Asia Pacific Chemical Sector in Midst of Steady Recovery

By Mahesh Hegde

Asia Pacific (APAC) chemical sector has been staging a tentative recovery from tough economic phases over the past few years. Driven partly by China’s surging chemical demand, the sector is likely to gain an uptick owing to a leap in merger & acquisition deals, and investment activity in the region. A challenging and steadily recovering global economy is leading towards increased joint ventures in APAC.

Changing regulations to influence growth of chemical sector

European Chemicals Agency (ECHA) imposed REACH and CLP regulations related to chemical manufacturing in the previous decade. ECHA helps chemical companies in complying with the legislation, advancing safe utilization of chemicals and providing associated information as well as addressing concerns. These regulations aim to ensure the protection of environment and human health from hazards associated with chemicals and their production, promoting alternative procedures for assessment of hazardous substances, while enhancing innovation and competitiveness.  

REACH and CLP regulations are not only impacting Europe but also influencing the chemical sector in Asia Pacific. Several APAC countries have reviewed their chemical policies & regulations, referring to REACH as a model. For example - India published the Draft National Chemical Policy, aiming to consolidate multiple legislations into one law. In addition, Korea introduced K-REACH, the Registration & Evaluation of Chemical Substances Act. Even Japan has followed the footsteps of the European REACH regulation. Representatives from Japan and Korea visited ECHA for learning more about the way of ECHA’s implementation of REACH and CLP regulations. These incidences have made rapid changes to the chemical sector in Korea, India and Japan, focusing more on public health, safety and environment. Formerly, Indian chemical sector discerned REACH and CLP regulations as technical barriers, however, post-initiative of Confederation of Indian Industry (CII) as well as Sustainable Support Services, events were organized across the nation for creating awareness about REACH compliance.

Rough patch in chemical sector seems to be getting over

Asia Pacific has emerged as a hub for chemical manufacturing and exports over the recent past. This has led several global leading companies to not only make huge investments in the region’s chemical sector but also set up their own sites to increase their presence in this emerging market. In a bid to consolidate its position in this lucrative market, BASF has invested in setting up a research and development centre in Mumbai, India. The plant will focus on R&D initiatives in the spheres of personal & home care products, organic synthesis, process development, and crop protection. This new plant of BASF comprises state-of-art laboratories for analytics, process development, application and chemical synthesis. According to Raman Ramachandran, South Asia’s head of BASF operations, nearly $340 million has been invested in R&D and manufacturing over the past four years. He also stated that with initiatives such as Swachh Bharat, Smart Cities, and Make in India, the country is experiencing robust and sustainable development, paving significant opportunities for the chemical sector.

The impending National Chemical Policy of the Indian Government promises to offer an enabling environment, create duty structure and infrastructure facilities for the chemical sector. Managing director of VAV Life Sciences, Arun Kedia, stated that shifting the focus of the speciality chemicals industry from trivial chemical molecules towards functionally demonstrable solutions will solve specific customer challenges or bring about significant improvements in industrial applications. In addition, Sanjeev Gandhi – member of the Board of Executive Directors of BASF SE for Asia Pacific region, stated that worst for chemical sector in the region is behind, and steady improvement will be witnessed in demand. He expects commodity chemical producers to recover at a slow pace in the near future.

Focus shifting to improve chemical enterprises’ regulatory compliance work

The Summit Meeting on Chemical Regulations (SMCR) in Asia Pacific acts as a pioneer for communicating regulations associated with chemicals in the region. SMCR invites industry representatives, officials, and chemical regulatory experts for sharing updates and compliance solutions. This further assists collaboration among APAC countries builds transparent sharing of enforcement measures and regulatory updates and promotes sustainability & safety of chemical industries in the region. According to a recent SMCR held in 2016 in Tokyo, Japan, Asia Pacific is treading along to become one of the most promising markets for chemicals across the globe, catering to one-third of the global demand. Under strict inspection and supervision of authorities such as China’s National Registration Centre for Chemicals (NRCC), the chemical sector in APAC is now focusing on improving the chemical enterprises’ regulatory compliance work, and stability in production & trade. They are also concentrating on turning challenges faced by chemical enterprises into opportunities while resolving technology gaps, increased costs and lack of experience.

APAC’s Importance to Chemical Industry Can Never be Underestimated - EDB, Singapore

The Government of Singapore’s Economic Development Board (EDB) plans & executes strategies for sustaining Singapore as the leading global center for investment and business. According to EDB, APAC’s importance to chemical industry can never be underestimated. The rapidly growing middle class population of Asia demands more consumer goods & electronics, better crop yields, and improved water treatment - all of these involve design of cost-efficient, advanced chemical systems. The board also estimates huge demand for chemicals to be used in the production of electronics and machinery for use within the region as well as for export. In addition, growth prospects for various specialty chemicals are being leveraged by surging demand from end-use industries, especially for mining, polymers and electronics.

EDB also projects demand for oilfield chemicals to soar on the back of APAC’s quick-paced upstream activity. According to EDB, a necessity for innovation, coupled with industry consolidation, will cause turbulence in every aspect of traditional manufacturing, transport, and utilization of speciality chemicals in Asia. However, better living standards and stellar economic growth can herald a bright future for the entire chemical sector in Asia Pacific.

The prospects of APAC chemical sector look encouraging, with diminishing uncertainty calming nerves across the supply chain. Although the sector has gone through its share of ups and downs, its return to a period of sustained growth can boost investor confidence. Introduction of new, innovative products appears can catalyze growth, giving a fillip to sectors which have borne the brunt during the period of sluggishness. However, chemical companies can adopt strategies to create opportunities for profitable growth including smarter portfolio management, digitization, and value capture.

Author: Mahesh Hegde is Features Writer at Future Market Insights.