IAL Consultants is a global chemicals consultancy that specializes in market research for polyurethane, as well as other key areas such as thermal insulation, flavours & fragrances, adhesives & sealants and other specialty chemicals.
Founded in 1966 as Industrial Aids Limited, IAL has over 40 years experience working with the world’s leading chemical companies. It was acquired by Business Research Group (BRG) in 1995 and works in partnership with IRL, which provides analysis services to the paints and coatings industries.
We spoke to Robert Outram, Director at IAL, to gain some insight and analysis into the latest developments in the chemicals industry.
Q1. In your opinion, what are the three biggest challenges facing the chemicals industry in 2016? How will these changes influence the industry and how will market players respond?
Robert: Oil Price – the low oil price is making it hard to achieve profit margins as customers are expecting cheaper products. This, along with the slowdown of economies, and over supply scenarios in some markets, has meant price wars are driving prices down and increasing competition.
Political uncertainty – the slow recovery in Europe, worries over the potential breakup of the European Union and austerity measures has restrained public confidence and, ultimately, affected spending. This has reduced demand for products and the chemicals used to make them. Political turmoil in Ukraine and the Middle East has also restrained markets growing as quickly as they should. The growth outlook of China is also raising concerns, particularly as there seems to be little faith in the official numbers published by the government.
Innovation – the ability to innovate is a huge challenge, from a technical standpoint and also a cost position. With budget cutbacks in R&D departments it becomes even harder for chemical companies to come up with new and exciting products that can drive value and profit.
Q2. What are the key trends in the polyurethane sectors in 2016? Are you seeing an increased demand for polyurethane foams in industries such as bedding & furniture, building & construction, automotive, packaging, etc?
Robert: Higher standards for polyurethane due to the better thermal performance for a given thickness.
Binders are a big growth area for PU to make chipboard and also products like rubber crumb for children’s playgrounds and athletics tracks.
Cold chain is growing in Asia and Middle East. Refrigerators and cold storage warehouses are also growing in number.
Q3. Do you expect the Asia-Pacific region to remain the dominant market for polyurethane? What factors are affecting the demand for thermal insulation products in Asia?
Robert: Asia will remain the biggest in terms of PU manufacturing volume but we will see changes in the supply chain. For instance, we see companies shifting out of Asia region.
Eastern Europe is becoming bigger too with large companies like Samsung moving its manufacturing to countries like Hungary. Eastern Europe is in competition with Asia in some respects with regard to supplying the Western European markets.
Q4. Where do you see the paints, coatings & inks sectors heading in the next five years? Are there any specific areas (e.g decorative coatings or UV curing) forecast to grow during this period?
Robert: Water based technologies will increase in market share. Particularly in areas where solvent based is still dominant such as industrial coatings. High solids and powder coat technologies are also growing, again due to concerns over VOC’s.
Fire resistant coatings are also a key area of development.
Packaging inks also show strong growth, particularly in Asia, where food is being packaged more and more as opposed to being sold loose.
Q5. What have been the most important technological developments in the chemical industry over the last decade? How will these developments guide the industry in the coming years and what can we expect to see?
Robert: Fracking is the most game changing technology as it changes the balance of chemicals available all through the supply chain. Less cracking of crude oil means less aromatic chemicals are available and also some product streams, such as C3, are affected too.
Q6. What other industry do you find the most interesting outside of the ones you cover? Have you ever considered covering this industry?
Robert: IT and telecommunications is probably an area of most interest as the technology brought out there has so much impact on people’s lives and also has a knock on effect on other industries, such as the chemical and materials industry.
As Robert notes in the Q&A, the APAC region is expected to continue its dominance in terms of polyurethane products. A recent report forecast the total production of polyurethane products in this region to surpass 15.3 million tonnes by 2019.
It was also interesting to see Robert highlight fracking as a game changing technology. The rising global gas prices, and the need to bridge the gap between supply and demand, is acting as a driver for the global fracking market. We’re seeing the continued use of hydraulic fracturing to get fuel from unconventional energy sources.
We’d like to take this opportunity to thank Robert for his time and providing us with such revealing insights.
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About the Analyst:
Rob is a Director at IAL, currently heading up the development and expansion of IAL’s Global Polyurethanes Enterprise Database. Rob also acts as a Project Director on ad-hoc consulting projects.
Rob joined IAL from Frost and Sullivan where he was Global Research Manager for the specialty chemicals group, with a focus on the automotive and transportation downstream applications. He has extensive experience working on consulting projects covering market entry strategies, value chain analysis, acquisition searches, strategic benchmarking, geographic expansion and due diligence. During the management of a global team of analysts, Rob gained experience of the PU and related materials such as additives in both the automotive sector and other applications areas.