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26. How is the global industrial gas market?

In 2005, the global industrial gas market is estimated to have been worth

USD50 billion, up by 4.2% y/y (Figure 3.27). Demand for industrial gases

is linked with a variety of industrial processes, such as metals production,

chemical synthesis, petroleum refining and electronics manufacture.

According to the end-use consumption pattern, metals, manufacturing and

fabrication account for 33% of the industrial gases consumption, followed

by chemicals and refining and electronics (Figure 3.28). Whether they are

used in steelmaking, metals manufacturing or fabrication, refining,

chemicals, healthcare, electronics or food and beverage processing;

industrial gases are valued for one or more of the properties of reactivity and inertness. The largequantities of oxygen, nitrogen and argon that are used in the steel and metal industry account for the

segments importance to the industrial gas market.

The industrial gas market is a highly consolidated one with the top five companies, namely Air Products,

Air Liquide, Praxair, BOC and Linde, accounting for almost 50% of the global capacity.

27. How is the regional demand for industrial gases?

Asia Pacific is the largest market for industrial gases with a share of

32% followed by North America at 30% (Figure 3.29). The Chinese

industrial gases market, in tandem with China's industrial sector, is

growing at a substantial rate. At present, the market accounts for

about 4-5% of the global industrial gas demand. According to

PricewaterhouseCoopers, the Chinese government is committing

more than USD85 billion to improve the environment and promote clean energy sources in preparation

for the 2008 Olympics in Beijing. Industrial gases companies have a huge opportunity to develop

technologies that reduce nitrous oxide emissions from coal-fired power plants.

Trends in the industry

28. What are the major consolidation trends of global chemical industry?

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The global chemical industry has witnessed significant mergers and acquisitions (M&A) in the past few

years. Major drivers for M&A have largely remained the same over the last 5 years, with occasional

exceptions. Generally speaking, M&As are useful for expanding product portfolio, geographical

expansion and attaining scale economies. In 2005, the global chemical industry M&A deal value reached

USD33 billion according to Young and Partners, the US based investment bankers. Deal value includes

deals over and above USD25m. In terms of deal volume, it decreased from a high of 85 in 2004 to 73 in

2005. Private equity or financial investors have been playing a significant role in the recent past with 36%

of the deals wrapped up by financial buyers in 2005. Notable acquisitions have been Access Industries

takeover of Basell along with the Chatterjee Group for USD5.7 billion.

In terms of industry segments, the commodity segment has recently been showing significant increase.

The share of commodity chemicals in total deals in 2005 was 59%, the first time since 1999 that

commodities have had the majority share (Young and Partners).

In terms of regions, Europe has been leading global M&A activity since 2001 as restructuring of

portfolios has been driving deals in the region. In 2005, Europe dominated global deals accounting for

49% of the total followed by Asia with 28%, the US with 24% and the rest of the world making up the

balance.

In deals involving strategic investors, a notable deal in 2005 was the UK-based INEOS acquisition of

Innovene, a subsidiary of BP, for USD9 billion in October 2005. Innovene is the petrochemical business

of BP Plc. INEOS was formed in 1998 and has grown rapidly through a string of acquisitions from ICI,

Dow, Degussa, BP, Enichem, Unilever and Solvay. This acquisition elevates INEOS to the worlds

fourth-largest independent petrochemicals company. M&A is expected to continue at a brisk pace in

2006, with active participation from both the strategic and financial players. There is also an expectation

that a few more block buster deals will come through in 2006.

29. What is the effect of globalization on chemical industry?

Today most major chemical companies have a presence across the globe. Emerging markets like China

and India in the Asia Pacific region have become hotbeds of action with major companies executing

ambitious plans in these regions. For example, DuPont is planning a TiO2 facility in Dongying, China by

2010 which will cost around USD1 billion. Globalization has helped companies achieve increased sales

and de-risk a companys business location through geographic diversification. As discussed in the above

section, a need to attain economies of scale and business expansion has led to consolidation of the

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industry. By geographical expansion, companies position themselves to benefit from the supply gap

existing in these regions and increase their overall earnings. For example, Henkel, Germany, acquired

US-based Sovereign Specialty Chemicals (SSC) in 2004 for the sum of USD575m. As 90% of SSC sales

were in the US itself, Henkel has enhanced its presence in the US market through this acquisition.

