• Demand from emerging markets, the rise of the ‘green chemistry’ industry, and the need for specialist chemicals for 3-D printing are some of the key opportunities for the UK’s chemical manufacturers
• Manufacturers should continue to invest in R&D and focus on exports
• Digitalisation has the scope to reduce costs, big opportunities lie in optimisation, better security and ‘smart’ manufacturing
Demand from emerging markets such as China for UK goods, the rise of the ‘green chemistry’ industry and the positive impact of digitalisation on production costs are three key future market opportunities for the UK’s chemical manufacturers, according to a new sector report from Santander and manufacturing organisation EEF. Other opportunities are the growing demand for low-impact products and production processes that meet heightened environmental regulation, and the need for specific chemicals to support the booming, global 3-D printing market. With £12.1 billion and £21 billion generated in gross value added and sales respectively in 2016, the UK chemicals industry makes a sizeable contribution to UK manufacturing and the wider UK economy. Output has increased 27% since 1990, a growth rate surpassed only by the pharmaceuticals, motor vehicles and other transport sectors. Paul Brooks, Head of Manufacturing at Santander Corporate & Commercial said: “From shampoos and soaps, to industrial products derived from petrochemicals and dyes, the chemical sector has a hand in almost every aspect of daily life, without us often realising. The sector’s impressive slice of R&D expenditure, given its size, has also contributed to huge gains in productivity growth over the last 20 years, and while the sector was hit hard, like most, by the financial crash, its output has bounced back and is now broadly back to its pre-crisis level. This relatively stable performance, combined with efficiency programmes, has resulted in significant productivity improvements in the sector. Indeed, between 1996 and 2016, the chemicals sector productivity growth more than doubled, outstripping growth in all other manufacturing sub sectors, barring other transport.” Martyn Jenkins at EEF said: “Our sector bulletin shines a light on the dynamic chemicals industry, and its contribution to UK manufacturing, not just in terms of sales, but to a host of other manufacturing sectors, through its integration across supply chains. Its success overseas, and productivity performance in recent years stands the sector in good stead for the future. But policy makers must underpin this by ensuring the UK business environment is cost competitive for this vital sector.” According to the EEF and Santander Chemicals Sector Bulletin, the six market opportunities for the UK chemicals sector are: Digitalisation As with all other manufacturing sectors, 4IR technologies, the Internet of Things, and Artificial Intelligence are all growing in importance and influence. The big opportunities lie in optimisation but also better security and importantly smart manufacturing, such as the introduction of closed loop sensors, which has the ability to improve logistics, reduce waste and avoid delays. Shale gas The recent development of the shale gas market has revolutionised world commodity markets over the last few years. In the UK, shale gas, and specifically the process of fracking, has been the source of much debate, with particular concern regarding the environmental impact. However there are also many opportunities on offer, in terms of job creation, cost reduction and crucially reduced dependency on Russian gas. Environmental policies The push towards environmentally friendly policies can represent an opportunity for chemical manufacturers, over the longer term. The demand for low-impact products and production processes is growing, and governments are increasingly introducing new regulations to this effect. This may mean higher costs in the short term for manufacturers, but it may also result in manufacturers pushing to achieve greater efficiency and productivity, key drivers for prosperity in the long-run. Opportunities also lie in the development of new bio products. Green chemistry Green chemistry broadly describes the efforts of industry to reduce the negative impact that chemical manufacturing has on the environment through emissions and waste, by developing alternative products and processes. One of the most influential trends has been the move to bio-based feedstocks. For instance, the majority of solvents have historically been derived from petroleum. In recent years, however, the element D-limonene has seen its uptake increase as manufacturers look to move towards “greener inputs”. D-limonene is the main component of oil extracted from citrus fruit rinds. 3D printers 3D printing is becoming a crucial technology in manufacturing, and the chemical sector is no different. Several chemical players are already investing, together with 3D printing manufacturers, to develop chemical products suitable for this technology. Producing polymers, resins or powders able to satisfy clients’ needs and to run efficiently in a 3D printer can be a great source of revenues for chemical companies. Emerging markets Long term growth in the chemical industry, as is the trend throughout manufacturing, hinges on the sector’s ability to harness the opportunities that emerging markets represent. The globalisation of the industry has occurred at a rapid pace, as more and more manufacturing activities shift to the Far East. While this can represent a risk to some incumbent UK chemical manufacturers, the opportunities on offer are great. Paul Brooks added: “Despite its relatively low share, China is expected to grow in importance as a destination for UK chemical exports, as demand in the region continues to grow at a substantial rate. In fact, despite growth being healthy across all regions, it is Asia and Oceania which has seen the greatest growth rate in terms of exports, with demand up 71% from its level in 2000. This helped to contribute to a trade surplus in the region, and represents a growing and untapped market for the sector.”