CHEMICAL COMPANY GROWTH: BACK TO BORING!

As the future of oil refining dwindles and core chemical industry end markets such as construction and automotive production take double digit declines, chemical companies are tightening their belts and looking to find new areas to replace lost revenues from their core traditional markets. It’s not an easy task.

There are however major growth markets in the chemical sector. No more so than the metals and minerals market, driven by the same megatrends that are catalysing the oil industry demise: the transition to electric vehicles and renewable energy. The key question is where to play in the value chain.

Lithium and rare earth metal demand is accelerating, due to the ongoing demand for EV batteries and other new applications such as hydrogen electrolysers and fuel cells. As the price of lithium and other important metals skyrockets and the number of batteries being out on the market increases I find myself wondering what will happen to all these electric vehicle batteries and motors containing valuable metals once the first major wave of electric vehicles hit the scrap heap. Recycling the valuable metal and closing the loop on this process will be critical and, possibly, very lucrative. With recent ESG horror stories about lithium mines displacing native communities and the pollution to waterways that mining can cause, a tight and ethical recycling process would be highly desired by auto companies. As Tony Soprano knows only too well, there is a lot of money to be made clearing up rubbish.

Markets and Markets has been tracking the new and emerging industries that offer huge growth potential. Lithium Ion Battery Recycling is one such area that has been attracting huge investment. The LiB recycling market is expected to grow at a CAGR of approx. 21% during the next eight years to become a US $35 Billion opportunity by 2031.

At Markets and Markets we see significant interest in back integration in the metals value chain. We even see auto OEM’s partnering and inserting themselves much further up the value chain than you’d expect them to be active; such is the importance of this value chain. Metals & minerals is the new “black gold”.

Markets and Markets has been tracking the rare earth and high value metal mining and recycling markets during the last ten years and have seen considerable investment and growth. The global rare earth metal market was valued at US $5.4 Billion in 2021 and this market is expected to grow at a CAGR of more than 12% (2021 to 2026) to reach US $10 Billion market by 2026.

Mining itself is an interesting industry for expansion. Not just in the metal production and processing either. At Markets and Markets we have seen lubricant companies switch focus away from automotive applications to off-highway and industrial lubricants for conveyor belts and other machinery. Water treatment and services for mining and the energy transition is also a big area for growth we have seen notable activity in.

Biomass production and biorefining, a domain that always threatened to take off in the 1990’s and 2000’s but never really did is, finally, evolving and taking off with companies like UPM leading the charge. Sustainability is not just a greenwashing word any more, it is really happening. Sustainable packaging from bio based materials has never let up in terms of demand as we move further into the age of e-commerce and Amazon seemingly appearing at my door on a daily basis.

Biomass gasification market to grow at a CAGR of 10% from 2022 to 2027, where power generation to hold the largest share, followed by hydrogen generation, and ethanol market

Indeed the 2020’s will be the decade where the companies that are in the basic, some might say less glamourous markets will do well. Take the boring old commoditized market of fertilizers for example. As the Russia/Ukraine conflict initiated, major opportunities were to be had replacing the fertiliser and agrichemical products that would normally have been produced in this region. Soil quality continues to decline, drought and flooding due to climate change has become a major issue, and it will be the agrichemical and agritech firms that will address these needs and capitalise.

There is lots of growth to be had. The crux will be to enter these markets and enter strategic partnerships early, spreading the development costs and extending the potential reach.

So, mining, metals, crop chemicals, biomass, packaging and industrial lubricants. Not sexy, some might say boring, but certainly areas of growth.