30. Which region has become a promising destination for western companies?

As an impact of the WTO, globalization has been improved and

increased foreign trade has led to a substantial increase in both

imports and exports of chemical products across the world. As

already discussed, Asia is a favorite destination for the majority

of the western chemicals companies. Many companies are

shifting their manufacturing activities to emerging markets such

as China where production cost is lower. According to Chemical

& Engineering news (C&EN), The Dow Chemical Company is planning to further globalize its R&D

operations by setting up a center in China employing 600 people by 2007. It will join companies such as

General Electric, Honeywell, Degussa, Hitachi Chemical, Toray Industries, and Unilever who already

have R&D in China. For many global companies, Asia contributes a significant chunk of revenues

(Figure 3.30). For example, 22% of Clariants total revenue comes from Asia.

31. Is outsourcing beneficial for chemical industry?

Outsourcing has been a common practice in the manufacturing industry for a long time being driven by an

improved international telecommunication infrastructure and lower professional labor costs. In the

chemical industry, outsourcing is very common due to its diverse segments and sub-segments that make

the industry highly fragmented and complex. Each player in the industry faces challenges - one of the

biggest being cost reduction, which is where outsourcing comes in. In recent times strategic outsourcing

supersedes tactical outsourcing and is increasing in all areas of the chemical industry. It goes far beyond

shifting capital investments from one owner to another. When done correctly, strategic outsourcing allows

assets to be used much more efficiently, thus enabling the company to maximize the return on assets.

DuPont, for example, acknowledged as a pioneer in offshoring, failed to meet its annual target in 2003 so

the company decided to accelerate the move of some of its facilities to emerging markets like China and

Eastern Europe. At present, 50% of DuPonts production, engineering and design are based offshore in

countries like China, India and the Philippines. Basic R&D is another area where many chemical

companies are off-shoring, though it might incur significant costs for certain companies. AT Kearney

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conducted a survey to understand the offshore practices of chemical companies (CMR Volume 265,

Number 4). According to their findings, engineering/technical/R&D constitutes 36% of the total activities

that are outsourced by the chemical companies. These R&D activities include design and process

documentation, product development and pilot plant manufacturing simulation.

32. Is petrochemical industry bullish about the future conditions?

Despite the spate of natural disasters in the form of Hurricanes Katrina and Rita in the third quarter of

2005, which severely affected the oil and gas industry along with the petrochemical industry, the year has

been good overall for the petrochemical manufacturers. The petrochemical industry is in fact gradually

approaching its peak of the current cycle and industry observers are of the opinion that the approaching

peak could eclipse the last peak which was achieved from 1988 to 1989. During the past two years, global

ethylene operating rates have been improving gradually and have exceeded 90% in 2004. This is expectedto touch 95% by 2006. Propylene operating rates are also following a similar pattern.

Companies have been able to pass on the high energy and feedstock pieces to the end consumers and

North American petrochemical producers have witnessed a return to profitability since 2004. This

followed a tough period between 2001-2003 when producers were affected by weak demand, high costs

and excess capacity. Lyondell Chemicals for example has witnessed its net sales go up by 213% to

USD18.6 billion while its profitability has grown by 883% to USD531m in 2005. The improvement was

driven by strong performance in the ethylene and propylene oxide segments coupled with the full-year

ownership of Millennium Chemicals. The results of other petrochemical companies like ExxonMobil

Chemical and ChevronPhillips Chemical were impressive in 2004 and 2005.

