Global Chemical Industry: An epilogue M&As in 2015

Global Chemical Industry: An epilogue of M&As in 2015

5:00 AM, 28th December 2015
Global Chemical Industry: An epilogue of M&As in 2015
Aerial view of Oil refinery in Louisiana - an example of chemical industry. © Wikipedia

The global chemical industry witnessed some major mergers and acquisitions through the year 2015 which not just strengthened the dynamics of the industry but also achieved a promising growth throughout the year. takes you through the nuances of the journey that this industry made during the year.

By Debarati Das

Year 2015 inked some major deals and cracked some path defining acquisitions across the globe. While US chemical industry presented steady growth, the Asian industry defined the dynamics of the industry dominating the sphere even while battling slowdown and the Chinese market as ever held the market strong with maximum deals. Europe, this year was however disappointing in the trail while India has started to show the confidence of moving upwards.

2015 - The year in passing

Even though the year 2015 started on a slow note for the chemical industry globally, the numbers quickly picked up in the second quarter and became steady by the third quarter of 2015. The first quarter was mainly driven by four megadeals, which collectively valued at over $9.1 billion. One of the deals being that of US-based Dow Chemical Company’s merger with US-based Olin Corp. The deal was completed in October this year, Olin announced.

The second quarter of the year saw growth in volume, however, deal value declined substantially to just over $210 million. According to PwC report, this was the lowest quarterly average deal value since the third quarter of 2013. The highlight of this quarter was the $1.5 billion deal of China-based Henan Billions Chemicals Company’s acquisition of 100 percent equity stake in rival Chinese titanium dioxide (TiO2) producer, Sichuan Lomon Titanium Industry Co. In this quarter, speciality chemical segment also was an attractive domain to investors.

The third quarter, on the other hand, saw strong growth in value when compared to second quarter but volume declined. PwC reported that the value in this quarter was driven by seven deals over $1 billion with a total value of just under $24.5 billion. As a result, despite an overall decrease in deal volume, the mean deal value jumped to more than $920 million, the strongest showing in the past three years. In this quarter, fertilizers & agricultural chemicals remained strong segments of investment, with each segment being responsible for more than 42 percent of activity in the chemicals sector.

Geographical Dynamics

Asia has been the key driver of the industry throughout the year inking maximum number of deals while Europe consistently lagged behind. In first quarter 2015, Asia’s deal volume witnessed 31 deals, which valued at almost $6.5 billion out of which 24 of the deals were driven by China-based companies. North America bagged nine deals valued at more than $10.7 billion in this quarter.

In the second quarter, sluggish market weakened the Chinese market, yet the Asia and Oceania region accounted for 39 deals valued at over $7.6 billion in the second quarter. In the third quarter, Asia yet again drove 42 percent of global activity despite slow-down in economic activity. This was followed by Europe with 26 percent of activity, and North America with 24 percent, according to PwC report.


The Indian outlook

With the domestic market size of $139 billion, the Indian chemical industry accounts for only 3.3 percent of the global chemical market. However, it accounts for 15 percent of India’s total industrial output. According to a report by Tata Strategic Management Group, the Indian chemical industry is expected to grow at about 9 percent annually to $214 billion by the first quarter of 2019.

The growth of this industry has constantly faced critical challenges such as the availability of feedstock, infrastructure, scale of operations, access to technology and absence of single window approach for doing business in the country. Moreover, India is highly import dependent for most of its chemical needs and with the inverted duty structure, raw materials are taxed at higher rate than the end product.

However, despite these road-blocks, the industry has also witnessed an increase in R&D investments and rise in collaborations. Along with this, the ‘Make in India’ initiative is also playing a pivotal role to stimulate growth in the chemical industry.

© Worldofchemicals News



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