For the eighth straight year, BASF, the German-based chemical producer, led the IHS ChemicalWeek “Billion-Dollar Club” annual sales ranking of global chemical companies by registering $81.5 billion in total sales for 2013. Coming up behind BASF, however, the rapid ascension of both Sinopec (China) and Sabic (Saudi Arabia) to the second and third positions, respectively, in the IHS ChemicalWeek rankings, indicates a major leadership change in the global chemical industry once dominated by U.S., European and Japanese firms, according to IHS.

Sinopec had $72.3 billion in sales in 2013, followed by Sabic at $60.7 billion, ExxonMobil with $59.3 billion and Dow Chemical at $57.1 billion in sales to round out the top five positions on the IHS ChemicalWeek list.

“The presence of both Sinopec and Sabic in the top three companies on our sales ranking, which puts them ahead of powerhouse U.S. companies ExxonMobil Chemical and Dow Chemical, respectively, is profound when you realize that just 10 years ago, neither of these companies were in the top-10,” says Rob Westervelt, editor of IHS ChemicalWeek, which has published its Billion-Dollar Club report for nearly 20 years. “In 2000, both Sinopec and Sabic each had roughly $7 billion in chemical revenue and have scaled that by approximately 10-fold in less than 15 years. Their rapid ascension to the top of the list is a sign that these are no longer emerging companies, but industry leaders who will continue to reshape industry as they further expand on their competitive advantages enabled by scale, feedstock or market positions.”

To illustrate the significant changes that have occurred in the industry in a relatively short period of time, Westervelt points to once mighty companies such as Hoechst (Germany) and ICI (UK), which are now gone. In 1994, he said, Hoechst led the IHS ChemicalWeek list of top chemical sales, with ICI following in seventh position in terms of revenue that year.

Says Westervelt, “We published our first ranking in 1995, based on 1994 revenues, and of the companies who made the top-10 list, only five of the original companies remain there: BASF, Bayer, Dow, DuPont and Shell. Of those, DuPont and Bayer, numbers 2 and 4, respectively, in our first ranking, are likely to drop out of the top-10 this year or next, since both are preparing to divest significant chemical operations.”

As for Sinopec and Sabic, Westervelt says it is not unreasonable to think that, “within the next few years, either of these two companies could overtake BASF as the top earner for chemical sales on the IHS ChemicalWeek list because Sabic has the feedstock advantages, and Sinopec has the market advantages that make them formidable competitors.”

In 1995, U.S., European and Japanese firms held 24 of the top-25 spots. Formosa (Taiwan) at 24th, was the only exception, noted the IHS ChemicalWeek report. This year’s top-25 list has 8 firms from outside the U.S., Europe and Japan. Sinopec is joined on the list by LG Chem (11, Korea), IPIC (19, United Arab Emirates), Braskem (20, Brazil), PTT Global (23, Thailand) and Reliance (24, of India). Formosa is now 11th on the IHS ChemicalWeek list.

According to the IHS analysis, overall sales were higher in the chemical sector in 2013, with the median rise at 6%, above 2012 figures of 4.5% revenue growth. Out of the top five companies on the IHS ChemicalWeek list, Sinopec reported the largest year-on-year (YOY) increase at 6%.
This year, noted the IHS ChemicalWeek report, capital spending surged in basic and industrial chemical companies as the shale gale sparked a wave of projects, with the average capital expenditure for ranked companies (of those listed companies that reported a cost breakdown of chemical CAPEX costs) up about 1% year over year, says HIS, to $814 million. Innovation expenses also grew 8% YOY as research and development costs increased to an average of more than $350 million.

In 2013, industry continued to capitalize on the competitive advantages enabled by shale gas development, announcing a wave of projects to build chemical capacity in North America. Fourteen crackers have been announced in the last five years.

Europe’s growth in the chemical sector is stagnant, with industry association Cefic having recently adjusted its forecast for chemical output down to just 1.5% growth for 2014, from an earlier 2% estimate.

With that, however, Westervelt says the top European companies’ revenues far surpass the earnings of top U.S. players. “The average 2013 revenue for the top-10 European companies is almost $33 billion, while the top-10 U.S. firms’ average revenue was approximately $24 billion.”
“Interestingly,” Westervelt says, “the global, major integrated oil companies that persevered through the difficult 1990s and held onto their integrated chemical businesses are now benefitting from the advantages of both their access to feedstocks and an integrated value chain to optimize their profitability in the sector. These true, integrated companies such as ExxonMobil, Shell and Total, have an advantage over other, less-integrated firms, which is reflected in their profitability. As some of the key producers in the Middle East move to capitalize on their own integration capabilities, they tend to look to ExxonMobil, in particular, as the model to follow.”

Additional Resources:

IHS Press Release