During the next decades the world is poised to witness a period with the longest positive transformation in human history. With more than 9 to 10 billion people depending on the scenarios and an economy with an estimated GDP of $280 trillion, the world will have the potential to host one of the largest, wealthiest, wisest and healthiest societies in human history. The world GDP is expected to quadruple from its 2010 levels, while China and India will not only become the world's largest economies, but also the largest chemical and pharmaceutical markets.

The world average life expectancy will increase from 67 year in 2010 to 75 by 2050, with millions of people having the potential to live well above 100 to 120 years, especially in the most advanced economies.

Large improvements in GDP per capita and science with also enable the creation of new large megacities, and the world urbanization ratio in the BRIC economies will double in the next decades. The need also to address climate change - with an unprecedented carbon productivity of 90% - and resource scarcity, like water, energy and food, will also create massive business opportunities as well as formidable challenges for our society and industry. Information technology and computational progress will also have the potential to accelerate and change most of the aspects of our life, the way we work, live and communicate.

In this first in a three-part series, Rafael Cayuela Valencia, author of the book The Future of the Chemical Industry by 2050, takes an in-depth look at how these megatrends will change the industry landscape.

An Industry in Growing Mode

During the next decades, the broad chemical industry is poised to quadruple in size from $3.9 trillion sales in 2010 to $18.7 trillion by 2050. According to an adjusted business-as-usual scenario (BAU), the chemical side of the industry is expected to grow from $3.1 to $14.9 trillion, while the pharmaceutical industry is expected to grow from $875 into $3.9 trillion during this period.

The world annual per capita consumption of pharmaceuticals is expected to grow from $128 in 2010 to $427 by 2050. On the chemical side, the world per capita demand is expected to grow from $456 in 2010 to $1631 by 2050; a figure that is equivalent to the chemical per capita demand in the U.S. in 2010.
Under this scenario, chemical demand will grow strongly in all regions - especially in the BRIC and REST economies. China and India would become the largest chemical market in the world with S4,048 and $2,903 billion in chemical sales annually - almost larger than the current size of the chemical industry in 2010. Also, China and India will become the second and fourth largest pharmaceuticals markets in the world respectively, with more $752 and $ 56 billion dollars sales each, and a combined market higher than the current size of the world pharmaceutical industry (fig.1).

This massive growth, especially in the BRIC and REST economies, will trigger a large amount of organic and inorganic growth, growth that will trigger a spring of large and cross continental M&A activity from the BRIC and REST economics into the advanced economies.

A Shift In Leadership

In 2010, eight of the world's top 10 chemical companies were from advanced economies; only one was from BRIC (Sinopec) and one from REST (SABIC). A similar situation could be seen in pharmaceuticals: again, eight of the world's top 10 were from advanced economies; the remaining two were from REST economies (Novartis and Roche). Considering that by 2050, the BRIC alone will host 51% of the world chemical market and 37% of the pharmaceutical one, it is to be expected that leading companies from the BRIC and REST will find themselves among the top companies in the world.

At the same time, the Indian chemical industry is expected to become the fastest growing market in the world . India with just $63 per capita of chemical demand and $11 per capita of pharmaceutical demand in 2010, it is expected to have a formidable growth potential in the decades to come. This becomes particularly clear when considering the fact that its GDP per capita could multiply by more than 15 times by 2050.

The Era of Mega Companies

In a world market three to four times bigger than in 2010, it is likely that large multinational chemical companies will become formidable in size. We can expect much higher governmental presence and public scrutiny, high levels of transparency due to social networks and the clear need to address climate change and resource scarcity. Royal Dutch Shell defines this as the need of our world to become more resilient, and the chemical industry will be called into action and will be at the forefront on the solution.

