China's chemical market sizzling hot, says Clariant

Swiss company forecasts world's No 1 spot for the country in five to 10 years

Swiss specialty chemicals producer Clariant AG said on Thursday that China will overtake the United States to become the world's largest chemicals market in the next five to 10 years despite an economic slowdown.

"The country's GDP growth rate is about 6.5 percent now and when you look at the chemicals sector, it is about 5 to 6 percent, a growth rate that you find nowhere in the world can match. That means even though China has short-term setbacks in its economy, the fundamental picture for the chemicals market will not change in the long term," said Christian Kohlpaintner, member of the executive committee of Clariant International AG.

The global market for chemicals products hit $3.8 trillion last year, while the Asian market led by China accounts for 40 to 50 percent of that figure with a market value of about $1.5 trillion to $1.9 trillion, he said.

The Basel-based company raked in $6 billion in revenue in 2015, of which around 5 percent will be spent for global investment.

Jan Kreibaum, Clariant's president in charge of markets in China and South Korea, said that 40 percent of the company's total investment will go into the world's second-largest market by 2017, especially for innovation and research.

"Our business requires intensive knowledge and ongoing innovation and that's why we are putting so much effort into it," he said, adding that a research and new regional headquarters will be built with more than 500 employees.

Specialty chemicals are products used in industries for their performance and function such as food additives, flavors and fragrances and water treatment materials.

The Swiss firm has four business areas: care chemicals, catalysis, natural resources, and plastics and coatings.

Kreibaum identified the personal care and packaging sectors as the most promising segments because of rising consumer-driven economies and industrialization.

A report by research firm IHS said that specialty chemicals market, dominated by companies from North America, Western Europe and Japan, will face more competition from Asian companies amid pressure caused by rising cost.

It warned that as competition increases, the industry will become more consolidated with mergers and acquisitions.

Lu Jinyong, a professor at the University of International Business and Economics, confirmed that trend by saying that the biggest potential for growth in China for the next decade lies in the development of the third- or even fourth-tier cities, where distribution channels should be set up in advance.