In search of lower costs and new market opportunities, both suppliers and consumers of specialty chemicals are looking to the East. In particular, those in the specialty biocides and specialty raw materials industry sectors are focusing on the lions of
the Asian market -- India and China -- as a means to gain a competitive advantage.
"Asia has already emerged as a key growth market, both in terms of supply and demand, as well as a source of cheap generic chemicals and raw materials," says Gillian Morris, industry manager for the Chemicals Practice of Kline's research division. "China and India will continue to lead the pack as their economies develop even further, offering both opportunities and threats to global suppliers of specialty chemicals."
Both China and India have outstripped the U.S. and Europe in terms of GDP growth over the last five years, and this trend is expected to continue. India's GDP growth for 2004 is forecast at 5.9%, and China's is forecast at 7.5%, according to the International Monetary Fund's World Economic Outlook database. Inflation has remained very low in China over the long term and has been steady in India since 1999, making these countries' markets attractive alternatives to the mature markets in the United States, Europe, and Japan.
China in particular has become an important competitor to Western chemicals suppliers, but several opportunities may be found to meet the demand for biocides within China's growing industrial base and its rising population.
"As China continues to increase its industrial production, it will need biocides for water treatment chemicals, adhesives and sealants, metalworking fluids, paints and coatings, and other applications, including cosmetics and toiletries. And with an economy that is more open to foreign trade and investment, a Western company with a good market entry strategy could do very well in China," says Morris.
But that market strategy must also include a defense against generic products, she cautions.
"As in the international markets, new products in the Chinese market will face significant pricing pressure from domestically supplied generics, particularly in regard to biocides," says Morris.
Demand for specialty chemicals and raw materials are also on the rise in India, particularly for cosmetic and toiletry applications. In fact, the Indian cosmetics and toiletries industry, currently estimated by Kline at Re $3 to $4 billion (U.S.) at the retail level, has been growing at an average annual rate of 10% over the last five years.
"With a continuing increase in per capita income, accompanied by reduced excise taxes, we expect this impressive growth rate to be sustained or even increase in the coming years," says Morris.
