Change

The Industrial end-user segment covers production activities as varied as oil and gas, metals and mining, electricity and utilities, agricultural, chemical manufacturing and pulp and paper manufacturing. Our specialty chemicals perform a variety of roles in this segment. We supply products such as chlorine and caustic soda that are a key building block for producing chemicals. Various products also support the production process, but are not included in the final production process outcome, such as bleaching chemicals for manufacturing pulp and organic peroxides for plastics production. In addition, many specialty chemicals are included in formulations and play a vital functional role in the final product, such as surface chemicals used in oil and gas and agricultural applications. We also sell liquid protective and powder coatings which play some aesthetic role, but primarily provide functionality such as fire and corrosion protection. We recognize two sub-segments in the Industrial segment:

Natural resource and energy industries

  • Oil and gas extraction
  • Metals and mining
  • Energy and electricity generation
  • Water and wastewater treatment
  • Agriculture

Process industries

  • Bulk chemicals
  • Specialty chemicals
  • Pulp production
  • Paper manufacturing

Percentage of AkzoNobel revenue

  • 25 percent

Examples of AkzoNobel products sold into this segment

  • Chlorine, caustic soda, ethylene amines and cellulose-based, sulfur-based and silica products used as a building block or a process facilitator in many industrial applications
  • Chelates and surfactants used in oilfield applications
  • Synthetic/natural polymers used in wastewater treatment
  • Surfactants, ethylene amines, sulfur products and chelates used for agricultural applications
  • Organic peroxides, metal alkyls and polymer additives used in the production of plastics
  • Bleaching chemicals, caustic soda and chelates used in pulp production
  • Retention chemicals used in paper production
  • Protective coatings used for oil and gas up and downstream, as well as energy and water and wastewater installations
  • Powder coatings used on pipes

Trends

Many markets within this end-user segment are fairly cyclical, with substantial swings in demand. However, some are subject to different cycles (agricultural), while others are lower growth and not as cyclical (pulp and paper). During the last recession, the impact of the economic cycle was more limited than expected, based largely on robust high growth country demand. In particular, the oil and gas market was quite strong on the basis of high oil prices. We continue to expect buoyant demand in energy and utilities as high growth regions build infrastructure and mature markets replace existing infrastructure, in many cases with more sustainable solutions. We also expect reasonable demand in other markets covered by this end-user segment, especially outside the mature European region as industrial confidence appears to be growing in the United States and in all high growth markets.

Future sustainability developments

The WBCSD’s Vision 2050 report foresees major changes in the Industrial end-user segment. As well as a four to ten-fold improvement in the eco-efficiency of resources and materials, it is expected that closed loop processes will make landfills obsolete and cooperation across sectors will become the norm.

Implications for strategy and actions

To ensure we are well-positioned, we need to manage product lines and improve margins in all geographies, while remaining focused on delivering better value for customers. Innovation will play a vital role in terms of improvingour sustainability profile and establishing triggers that prompt the use of our products. We need to continue restructuring in mature geographies, while in high growth areas, we must continue to ensure strong positions and appropriate business models.

Chemical production1
$ billion, value added

Industrial – Chemical production (line chart)

Energy and utilities construction2
$ billion, output

Industrial – Energy and utilities construction (line chart)

Purchasing mangers’ index3

Industrial – Purchasing mangers’ index (line chart)

Sources: (1) Oxford Economics (2) Business Monitor International (3) Markit Economics, Institute of Supply Mangement.

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