One eye on the future, one on tomorrow's headlines
15 Jan 2000
Another month, another merger - or in this case, reports of a possible merger between chemicals giants Du Pont and Monsanto. Given our analysis last month (see February, page 12) of the recent rounds of mergers and acquisitions affecting the global chemicals business, it might be tempting to ask of this latest one, so what's new? Undoubtedly, had it not been for Monsanto's recent headline-making activities in the field of genetically modified crops, this story might have rated hardly a mention in the national press. But to anyone attempting to make sense of all the upheavals in the industry, it adds another twist to what has become a slowly emerging pattern of behaviour among the major players.
Established wisdom - as first laid down by ICI with the formation of Zeneca (itself soon to become AstraZeneca), and most recently with the set up of Aventis by Rhone-Poulenc and Hoechst - has been for companies to float off their more highly valued pharmaceuticals and biotechnology-based divisions as separate businesses. The current talk of a $28billion tie-up between Du Pont and Monsanto would appear to fly in the face of that trend.
Despite the headlines, however, this merger might not even come to pass (neither company had commented at the time of writing) but the reports highlight the industry's current uncertainty. Pity then the economics forecasting team at the Chemical Industries Association, whose latest study Main World Chemical Markets by Geographic Area 1996-2010 has just been published.
As any industry analyst (or journalist) would agree, it's a brave person indeed prepared to forecast 12 months ahead at the moment, never mind 12 years. Nevertheless, the CIA's Long-term Assessment Panel has been here before. The latest study is an update of the 1990 Chemical Industry Main Markets report, which covered the years 1989-2000. Like the latest study, this was prepared at another `time of great uncertainty and slow growth'. Undeterred by this, and the fact that the latest complete figures for the industry date from 1996, the panel has produced a surprisingly up-beat assessment for the longer-term future.
Worldwide growth in demand for chemicals is expected to average 3.6 per cent a year through to 2010, compared with 2.6 per cent from 1979 to 1996. What will fuel this growth in demand? Well, compared with 1995 figures, by 2010 there will an extra 1.3billion people in the world - all needing food, drink, shelter, clothing and other consumer needs that make demands on the chemical industry.
Although there will be an obvious swing towards the developing markets of the Far East - in terms of both demand and supply of basic industrial and agrochemicals - the industry in the developed areas of North America, Europe and Japan is expected to continue increasing the emphasis on the specialist areas of pharmaceuticals, environmental chemicals and biotechnology products.
