemulsion • Nanoencapsulation
Excipients suited for enhancing sensory aspects of the formulation growing in demand Natural excipients or excipients derived from natural sources is a major focus of attention Different excipient chemistries compete in a category based on price
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DRIVERS
Growing Importance of Dietary Supplements Drives Excipients in Nutraceutical Space Consumer compliance and convenience giving rise to novel dosage formats, such as gummies, chewables, ODTs, etc., leading to growing use of different types of excipients in nutraceuticals
Preference of direct compression technology over wet granulation for tablet manufacturing favors directly compressible excipients.
RESTRAINTS
2019
Clean label, non-GMO, and organic requirements limit the growth of some excipients in nutraceuticals
2024
Growing price competition in the nutraceutical markets restrict the use of high-priced excipients
CAGR +4-5%
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Upcoming ban on titanium dioxide in France is driving the use of few excipients, such as calcium carbonate and HPMC
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US and Europe face competition from imports of some nutraceutical excipients
PERSONAL CARE INGREDIENTS
Consumer Driven Cosmetics and Personal Care Ingredients Personal care ingredients, an area that has been a focus for many global specialty chemical giants over the last decade, is long being driven by natural products and sustainability concerns. In addition to these mega trends, others have emerged. Currently, we see three trends that are expected to impact the personal care industry in the future.
LOCAL CULTURE INCLUSIVE BEAUTY MINIMALISM
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LOCAL CULTURE
The tend of increasing adoption of local culture in developing personal care products, especially in developing countries, was always present in some form, as can be seen by the importance of traditional Chinese medicine or Ayurveda in developing personal care products in China and India. However, it was largely restricted to local formulators in these regions. For example, in India, Vicco is a popular brand for some products that are made using traditional herbs. However, in the last several years, the multinationals have started marketing their products with the traditional angle—for example, using Ayurveda in their new products. Lever Ayush, a toothpaste from Unilever, is an example. This trend could drive the growth of natural ingredients more quickly in developing regions.
INCLUSIVE BEAUTY The trend of inclusive beauty is mainly impacting color cosmetics and makeup products, with large color cosmetics brands launching different foundation product lines for all skin types. For instance, L’Oréal’s Accord Parfait with 28 different skin tones and Maybelline’s Fit Me! with 20 skin tones follow an inclusive beauty trend and push toward customized beauty products. Currently, this trend is strong in the United States, Europe, and to some extent in Brazil; it is expected to catch up in other markets. The trend is expected to drive the demand for ingredients such as titanium dioxide and iron oxides that are used in customized foundations.
MINIMALISM The third key trend that we see in the market is the minimalism trend. It originated due to the search for simpler formulations with as few ingredients as possible to maintain product effectiveness, which may be linked to more-conscious consumption, with more skin-friendly products for the consumer. From an industry point of view, this movement is to reduce cost by using multifunctional ingredients as well as simplify processing, as manufacturers must use fewer ingredients. This also leads to a movement toward multifunctional ingredients and the emergence of blends in all groups of ingredients.
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Industrial Surfactants: Early View Of Growth Expectations Per Region To complete our overview of key trends in some specialty chemicals segments, here is some information about the in progress research on the market of surfactants in industrial applications.
trade war, and the tense Middle East political situation, The overall CAGR forecasts in the regions analyzed are are all factors that are expected to indirectly affect the the strongest in developing markets. consumption of surfactants in industrial applications. Europe is affected by slowing automotive and relat- Eastern economies will suffer the most from this. U.S. ed industries (notably, tires) and is expected to wit- demand has been strong in 2019, but growth is expectness the most sluggish growth between 2019-2024. ed to slow down in the near future and stabilize at 1.82.1% after 2020. In Europe, growth over 2019-2024 is The U.S. market sustained growth and has an optimistic expected to be below 1%. forecast in 2019. In Southeast Asia, consumption varies between industries across different countries; how- China’s consumption will be growing over 2%, but ever, overall sales of industrial surfactants have not de- growth will be inequal between applications. clined, as stronger demand is expected from 2019-2024. Smaller markets such as Brazil, the Middle East, and The strongest growth potential over the next five years Southeast Asia will actually present more positive is forecast for the Middle East. growth potential. Brazilian consumption will be driven by strong growth, expected to come from crop protecWhile surfactant consumption in HPC application is tion and oil and gas applications; with even stronger usually less prone to cyclicality, industrial applications growth, the Middle East and Southeast Asia are expectare expected to be more affected by a relatively ad- ed to reach an average CAGR of almost 4% by 2024. verse economic environment. Uncertainty caused by the Brexit, the Sino-American
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About Kline
Kline is a leading global management consulting and market research firm that provides reliable data, expert insights, and successful solutions across a diverse array of markets. Building on 60 years of experience in the chemical industry, our distinctive series of market research reports combine intensive primary research input and trusted secondary resource data. www.Klinegroup.com
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