| |
The specialty biocides described in this report include many different chemical types that are used in a variety of end-use areas. They are linked only by their common functionality in destroying or inhibiting the growth of a broad range of microorganisms. The report excludes chemicals that are highly lethal to all living things (e.g., hydrogen cyanide), pharmaceuticals, chemicals used solely to control agricultural pests (i.e., pesticides), and commodity biocides (e.g., sodium hypochlorite and most iodofors).
The 2004 market for specialty biocides at the manufacturer’s level of sale in North America, Western Europe and Japan amounted to almost 560 thousand metric tons, valued at over $2.5 billion. This market is expected to grow at an average annual rate of only about 2.2% (volume basis) over 2004–2009. Growth will be much faster (2.7% per year) in North America than in the other two regions, where little, if any, growth is expected.
The following pie chart shows consumption of biocides in North America, Western Europe and Japan:
A diverse group of chemical companies participate in the biocide business at the manufacturer’s level; however, biocides generally represent only a small part of each producer’s chemical business. This reflects the diversity of product types and end-use markets. An important consideration is the impact of government regulations. In both the United States and Western Europe, these regulations require the registration of biocides, a process that includes lengthy and expensive toxicological tests that are designed to demonstrate that the products can be used safely. To comply with these regulations requires expertise and infrastructure, and they were a major reason why many large companies that first entered this business were often large manufacturers of pharmaceuticals or pesticides that already had similar biological testing capabilities.
Over time, newer regulations in all three industrialized world areas have further restricted or banned the use of some biocides and stimulated the use of acceptable replacements of lower human toxicity. Because of the increasing cost of complying with these regulations, very few new products have been introduced. Increasing costs also led to further consolidation within the industry, as the smaller producers were forced to withdraw from the basic production of biocides because their lower sales volumes could not justify these added costs. This process is continuing and several large companies may emerge with significant participation in a broad range of biocides.
At the same time, increasing consolidation in the customer base also led to lower prices for many biocides during the 1990s and early years of the new century. Larger customers were able to exert considerable leverage on their suppliers. Thus, the growth in the overall value of this business had been limited or nonexistent in many segments in spite of increases in the volume of biocide sales. In late 2003, however, higher raw material prices allowed biocide suppliers to successfully raise prices. There is also some general consensus among suppliers that margins had eroded to a minimal level acceptable. However, lower-cost imports, especially from China, remain a continuing threat to margins of North American suppliers.
In some cases, the impact of environmental issues or technological changes (e.g., the increasing use of the alkaline process in papermaking) has had a major indirect impact on biocides. As an example, an environmental issue directly related to a corrosion inhibitor in water treatment might be resolved by an alternate corrosion inhibitor that is effective only at a higher pH than previously employed. The resulting higher pH might then require a different biocide that is effective at this high pH, even though the biocide previously used raised no serious environmental issues.
The major markets for biocides are in wood preservatives, swimming pools, sanitizers and disinfectants, food preservatives, industrial water treatment, personal care products, metalworking fluids, and paints, coatings, and plastics. The most profound changes in recent years have been in the wood preservative market, where large volumes of arsenic-based inorganic biocides have been replaced by alternative products of much higher cost.
Although compliance with government requirements for product safety greatly increases testing and other development costs, profitability is still relatively high in many product and market segments because customers have a compelling need to use biocides and no choice but to use registered products. Furthermore, the limited number of producers of each product type and the limitations in substituting one class of biocides for another constrict the choices available to customers. Historically, this has allowed biocide producers to achieve wider sales margins than those achieved with most other specialty chemicals. More recently, these margins have narrowed because of the increasing leverage of fewer but larger suppliers, as noted above.
From the viewpoint of biocide suppliers, there are few opportunities to expand into other product types, except through acquisition. Furthermore, many product types are market specific. Thus, geographical expansion into other global regions may be the only way to achieve growth in excess of local GNP growth. Ultimately, only a small number of large and financially successful multinational producers may manufacture most of the biocides used throughout the world.
|
