REACh could pose obstacle to introducing new products
Despite the impact of the recent presidential election, lackluster global growth and a host of mergers and acquisitions, SOCMA members are optimistic about the specialty chemical market in both the United States and European Union as they look ahead to 2017. However, at least one company feels the looming 2018 REACh registration deadline could pose a big obstacle for introducing new products in those markets.
“We are forecasting a strong 2017 for specialty chemicals in the U.S. and EU,” said Jay Dickson, President of Nation Ford Chemical, Inc., a specialty chemical manufacturer in Fort Mill, SC. “There will be pockets of high growth in China and some contraction, as Beijing is cracking down on high polluting segments and companies.”
Dickson said his company has a positive outlook over a two-year horizon. “Growth is expected in the commercialization of higher value added products in the specialty chemical sector.”
KMCO CEO John Foley says he is generally optimistic that the specialty chemical sector can keep a tight rein on capital investment, which “leaves custom manufacturers such as KMCO in a favorable position to support these companies’ growth or restructuring of existing production via levering his company’s installed capacity.” KMCO, LLC, located in Houston, TX, is a specialty chemical manufacturer and toll processor to many of the world’s largest chemical companies.
“Our growth can be significant by levering ‘blocking and tackling’ productivity improvement and upgrading our utilities,” Foley said. “We have the ability and the strong intent to double our custom manufacturing volumes.”
According to Michael Gromacki, President of Dixie Chemical, Inc., a specialty chemical manufacturer located in Pasadena, TX, merger and acquisition is going on both upstream and downstream and is creating some challenges in the specialty chemical sector.
“Your customer base is consolidating and your supply chain is consolidating, and it is resetting new relationships,” Gromacki said. “This growth and acquisition is great for the companies involved, but there are a lot of other companies affected by it as well. Consolidation in the next year or so is going to be a factor, not necessarily a bad factor overall, but it’s going to be a factor.”
Dixie Chemical is also seeing commodity swings. “Some materials are long that are benefitting specialty chemicals, and some are getting tighter,” Gromacki said. “So the commodity swings are just things we have to keep track of. These are two issues we will see going forward in the next year or two.”
So what are the growth drivers for these companies?
Nation Ford says its products that improve performance, or the quality of life, will drive much of the growth in this sector. “The U.S. and EU are the leaders in technological advancement in chemical manufacturing, and that will fuel growth in these regions.”
The specialty sector is in a stable growth situation, according to Gromacki. “Our fuel and lube market and thermoset market are growth markets, and our paper market is stable and growing at the GDP level.”
The main thing that concerns Dixie Chemical is uncertainty in Asia, Gromacki said. “Some are saying it’s overheated. Others are saying it’s propped up and stabilized, or in an upswing. We are also concerned about the lay of the land with petroleum. You see this Middle Eastern discussion about the possibility of the Saudis and Iranians curtailing oil, so it’s both geopolitical and oil related,” he said.
Despite these concerns, Gromacki said his company is “really positive about our markets right now. There are a lot of different megatrends we benefit from, including the electrical energy distribution and smart grid that are driving innovation. Our materials automotive light-weighting is another big trend that benefits us. There is also additive manufacturing and infrastructure investment – all areas we feel are good factors for our chemistries.”
Dixie doesn’t see any regulatory issues affecting its business, Gromacki said. “If we adapt to regulatory changes better than our competitors, we win,” he said. “We just need to understand them, to adapt, but we don’t spend a lot of time worrying about regulations but looking at how to grow.”
For Nation Ford Chemical, the major concern on the regulatory front is REACh and the pending 2018 deadline that could pose a significant challenge for specialty chemical manufacturers.
“The biggest challenge will be registering specialty chemicals in the EU for the 2018 deadlines,” Dickson said. “The high cost of registration may make it prohibitive to introduce new products in those markets.”