Sinopec, the main petrochemical producer in China, believes that the petrochemical industry is at the top

of the cycle. Bullish about future conditions, the conglomerate has spent billions of dollars on various

projects in 2005 and shows no sign of slowing down. According to Chemical Market Associates Inc

(CMAI), global industry wide EBIT remained well above reinvestment levels in 2005, averaging USD130

per metric ton for the year which is indicative of petrochemical cycle peaks. To capitalize on the cycle

peak major expansions have been taking place mainly in the Middle East. This is because in natural gas

rich regions, such as the Middle East, ethylene plants based on ethane feedstock are more popular. These

ethylene plants which are based on fixed natural gas prices (US$0.75-1.5/mmbtu, as per Oil & Gas

Journal /Dec 5, 2005) produce the lowest cost ethylene in the world.

33. What is the global outlook for chemical industry?

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According to BASF Group, in 2006 world chemical production growth is expected to be 3% with Asia

(excluding Japan) accounting for highest growth of 7.1% followed by South America and the US with a

3.8% and 2% growth rate respectively.

According to PriceWaterHouseCoopers, Chinas emerging presence as importer, processor, consumer,

and exporter of industrial chemicals will reshape the economics of the industry. It is forecast to become

the third largest chemical producing country by 2006, behind the US and Japan, but ahead of Germany.

Major inorganic chemicals such as chlor alkali and soda ash are expected to show healthy growth rates in

2006 after some products saw a dip in demand in 2005 due to the hurricanes that swept across the US

Gulf Coast region in August and September.

According to Potash Corp, Fertilizer demand in Asia and Latin America is expected to increase by 2.6%

and 3.2% per year respectively through to 2010, while growth in Eastern Europe and the Russian

Federation is expected to be 4.8% and 3.5% respectively, per year. The global outlook for the industrial

gases industry is encouraging. The use of fossil fuels is continuing to damage the environment and at the

same time energy requirement is rising. Hydrogen will be the environment friendly fuel of the future.

The biggest challenge the chemicals industry is going to face in 2006 is the rapidly increasingprices of

oil and natural gas which is used for energy and feedstock purposes. The profitabilityof companies will

depend on whether they are able pass on this high raw material costto end-use consumers or not.

Growth Drivers

Major growth drivers

34. How is Chemical industry feeding other industries?

The chemicals industry has grown at a compounded annual growth rate

(CAGR) of 4.04% from 2001 to 2005. The chemicals industry is known

as the enabling industry, as it provides the input for many other major

industries (specified opposite) (Table 4.1). The industries that use the feed

from the chemicals industry are called end user industries. Hence growth

in end-user industries will, in turn, drive the growth of the chemicals

industry.

The emerging economies including India and China have maintained their

GDP growth in 2005 with India registering a growth of 8.1% and China a

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growth rate of 9.2%. The GDP growth rate of the US declined in 2005 due to hurricanes Katrina and Rita

and Japans GDP growth rate saw a marginal decline from 2.9% in 2004 to 2.1% in 2005 (Figure 4.1).

Overall, the GDP growth across the major regions was good, with the exception of Brazil. These growing

economies help the growth of end user industries which, ultimately, will drive the growth of the

chemicals industry.

Substitution of conventional materials

35. How are innovative chemical products driving the growth of the chemical industry?

Research and development has led to the innovation of

chemical materials that can substitute for more traditional

and more expensive materials (Table 4.2). The substitution

of conventional expensive materials with the cheaper

chemical alternatives has brought down the cost of theproducts in which the substitiute materials were used. The

cost reduction has, in turn, increased the affordability and

thereby the consumption of these products. In the

automobiles sector, plastics are widely used since they are

much lighter than steel components. By reducing the vehicle weight, fuel consumption can be

considerably improved.

According to an industry thumb rule, a reduction in vehicle weight of 100 kilograms will bring down fuel

consumption by 0.35 liters per 100 kilometers. Industry estimates suggest that using around 14% plastic

in cars saves more than 400m liters of fuel in Germany every year.

International trade

36. How has globalization helped the Chemical industry?

The spread of the chemicals industry across borders and increasing

globalization, has improved foreign trade and helped drive growth in the

industry. The decreasing importance of national borders as a barrier to

trade has led to a substantial increase in both imports and exports of

chemical products, benefiting those countries with well established

chemical industry markets.

