presentation chemicals in developing and transition...

Chemicals in Developing and Transition Economies

Prepared for: The World BankMarch 28, 2007

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Study Objectives

Document and confirm or correct the hypothesis that chemicals production and use have been growing and continue to grow, at an especially rapid rate among the developing and transition economies over approximately the last decadeCharacterize current chemicals production and trade in the developing and transition economies, with respect to the specific countries and the chemicals and classes of chemicals being manufactured, imported, or exported, andEstimate corresponding future trends


Target Countries

MyanmarSri LankaPapua New Guinea

RomaniaCroatiaBulgariaAlbaniaUzbekistanTajikistanUkraineRussiaKazakhstanGeorgiaAzerbaijanArmeniaLibyaEthiopiaTurkeyTanzaniaZimbabwe

NigeriaKenyaAngolaTunisiaMorocco

AlgeriaSouth AfricaUAE(primarily

Abu Dhabi)

Saudi ArabiaOmanKuwaitIraqIranEgyptBahrainQatarJamaicaUruguayEcuadorBolivia

HungaryColombiaPeruTrinidad and Tobago

Chile

VenezuelaArgentinaBrazilPolandBangladeshPakistanVietnamPhilippinesThailandMalaysia

IndonesiaSingaporeMexicoIndiaChina (including Taiwan)


Chemical Industry SegmentationBasic Chemicals: bulk inorganics and organics, fertilizers, intermediates, resins, elastomers, fibers and dyestuffsSpecialty Chemicals:– Adhesives, coatings and sealants– Agricultural chemical intermediates– Dyes and pigments– Specialty polymers– Food additives, including flavors and fragrances– Plastics additives– Water management chemicals– Oil field chemicals– Textile chemicals– Catalysts– Mining chemicals– Printing inks– Paper chemicals

Consumer Care ProductsLife Science Products: pharmaceuticals, crop protection chemicals, and other products from biotechnology


Sources of data

Country embassies and consulates– Nexant diligently contacted and researched for data on

the chemical industries in target countries– The available data from embassies and consulates was

either completely non-existent or so sketchy as to not provide a basis for projections in the report

– Hence, it is not considered useful to include a summary of what types of data for which types of chemicals were obtained as requested in the World Bank comments

Historical data obtained from the UN and UNIDO provided production and trade in the groupings needed for this study: Basic Chemicals, Specialty Chemicals, Personal Care Products, and Life Science Products


Forecasts of production, demand and trade were based on four growth models applied to each country as appropriate

Growth Model 1: Countries with basic chemical production not competitive with global leaders or non-existent chemical production. In this case, the country’s basic chemicals production is assumed to grow at less than GDP levels with imports increasing or net exports decreasing over time. Growth Model 2: Countries with a relatively strong basic chemicals production where growth in domestic demand will stimulate self-sufficiency. In this case, net exports (trade) is assumed to stay flatGrowth Model 3: Countries with a very strong and competitive basic chemicals industry. In this case the country’s basic chemicals production grows faster than GDP growth with net exports increasing over the forecast periodGrowth Model 4: Countries with strong basic chemical production with small expected growth in production in the future. In this case, the net exports grows, but at a flat rate.

These models were applied to particular countries with specific assumptions


PROPYLENE OXIDE

Low Value High Value

Dipropylene glycol

Allyl alcohol

Tripropylene glycol

Polypropylene glycols

Propylene glycol

Isopropanolamines

Pesticides

Surfactants

Hydroxypropyl cellulose

Polyurethane intermediate

Thickeners

Acid gas scrubbingPropylene Carbonate

Antifoam agents for latex paints

Lubricants

Urethane Intermediates

Functional fluids

Acid gas scrubbing

Anionic surfactants

Fatty acid derivatives

Acrylate esters

Coatings

Humectant

Solvents

Plasticizers

Polyurethane polymers

Unsaturated polyester resins

Functional fluids

Paints and coatings

Chemical intermediate

Plasticizers

Unsaturated polyester resins

Foodstuff solvent and humectant

1,4-Butandiol (Lyondell)

