The chemical industry is able to move ahead of other industries in its value chain
Looking at the chemical industry geographically, from August 2016 to December 2017, Asian chemical companies - including companies from Japan Chemical Industry and other Asian countries - reported particularly strong TRS performance. Both companies outperformed the local stock market. The biggest growth was seen in Asian companies other than Japan, whose TRS performance has stagnated since the end of 2011, with a 31% increase. In the past 17 years, such companies have grown significantly from a low base. It has risen from 7% of global chemical stock valuations in 2000 to 16% of the industry's valuations, more than quadrupling over the same period to nearly $1.5 trillion.
Why can the chemical industry surpass other industries in its value chain? We see three main factors. First, the position of the industry in the value chain has been strengthened. This enables it to maintain higher profitability, which is the result of its productivity improvement work.
Second, the chemical industry has benefited from China's strong demand growth over the past 20 years. This growth outpaced the growth of China's own chemical production, allowing producers in Western Europe and North America to grow, despite their nearly stagnant domestic markets.
Third, the products of the chemical industry play an important role in most aspects of modern life. Many participants in the chemical industry have been able to use their innovative ability to find new trends in profit growth. At the same time, many of the intellectual property rights and technological know-how used to make molecules owned by the industry are not easy to obtain, which makes the existing manufacturers in a strong position.
In addition to these fundamentals, some of the industry's performance has been supported by other external developments. The most important is that from 2000 to 2013, natural gas raw materials with favorable prices can be obtained in the Middle East and North America, as well as the rising prices of agricultural products. Recently, the oil price has fallen from the historical high at the beginning of 2014, which has helped the global petrochemical producers using oil-based raw materials to make profits; at the beginning of this century, these companies did not benefit from the natural gas raw materials with price advantage.