In the US, for example, chemical exports (excluding pharmaceuticals) are estimated to have grown by

10% in 2005, according to Chemical and Engineering News (Figure 4.2). More than one-third of the

chemicals produced globally are now traded on the international market. In 2005, the total chemical

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export from the US is estimated USD94.66 billion and has grown at a rate of 10% compared with 2004.

Organic chemicals and plastics accounted for 59% of the overall exports. The export of inorganic

chemicals grew at an impressive rate of 22% to USD7.58 billion in 2005 from USD6.19 billion in 2004.

The US import of chemicals increased from USD78.17 billion in 2004 to USD87.51 billion in 2005,

growing at a rate of 12% on a y/y basis. The import of organic chemicals alone accounted for 43% of

overall chemical imports by the US, a figure growing at a rate of 6% to USD37.43 billion in 2005. The

import of fertilizers grew by 35% to USD3.55 billion in 2005 while the import of plastics and inorganic

chemicals registered a robust growth of 19% and 18% respectively for the same period.

According to Chemical and Engineering News, the Japanese export

of chemicals (excluding pharmaceuticals) grew by 15% to

USD71.94 billion in 2005 from USD62.52 billion in 2004 (Figure

4.3). The export of organic chemicals accounted for more than a

quarter of the total Japanese chemical exports. The exports of

organic and inorganic chemicals grew by 23% and 18%

respectively in 2004 compared with that of 2003. The import of

chemicals increased from USD40.96 billion in 2004 to USD45.50 billion in 2005, growing at a rate of

11% on a y/y basis. The import of organic and inorganic chemicals grew by 15% and 25% respectively in

2004 compared to 2003.

In Europe, Germany was the largest exporter and importer of chemicals. In 2004, chemical exports in

Germany grew by an impressive 21% to USD122.51 billion and imports grew by 12% to USD80.59

billion. Chemical exports from Belgium increased by 10% to USD93.06 billion in 2004 and its chemical

import increased by 14% to USD75.99 billion in the same year compared with 2003. In France, chemical

export and import was USD68.53 billion and USD54.97 billion respectively in 2004. Chemical export in

the Netherlands grew by 15% to USD55.47 billion in 2004 compared with that of 2003.

The Chinese chemicals industry a key growth driver

37. Which country generates the highest demand for industrial chemicals?

The Chinese chemicals industry is one of the key drivers of the global

chemicals industry. Chinas strong GDP growth (9.2% in 2005)

ensures growth in the chemicals industry which is dependent upon

end-user industries such as the manufacturing, automobile,

agriculture, and housing sectors. China is the fastest growing

chemical consumer in the world. According to Chemical and

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Engineering News, Chinese chemical imports (excluding pharmaceuticals) increased by 17% to

USD48.42 billion in 2005 (Figure 4.4).

Chemical exports grew by an impressive 27% to USD30.08 billion in 2005 compared with 2004. In 2002,

Chinas chemical consumption accounted for about 15% of global demand and, according to Goldman

Sachs, it is estimated it will account for almost 20% of global demand by the end of 2006. Chinas

growing presence as an importer, processor, consumer and exporter of industrial chemicals is expected to

reshape the economics of the global chemicals industry.

38. Which factors are expected to drive the demand for chemical industry?

The rise in industrial demand with the growth in economy, especially the emerging economies such as

China and India, is expected to drive the growth of the chemicals industry in the future. Moreover, the

substitution of conventional more expensive materials with new, innovative chemical materials will

increase in the future and this substitution is expected to further drive the growth of the chemicals

industry. For example, by 2010 cars will have a plastic content of 19 20% compared with 1315% in

2005. This will trigger the growth of engineering plastics in the world. International trade is expected to

increase with the continuing robust growth of the emerging economies.