Diallyl phthalate Crosslinking agent

Sample Chemical Value Chain


China is already a dominant producer of basic chemicals

Basic Chemicals Production in Target Counties, 2005 Brazil9%

Russia7%

Other10%

China57%

India3%

Ukraine2%

Trinidad2%

Malaysia2%

Indonesia2%

Tunisia2%

Saudi Arabia4%

Q405_00753.001.11_Charts.xls\Figure 2.1

Total = 406 Million Metric Tons


China Basic Chemical Production, 2003Thousand Tons China Basic Chemical Production, 2003

Thousand Tons Sulfuric Acid 33191Nitric Acid 1162Hydrochloric Acid (31%) 5276Caustic Soda 9399Soda Ash 11075Calcium Carbonate 2574Sodium Sulfide 493Trisodium Phosphate 898Borox 401Sodium Silicate 1250Chlorine Liquid 2718Ammonia 37946Other Fertilizer (as Nutrient) 10500Chemical Pesticides 863Ethylene 6118Propylene 5932Butadiene 858Benzene 2408Styrene 948Methanol 1989Butanol 204Formaldehyde 3090Acetic Acid 947Phthalic Anhydride 598Paint 1641Building Coatings 773Printing Ink 204Pigments 1114Dye 860Synthetic Fiber Monomer 5593Other 8627Subtotal 159650


China is projected to become even more significant by 2020

Basic Chemicals Production in Target Counties, 2020

Indonesia1%

Russia4% China

75%

Other8%

Saudi Arabia2%

India1%

Ukraine1%

Trinidad1%

Tunesia1%Malaysia

2%

Brazil4%


Total = 1729 Million Metric Tons

Some energy-rich countries like Russian and Saudi Arabia will also increase share


Basic Chemicals Net Trade, 2005-2020Basic Chemical Net Trade, 2005 and 2020

(Thousand metric tons)

-20000 -10000 0 10000 20000 30000 40000 50000 60000 70000

RussiaSaudi Arabia

TrinidadTunisia

MalaysiaUkraine

QatarBahrain

VenezuelaIran

BrazilMexico

China (Ex Taiwan)Turkey

ThailandColombia

IndiaPakistan

PolandArgentina

Thousand Metric Tons2005 2020


LargestImporters

LargestExporters


Brazil, Singapore and India are currently the most significant producers of specialty chemicals

Specialty Chemical Production in Target Countries, 2005

Brazil14%

Singapore11%

Argentina3%

Other27%

Russia10%

China6%

Saudi Arabia6%

Thailand5%

Malaysia4%

Ukraine5%

India9%


Total = 19.1 Million Metric Tons


The established patterns will not change dramatically going forward, but China will become more significant

Specialty Chemical Production in Target Countries, 2020

Argentina2%

Brazil11% Singapore

8%

Other35%

Russia10%

China8%Saudi Arabia

5%

Thailand5%

Malaysia3%

Ukraine5%

India8%

Total = 42.5 Million Metric TonsQ405 00753.001.11 Charts.xls\Figure 2.5

Imports from industrialized countries to these countries will continue based on knowhow


Consumer Care Chemical Production is driven by population and standard of living

Consumer Care Chemical Production in Target Countries, 2005

Thailand1%

Brazil21%

China33%

Other5%

Iran4%

Saudi Arabia3%

Mexico19%

Argentina3%

Indonesia2%

Malaysia2%

India7%




China will show the most significant increase based on its strong economic growth and increased standard of living

Consumer Care Chemical Production in Target Countries, 2020

Thailand1%

Brazil14%

China43%

Other5%

Iran8%

Saudi Arabia4%

Mexico11%

Argentina2%

Indonesia2%

Malaysia2%

India8%

Q405_00753.001.11_Charts.xlsFigure 2.10



China and India are currently dominant producers of life science chemicals

Life Science Chemical Production, 2005

India20%

Malaysia2%

Other8%

China29%

Indonesia4%

Thailand4%

Brazil5%

Ukraine6%

Russia10%

Singapore7%

Mexico5%

O:\Q405_00753.001.11_Charts.xls\Figure 2.13



China is projected to surpass India going forward in this sector, especially in biotechnology-related areas

