Chemical Industry Trends Impact on CMS CMS Forum – San Francisco, CA November 12, 2008

Robert Davenport Director, Safe & Sustainable Chemical Series SRI Consulting

Introduction SRI Consulting • 55+ years of chemical business research

• Once known as Stanford Research Institute • Now division of Access Intelligence Safe & Sustainable Chemical Series

• New series of reports on important opportunities and threats to industry

• Bioproducts, safe materials, new energy

2

Items to Cover • Sustainability ─ Just what does this mean? • What is the status of the global chemical industry?

• What are some recent trends? • What can we expect to see coming? • Threats or opportunities to CMS?

3

What Constitutes Sustainability? • Difficult question • Different parties value different attributes • Everyone wants it • Stake holders demand it • Three major areas of concern

4

Elements of Sustainability

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Economic Sustainability • It has to be • No value, no survival • Laws may help

• Bottom line value • Supplier → end-users • Entire value chain in total

6

Environmental Sustainability • Products and services renewable over time • Safety along value chain • Minimize toxicity • Minimize GHG footprint

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Sustainable in Society • Complex issue

• • • • • • •

Employment vs. economy Self sufficiency Integration into economy Alternate use of capital Educational issues Infrastructure changes N.I.M.B.Y.

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So When Is a System Sustainable?

Economy

Society

Environment

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The Chemical Industry Today

Hydrocarbons

Polymers End User

Intermediates Minerals

Others

Commodity Specialty Fine Chemicals

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End Uses Fine Chemicals Plastics/Resins Specialty – Functional Specialty – Market Focus Fertilizers Fibers Coatings Solvents Elastomers Other

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$2 Trillion Globally (or more)

Some Trends • Energy uncertainty • Biotechnology thrusts • Regulations galore • Nanotechnology • Changing order

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Historical Oil Prices Dollars per Barrel

136

160

140

High Low 90.5

120

2002

48.2

35.2

27.6

2001

24.6

31.8

29

26.6

17.1

1999

16.2

1998

23.2

32.3 9.76

24.7 9.41

15.2

15.9

20

23.2

40

44.3

60

53.3

60.8

80

63

71.4

100

0 1997

2000

2003

2004

2005

2006

2007

Note: Based on weighted average, weekly, all-country, fob, exported value. Source: EIA. 13

2008

Biotechnology

• Red ─ Pharma • White ─ Industrial • Green ─ Agriculture

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Biotechnology Focus • Early focus – agriculture and pharma • Size of market • Profit potential

• New interest in industrial • “Green” focus • Energy situation

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Nanotechnology • Big interest several years ago • Industry that is hard to define • Materials • Processes

• Many types of products • • • •

Nanotubes Nanofibers Fullerenes Organoclays

16

Nanotech Applications and Growth Billion $ Sales 40 35

Other 30%

Materials & Production Process 31%

35 30 25 20

Consumer Products 7% Pharma/ Medical 21%

4.5

10 5

1.1

Electronics 11%

15

0 2007

Source: Freedonia.

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2012

2020

M&A Activity Some Major Transactions 2008

• • • • • • •

Dow buys Rohm & Haas Ashland buys Hercules Vestar buys Unilever N.A. Detergent business BASF buys CIBA Tata buys General Chemical Industrial Products Incitec Pivot buys Dyno Nobel Jordan Company buys Haas TCM

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What’s Coming? • Less regulation (ha ha) • Green & sustainable • New energy sources • Biomass conversion • Recycling

• Petroleums of the future • Water • Various elements

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Regulations • The big ones • Registration, authorization and evaluation of chemicals • REACH

• Restriction of hazardous substances – electrical/electronic equipment • RoHS

• Waste electrical and electronic equipment • WEEE

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New Energy Sources • Solar • Wind • Biofuels • Rejuvenation • Nuclear

21

World Energy Demand – Long-Term Energy Sources

22

The Future

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Chemicals from Biomass • Forestry • Natural Products • Fermentation • Food/Agriculture Products • By-Product of Biofuels • Thermochemical Products

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Recycling • Plastics • Solvents • MSW • Reuse vs recycle • Electronics • Other

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CMS Impact • Green initiatives • New materials in market • New service opportunities • Global changes • Information value increasing

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Dow Corning Study on Green Percent

Most Important Second Most Important Third Most Important

30

29

30

32

35

20

20 14

15

17

18 16

15

20

18

19

21

25

15

9

10

5 0

Reducing Waste

Source: Dow Corning.

Increasing Developing Energy Green (environmentally Efficiency friendly) Products 27

Reducing CO2/ Using Greenhouse Renewable/ Gas Emissions Cleaner Energy Sources

Where is Impetus? 37

Percent 40

Most Important Second Most Important Third Most Important

35

25

30

16

18

11

12 6

8

8

9

9

10

9

9

11

15

12

15

17

20

18

20

21

25

0

3

5

Share- EnvironThe Your The Your Local mental Media Customers Govern- Suppliers Commun- holders Campaign ment ities Organizations and the General Public

Source: Dow Corning.

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New Opportunities in Energy

• Solar • Non-photo voltaic • Heat transfer media

• Wind • Lubricants/functional fluids

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Biomass → Chemicals • • • • • • • •

Renewable/sustainable/locally produced CO2 reduction Cost advantage Alleviate waste or by-products Less toxic Might be biodegradable Market/political advantages CMS providers can bring solutions to many issues

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The Plastic Car

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Serve the Entire Lifecycle • Synthesis and production • Minimize waste • Use renewable/recyclable • Less GHG • Less toxic • Optimize transport and packaging • Less material and energy • Less hazards • Efficiency in use • Renewable/recyclable • Minimize • Reuse/recycle/dispose • Value from waste 32

Changing Global Markets Petrochemical Investment

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Information Value Increases • Regulations • Green opportunities • GHG status • New materials • Future trends

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SRI Consulting Programs • Process Economics Program • Process economic analysis of 100’s of processes • Examples: Chemicals from Agricultural Waste, Methanol to Olefins

• Chemical Economics Handbook • Market analysis of hundreds of chemicals • Examples: Acrylic Surface Coatings, Zeolites

• Specialty Chemical Update Program • Strategic analysis of specialty product groups • Examples: Electronic Chemicals: Semiconductors, Silicon and IC Process Chemicals, Plastic Additives

• Safe & Sustainable Chemicals • Analysis of evolving chemical development – “oven” • Examples: Global Solvents Report: The Green Impact, Chemicals from Biomass

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Thank You Robert Davenport Director, Safe & Sustainable Chemical Services +1 650 384 4350 [email protected] www.sriconsulting.com