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Markets

39. How was the performance of chemical industry in 2005?

The momentum of 2004 was carried forward to 2005, a greatly improved year in the chemicals industry

with companies posting strong results. But rising feedstock prices, and hurricanes Katrina and Rita, made

the second half of the year challenging for the chemical industry, particularly in the US. The chemical

industry is sensitive to natural gas prices because natural gas is used as a feedstock and as an energy

source to run various processes. The global chemical industry is dominated by the US, who is, in turn,

driven by heavy demand from the end-user industries that are fuelling the growth of chemicals.

North America

40. What is the market size of the US chemical industry?

In 2005 the US witnessed industry-damaging hurricanes, rapidly

increasing costs, and a slower production growth rate, all leading

to large price increases for most chemicals, especially organics.

The storms cut production, especially basic chemicals, further

boosted oil and natural gas costs and damaged the transportation

infrastructure, preventing products from moving in or out.

Despite all these unfavorable factors, the US chemical industry

managed to keep its balance. The market size of the US chemicals industry is estimated at USD267billion in 2005, up 4.7% over 2004 (Figure 7.1). It has grown at CAGR of 1.1% from 2001 to 2005.

41. How was the segmental growth rate for the US chemical industry?

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According to Chemical and Engineering News (C&EN), total basic chemical production for 2005

dropped 6.6% over 2004, with a 1.5% decline in inorganic chemicals and a 9.3% fall for organic

chemicals. The price index for total chemicals rose 9.5% in 2005,

compared with a 7.2% increase for all commodities produced in the

US. In chemicals, the growth of plastic resins was the largest, rising

18.9% over 2004. Basic chemicals, the largest industry segment,

showed an average price growth of 13.9% that accounted for the

14.8% increase in basic organic chemicals and 11.2% rise in basic

inorganic chemicals. Most producers, especially basic chemicals producers had to raise prices to offset the

increase in oil and natural gas prices.

A comparison of growth figures of GDP and the chemicals industry from 2002 to 2005 revealed that the

chemicals industry recorded an estimated growth of 4.7% in 2005 and the GDP grew by 3.5% over the

previous year (Figure 7.2).

In 2004, base chemicals accounted for 49% of chemical sales followed by specialty and fine chemicals at

35% and consumer chemicals at 16% (Figure 7.3). The chemical

market consists of base chemicals such as petrochemicals, inorganic,

fertilizers and industrial gases; specialty and fine chemicals which

include agrochemicals and consumer chemicals.

42. How is the outlook for the US chemical industry?

After the hurricanes in 2005 there are better prospects for the US chemical industry in 2006, but

uncertainty related to energy prices, exchange rates and possible geopolitical shocks still exist. The

question in any forecast for the cyclical chemical industry is what the total economy is expected to be

like? According to the credit assessment firm Fitch Ratings, the chemical industry expects commodity

chemical producers to realize peak profitability in the first half of 2006. The duration of the peak margins

depends on economic growth and the volatility of raw material costs. While they are expected to remain

high, these costs are predicted to be moderate by year-end 2006.

Canada

43. How did the Canadian chemical industry perform in 2005?

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The Canadian chemical industry in 2005 was much like the US, but without hurricanes. Production was

low, but price increases drove the value of shipments higher. The market size of the Canadian chemical

industry is estimated at USD25.5 billion in 2005, up 6.3% over 2004 (Figure 7.4). It has been estimated to

grow at a CAGR of 3.0% from 2001 to 2005.

Considerable cost pressures from high raw material and energy prices and from the strength of the

Canada-US exchange rate continued to impact Canadian chemical companies in 2005. Canadian

production volumes of major chemicals dipped somewhat in 2005. According to the Canadian Chemical

Producers Association (CCPA), sales volumes of basic chemicals and resins dropped by 2% while prices

increased by 8% in 2005. According to C&EN, Canadian prices for

organic chemicals jumped 10.7%, while inorganic prices rose 7.0%. A

comparison of growth figures of GDP and chemical industry in Canada

from 2002 to 2005 revealed that the chemical industry recorded an

estimated growth of 6.3% in 2005 and GDP grew 2.8% over the

previous year (Figure 7.5).

