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Spending in Chemicals Industry

Published On : 2018-06-07

The chemical industry is expected to spend more than US$ 2.8 trillion over the next 18 years as new sources of feed stock have brought about a change in the chemical industry thereby resulting in an increase in capacity addition. The past few years have resulted in an expansion in coal-based processes in China and shale gas has brought about a significant change in the chemical industry in North America. By 2019 North America is expected to add 63 million metric tons of chemical capacity, which is expected to surpass the chemical capacity of the Middle East. Further, till 2015, Asia Pacific added more than 433 million metric tons chemical capacity. Among key products, the capacity addition of aromatics is expected to surpass 90 million metric tons between 2016-2022, while the capacity addition of plastics and olefins are expected to surpass 130 million metric tons and 120 million metric tons respectively.

According to Insights and Reports, the research and development spending in the chemical industry in the U.S. was valued at US$ 93.4 billion in 2016, down from US$ 94.1 billion in the previous year. In addition the research and development spending on the chemicals industry in the European Union was valued at more than US$ 11 billion in 2016. Further, according to the government on India, the research and development spending on the chemical industry in the country is expected to account for more than 4.3% in the future of the revenue generated from this industry, up from the current 0.7%.

Some of the key players operating in this field includes BASF S.E., DowDupont Inc., SABIC, ExxonMobil Corporation, LyondellBasell and Sinopec among others. Mergers and acquisitions in the chemicals industry is anticipated to be strong on account of greater valuations which is expected to continue mitigating due to the improving economic conditions globally. The chemicals industry in the U.S. is anticipated to have a series of merger and acquisitions in the forthcoming years on account of the latest tax legislation that will allow the U.S. based companies with more cash flow for investment purposes.

According to Insights and Reports, U.K. is expected to remain a lucrative market for both financial buyers and corporates despite the Brexit event. Additionally, the volume of deals in Germany is expected to grow since the companies operating in the country are expected to use their earnings to raise their competitiveness by way of entering into new consumer groups, expanding scale, and technology gaps among others.

Japan is expected to have a high level of merger and acquisition activity in the coming years despite the few uncertainties such as the entry of shale gas based products in the Japanese market. The chemical industry in Brazil is still hindered by the economic and political instability, which in turn has kept the foreign players from entering the country. However, favorable exchange rates, rising investments in infrastructures and favorable tax rates are some of the factors that are attractive investments in Brazil.