Life Science Chemical Production, 2020

Malaysia1%

India12%

China47%

Other13%

Singapore5%

Ukraine3%

Brazil4%

Thailand2%

Mexico4%

Indonesia4%

Russia5%

O:\Q405_00753.001.11_Charts.xls\Figure 2.14


This area is considered relatively environmentally benign, with the exception of potential release of GMOs


Backup Slides:


Specific assumptions in Basic Chemicals

India is expected to be within the purview of growth model 2 until 2008. In the post-2008 phase the effects of ongoing major capital investments in major commodity base chemicals in the Middle East (scheduled to come on-stream around 2008) will transform India into a growth model 1 country. Demand will increase at 1.1 times GDP, but production only at 0.9* GDP Thailand is expected to fluctuate between growth models 2 and 3 based on its position as a marginal producer of oil/gas while being a traditionally export oriented economyIran is a model 3 country resulting from world scale projects and highly competitive feedstock prices and production is estimated to grow 20% per annum and demand at 1.4 times GDPSaudi Arabia is a model 3 country expected to substantially increase basic chemicals output from 2005 onwards. Basic chemical production was projected from ethylene projections and demand estimated to grow at 1.4 times GDP growth for 2006-2020Other Middle Eastern countries (Bahrain, Kuwait, Oman, and Qatar) were classed as model 4 countries with export growth overthe forecast period projected to range between 3-13% per annum


Specific assumptions in Basic Chemicals (ctn.)China is projected to fluctuate between model 2 and 3. Basic chemicals growth in China over the forecast period involves large capital investments due to strong derivative demand. Hence, Chinese basic chemicals’ demand growth rate based on current capital outlays and projected world scale capacity additions waspegged at 1.9 times GDP growth and net imports declining 10 % per annum. Russian basic chemicals growth was pegged at 1.1 times GDP into 2008 beyond which it is expected to grow at 1.2 times GDP given increased feedstock availability from 2008Brazil is a model 2 country. Basic chemicals demand is expectedto grow at 1.3 times GDP growth due to strong capital investments in chemicals coupled with increases in Brazilian domestic oil discoveriesTrinidad & Tobago and Venezuela are model 4 countries. Basic chemical exports are projected to grow 2 and 8 % per annum, respectively and demand at 1.1 times GDP based on cheap oil and natural gas availability


Specific assumptions Specialty Chemicals

Specialty chemicals production growth in China is expected to exceed GDP growth (1.1 times GDP growth) while demand will grow at GDP.Specialty chemical production in India is projected at GDP whiledemand will grow at 1.1 time GDPThe export oriented economies of Malaysia and Thailand are expected to grow their specialty chemical production faster thanGDP growth by a factor of 1.1 while demand will grow at GDPHungary, Poland and Romanian specialty chemical industries are evolving from state-owned concerns into modernized specialty chemical producers owing to their strong R&D, skilled technical talent and supply linkages with domestic Eastern European plastics, paints and textile producers with duty free access into the advanced economies of the European Union. Hence, these three countries’ specialty chemicals demands are expected to grow slightly above GDP growth rates (at 1.1 times GDP)


Specific assumptions Consumer Care Products

Demand in each country was projected to follow GDPExport growth rates were assumed for some energy-rich countries such as Bahrain, Epypt, Iran, Kuwait, Oman, Saudi Arabia, Trinidad and Tobago and VenezuelaEstablished exporters Singapore and China were assumed to increase exports modestly (2% per annum) and (4% per annum), respectivelyProduction growth rates were estimated at 0.9* GPD growth for countries seen as having weak production fundamentals such as India, Ethiopia, and Kenya


Specific assumptions Life Science Products

Life science product demand was projected to grow at 2 times GDP in most of these developing countriesLife science production rate assumptions were similar to those for consumer products

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