The basic chemicals segment is the biggest segment in the Canadian chemical industry, accounting for

44.0% of its total chemical share in 2004, followed by specialty and fine

chemicals (Figure 7.6).

44. What is the future outlook for Canadian chemical

industry?

Canadian chemical producers are optimistic about 2006. CCPA forecasts that volumes in 2006 will

increase by 5%, whereas prices are expected to increase by 6%, driving up sales by 12%. Operating

profits are forecast to surge by 33%. The North American petrochemical producers are primarily natural

gas based and the key concern is to remain globally competitive, while facing higher natural gas

feedstock costs than offshore competitors who are primarily oil-based. North American natural gas prices

have risen to become the highest in the world. Another key factor that could negatively impact growth

prospects is further increases in the Canada-US exchange rate. A high Canada-US exchange rate willmake Canadian exports uncompetitive. Inorganic chemical producers are also facing increased energy and

raw material costs and the impact of the high Canada-US exchange rate.

45. Who are the major players of North American chemical industry?

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DOW Chemical Company: The Dow Chemical Company, the largest chemical company in the US is a

leader in the production of plastics, chemicals, hydrocarbons, herbicides and pesticides. The company

also manufactures commodity chemicals (chlor alkalies and glycols) and agricultural chemicals. It has

156 manufacturing sites in 37 countries and supplies more than 3,200 products. In 2005, it reported

annual sales of USD46.3 billion, 15.29% higher than the previous year sales of USD40.16 billion.

DuPont: DuPont was founded in 1802 and incorporated in 1915. It is the 67th largest US Corporationin

the Fortune 500 list. DuPont operates in a wide range of disciplines, including high performance

materials, synthetic fibers, electronics, specialty chemicals, agriculture and biotechnology. It has a

presence in about 75 countries worldwide and about 55% of its revenues come from sales outside the US.

DuPont caters to many markets such as automotive, textile, construction, agricultural, medical, packaging,

electronics, nutrition and health markets. In 2005, its net sales amounted to USD26.6 billion, declining

2.56% over 2004.

ExxonMobil: The ExxonMobil Corporation is engaged in the energy and petrochemical business.

Throughits divisions and affiliated companies, ExxonMobil operates in the US and 200 other countries.

Its principal businesses are exploration and drilling of oil and natural gas, sale of crudeoil and natural gas

and the manufacture of petroleum products. The company is also a manufacturerand marketer of basic

petrochemicals including olefins, aromatics, polyethylene and polypropylene plastics and a variety of

specialty products. It also has exposure to electricpower generation. In 2005, the company reported total

sales of USD358.95 billion, up by23.2% from 2004.

Bayer: Bayer is one of the leading multinationals in chemical industry, specializing in health care,

nutrition and innovative materials. Its global product portfolio comprises 5,000 products. Headquartered

in Leverkusen, Germany, Bayer operates in five continents through a networkof 350 group companies. In

2005, Bayer had revenues worth USD32.3 billion that increased1.89% over the previous year.

BASF: BASF is the world's leading chemical company having its operations in five continents. Itfocuses

on five segments: chemicals, plastics, performance products, agriculture production and nutrition, and oil

and gas. Production facilities in 170 countries allow BASF to meet customer needs in a better way in

terms of flexibility and, reliability. In 2005, BASFs salesrose 13.9% to EUR42.74 billion.

Europe (excluding the UK)

46. How was the growth of European chemical industry in 2005?

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According to CEFIC, the European chemical industry experienced a slowdown in its production growth

in 2005. External demand for chemicals was less dynamic due to a

deceleration in global economic activity but 2006 is expected to see

some pickup in production. The major factor shaping the European

chemical industry in 2006 will be the advent of REACH. The

market size of the European chemical industry is estimated at

USD525 billion in2005, a growth of about 2.9% over 2004(Figure

7.7).

