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Chemical Industry Market Report 2006
Key Note Publications Ltd, Nov 2006, Pages: 107
The chemical industry is the largest manufacturing sector in the UK, which is in turn among the top ten chemical-producing nations in the world. UK manufacturers' total sales of chemicals and chemical products increased by an estimated 12.6% between 2001 and 2005, to £55.1bn at manufacturers' selling prices (msp). Growth would have been even faster but for the impact of the global economic slowdown that occurred in 2001 and 2002, together with the intense competition within the industry, which has affected UK suppliers' sales and held back price increases.
Although this report focuses on the UK, the chemical industry is a highly globalised sector, which processes raw materials and supplies intermediates (semi-processed raw materials) to other manufacturing industries in the UK and worldwide. Consequently, the industry is strongly dependent upon the performance of the international economy and on global prices for raw materials such as oil and other commodities. Indeed, the chemical industry is vulnerable to slowdowns in the wider economy, because its products are used in almost all manufacturing sectors, from electronics to pharmaceuticals, and its output forms the basis for a host of everyday products.
The industry is dominated by international companies and has experienced a wave of consolidation over the past 5 years. However, there are still many small companies in the biotechnology sector and some of the largest companies have demerged their life-sciences and agrochemical interests.
It is forecast that UK manufacturers' sales of chemicals and chemical products will continue to increase at a healthy pace over the next 5 years. Growth is expected to slow in 2007 and 2008 as the global economy slows and as extra capacity comes onstream, depressing prices. However, global economic growth should begin to accelerate again in 2009 and 2010.
Overall, the long-term outlook for the UK chemical industry appears positive, although there are likely to be significant changes within the industry over the next 5 years. UK production of relatively simple chemicals is likely to decline as these activities continue to be transferred to lower-cost bases in the developing world. However, the hi-tech, high-value-added end of the market, where the UK has a significant competitive advantage, should continue to expand at a rapid rate. The pharmaceutical industry, in particular, is likely to experience continued strong growth.
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