Specialty Chemicals Sector Check - The Great Migration: Motilal Oswal's Thematic View

Motilal Oswal Report

Led by major oil discoveries, refining capacity in the Middle East grew to four times over 1970- 2020. On the other hand, a rising consumer market led to China raising its refining capacity 28 times during the same period. In the meanwhile, the global capacity rose a meager two times.

Similarly, abundant gas in the U.S. resulted in a wave of petrochemical projects over 2015-19, accounting for 13% of the total capacity added globally.

As a fast growing consumer center, China added another 28%.

Chemicals can be broadly divided into two groups - organic and inorganic.

An organic chemical necessarily contains C-H or C-C bond-like methane (CH4), ethane (C2H6), and their derivatives, while the rest, which are basically metal or mineral derivatives (lacking C-H or C-C bonds) are termed as inorganic chemicals.

Organic chemicals owe their genesis primarily to fossil fuels such as oil, gas or coal or biomass.

Our research suggests multiple reasons for manufacturing of chemicals to migrate to areas with cheaper availability of feedstock, especially to the U.S., Middle East, and Africa over the long term.

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