Chemical industry investment trends

As described, fundamental trends in the chemical industry particularly favor leading distributors like Brenntag, which can enter into partnerships with chemical producers on the basis of sufficient geographical coverage and the required financial strength to make investments in environmental standards, as well as adequate technical sales capabilities and services. 

Private equity funds are attracted to the chemical industry for the same reasons as they like any sector - they believe they can generate good returns. The investment opportunities are driven by the industry s structural challenges and evolution. Therefore, continuous analysis of equities markets, consolidation trends, and related M A activity is essential. 

These trends largely hold tme in the case of the chemicals industry although ownership restrictions in strategic upstream segments remain firmly in place. Another concern for industry representatives is indications in the 11th Five Year Program (FYP) that investment caps in the adjacent energy and enviroiunent sectors will remain and local content requirements for the constmction of new plants will be introduced... 

Available data on chemical industry R D tend to be rather selective, usually only from large, publicly held firms. This makes analyses and conclusions only meaningful with respect to the sample, not to the overall picture. Some analysts use the number of patents issued or papers published to gauge R D output, but these data do not differentiate between the value and significance of patents and papers and are therefore only modestly helpful. The aforementioned industrial R D spending data are likely a more useful tool, as at least they tell us what the sum of decisions by large firms is on how much to invest prudently in future discoveries trends over the past ten years are shown in Figure 6. 

The level of growth in crop protection chemicals is imlikely to support the overall investment in R D made by the industry in the past decade. We have estimated that for each dollar invested in R D by the industry as a whole in 1971, just over seven dollars was returned fifteen years later. In contrast, just four dollars was returned in 1995 from a dollar investment made in 1980, This is only a proxy measure of R D returns and far from accurate, but the trend is clear. 

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