It has been estimated by Cygnus to grow at CAGR of 3% for 2001-2005. The European Chemical

Industry Councilexpects output in the chemical industry (excluding pharmaceuticals) to grow by only

1.6% in2005, compared with 2.6% in 2004. External demand for chemicals was less dynamic due to a

deceleration in global economic activity. Domestic demand in Europe could not compensate for the

fallback in foreign demand.Having performed very well in 2004, specialty and fine chemicals activity

decreased as a result of weaker global demand, intensive

international competition and cost increases. A comparison of

growth figures of GDP and the chemical industry in Europe

from 2002 to2005 revealed that the chemical industry recorded

an estimated growth of 2.9% in 2005 andGDP is estimated to

have grown 1.5% over the previous year (Figure 7.8)

47. How was the segmental growth of European

chemical industry?

A major segment of the European chemical industry is the base

chemicals segment, which accounted for a 52% share in 2004.

Similarly the specialty and fine chemicals segment constituted 32% of

the chemical market. This segment consists of fine chemicals, other

specialty chemicals, paints, dyes and crop protection chemicals. The

consumer chemicals segment constituted the balance 16% (Figure 7.9).

The consumer chemicals segment consists of perfume, cosmetic

chemicals, soaps and detergents.

48. What is the future outlook of European chemical

industry?

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The European Chemical Industry Council predicts that 2006 will be a better year for the industry, with a

modest improvement. Production growth in 2005 was only 1.6% over 2004. In 2006, growth of 2.3% is

projected for the industry excluding the traditionally faster growing pharmaceuticals segment.

Encouraging signals from business, improved consumer confidence with increased export opportunities

should contribute to a recovery of the domestic economy.

49. Who are the major players of European chemical industry?

Akzo Nobel: Akzo Nobel, headquartered in the Netherlands, is active in pharmaceuticals, coatings and

chemicals. It operates in more than 80 countries and employs almost 64,000 people. It is one of the

worlds leading chemicals and coatings companies. It is also the worlds leading salt specialist and

produces chemicals found in everyday items such as ice cream, toothpaste, bakery goods, cosmetics,

plastics and glass. In 2005, its revenue stood at EUR13 billion, up

1.3% on its 2004 revenue.

Total Fina: Total Fina was formed in 1999 when France's Total bought Belgium-based Petrofina. It

became Total Fina Elf in 2000 with the acquisition of its French rival Elf Aquitaine. The company

renamed itself as TOTAL S.A. in 2003. Operating in more than 100 countries, the company has reserves

of 11.1 billion barrels of oil equivalent. It operates 28 refineries andmore than 16,000 Total, Elf, or Fina-

branded gas stations, mostly in Europe and Africa. Thecompany is also a major producer of chemicals.

The company reported total sales ofUSD169.43 billion in 2005 an increase of 1.9% over 2004.

Degussa: Degussa, headquartered in Frankfurt, Germany, and has 21 units that are grouped in 5

divisions: coatings and advanced fillers, fine and industrial chemicals (for pharmaceuticals, water

treatment, paper, and mining), construction chemicals (concrete additives), performance materials (super

absorbents, additives for personal care products and paints), and specialtypolymers. The company had

total sales of USD13.86 billion in 2005 a decrease of 5.2% overthe previous year.

UK

50. What is the overview of UK chemical industry in 2005?

The UK chemical industry manufactures a diverse range of

products. In Europe, the UK has a share of about 8% in the

chemicals market and ranks fourth in consumption. In 2005, the

market size of the UK chemical industry is estimated at USD45

billion. The industry is estimated to have grown by 4.6% over the

previous year (Figure 7.10).

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The UK chemical industry has grown at CAGR of 4.4% from 2001 to 2005, with the market size

increasing from USD37.78 billion in 2001 to USD45 billion in 2005. A comparison of growth figures of

GDP and chemical industry in the UK from 2002 to 2005 shows that the chemical industry recorded an

estimated growth of 4.6% in 2005 and GDP grew 1.8% over the previous year (Figure 7.11).

In 2004, the base chemicals segment constituted 47% of the chemicals market, followed by specialty and

fine chemicals at 41% and the consumer chemicals segment

contributing 12% (Figure 7.12).