We supply specialty chemicals for oil and gas, metals and mining, electricity/utilities, agriculture, chemical manufacturing and pulp and paper. They play an important functional role during production or in the end product. We also sell liquid protective and powder coatings, which are largely used for their functional benefits, such as fire and corrosion protection.
25% of revenue
There is more uncertainty today in the Natural resource and energy industries sub-segment than there has been in the recent past due to the much lower oil prices seen towards the end of 2014. Most analysts are predicting a fairly rapid rebound, but the outlook is quite unclear as we go to print. If the market remains in over-supply and prices remain low, this will eventually have an impact on demand for chemicals used in extraction and even coatings used in major oil-related projects. On the other hand, demand for more environmentally-friendly solutions and technologies that lower extraction costs is likely to remain robust. Furthermore, most oil and gas projects are major, multi-year activities so the likelihood is that the impact on demand in the short term will be limited.
In the Process industries sub-segment, growth has moderated in China, but is still high compared with most geographies. In North America, the growth outlook in chemicals is also quite positive, due in part to the impact of shale gas. Analysts believe that China has now surpassed North America in terms of chemicals value added, and although growth rates going forward in China are expected to be much lower than they have been in the recent past, they are still higher than North American growth rates and much higher than European growth rates.
Given our strong position in pulp bleaching chemicals, this is also an important part of the Process industries sub-segment for AkzoNobel. Pulp bleaching continues to contract in North America and the growth rate in Europe is low. Globally, the main region for growth is South America, which continues to grow in a consistent and stable manner. This is a positive development for AkzoNobel, as we have a strong position in pulp bleaching chemicals in South America.
Future sustainability developments
Based on the WBCSD Vision 2050, a four to ten-fold improvement is expected in the eco-efficiency of resources and materials by 2050. Closed loop processes will increasingly lead to a reduction in waste that goes to landfill.
Implications for strategy and actions
As growth rates slow, we must continue to improve productivity and innovation rates to remain competitive. In particular, with limited growth in Europe, we must continue to optimize our manufacturing footprint in the region. At the same time, we need to be prepared to capitalize on growth opportunities where they do exist, such as chemicals in China and North America and pulp in South America. While we do this, we clearly have to continue to improve in terms of sustainability levels throughout the value chain.
Energy and utilities 1
$ billion, value added
Chemical production 2
$ billion, value added
Bleached pulp production 3
1 Source: Business Monitor International
2 Source: Oxford Economics
3 Source: RISI