In 2007, among the top 100 largest economies in the world, 47 were large corporations. Due to globalization, multinationals has tended to grow much faster than countries, even the fastest ones. Keeping this in mind, it is completely plausible that of the large chemical companies like BASF or Dow could eventually report annual sales upwards of $150-250 billion dollars. Such mega companies will have to find new ways to relate to their different stakeholders, governments, international organizations, NGOs and society.

Again, the pressure will be higher than ever for these companies to enable emission and energy reductions. How will the industry operate with these kinds of players on the field? How will these companies adjust to the new market realities? The chemical industry has been traditionally highly exposed to societal scrutiny, but ever-expanding companies combined with ongoing resource scarcity will lead to an even higher level of public attention; with that comes more responsibilities and obligations for the industry.

On the Petrochemical and Polymers Side

Global petrochemical and polymer demand is expected to see massive growth in the next decades. It is currently one of the most significant industry segments, making up 37% of the chemical industry (including pharmaceuticals) in 2010. Some scenarios project ethylene demand to grow a whopping 400% from the current 120 million tons to 500 million tons by 2050. The 2010 discrepancies in per capita ethylene demand - 3 kg in India and 10kg in China compared to 44 kg in Europe and 70 kg in the U.S. - present a tremendous growth opportunity for global demand.

According to the BAU scenario, the chemical industry is expected to add more than new 500 world-class steam crackers (800 kilo tons of ethylene capacity) around the world by 2050 - excluding the regular replacement of all old crackers - representing a tremendous investment and growth opportunity for the industry. Interestingly, this growth will impact all three economic areas (advanced, BRIC and REST) as well as most of the individual countries, excluding Japan. In moments of economic crisis and desperation, even Europe 27 is expected to add more than 10 crackers by 2050 (fig. 2).

In this transition, China could become the largest ethylene market during the next decades, 2020-2030, while India could surpass Europe by 2030-2040 and U.S. by 2040-2050.

Global Growth and Massive Transformation

The chemical industry is poised to enjoy to a period of formidable growth, led by BRIC and REST economies. Advanced economies will keep growing although this might be geared toward specialty products. During this period, the industry will face a massive transformation not only into its markets, players and products, but climate change will also drive a technological revolution from its products as from its feedstock. It's a bright future for the companies and markets that are able to take the lead on facing upcoming challenges.

During this transition, millions of people will be freed from poverty forever, the world GDP per capita will triple from 2010 levels to $30,675, the highest world average GDP per capita in our history. This will enable the creation of the largest middle class population in our history - 50% of the world population. Meanwhile, the BRIC economies will see their GDP per capita multiply even more, with China and India at the front with 800% to 600% increases, respectively.

The industry will find itself having to address many challenging and conflicting issues - such as massive growth in demand while enabling emissions reduction in other industries. At the same time, the industry will be involved in massive transition, changing its feedstock (to maximize shale gas), its markets (from the advanced to BRIC economies), major players and even its technologies and way to work (from operational focus towards innovation, convergence and collaboration) while reducing its own energy and emissions.

The industry is facing probably it largest challenge and deepest transformation but also an enormous business opportunity. The challenge will be enormous, but the rewards will be equally impressive and our obligations undeniable.

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The Future of Chemicals Series
1. An Industry on the Grow (Bitte das hier fett)
2. Technological Changes
3. Climate Change and Call to Action

Terminology
For the purposes of this article, the world has been segmented into three major areas:
• Advanced: U.S., Canada, EU-27 and Japan
• BRIC: Brazil, Russia, India and China
• REST: All other countries

Want more? Check out the book.

The Future of the Chemical Industry by 2050
Discussing the technological supremacy of the chemical industry and how it will adopt a leading position to solve some of the largest global challenges humans have even seen, this book details how the industry will address climate change, aging populations, resource scarcity, globality, networks speed, pandemics, and massive growth and demand. Author Rafael Cayuela currently works as the global product and marketing director for Styron.

• ISBN: 978-3-527-33257-1
  Hardcover
  332 pages
  June 2013
  Wiley-VCH