Cellulose Ethers and Its Derivatives

Global Capacity-Demand Analysis

• The global market size is estimated to be $7.1 Billion in 2023, and it is expected to grow at a steady rate of 5.96 percent, due to an increased demand from construction, pharmaceutical, F&B, and personal care industries

• The construction industry (38 percent) is the major end-use industry of cellulose ethers, followed by the F&B (20 percent) and pharmaceutical/personal care industry (16 percent). The pharmaceutical industry is growing at a higher rate of 5–6 percent, mainly due to the demand from modified drug release technology

Industry Best Practice : Cellulose Ethers and Its Derivatives

Engagement models

Consumer Market: 

• Highly specialized buyers prefer to engage in global sourcing with qualified top suppliers of cellulose ethers, due to presence of limited suppliers, to avoid price fluctuations and supply chain disruption

Industrial Market: 

• Construction, paints and coatings and other industrial applications buyers prefer spot buying, due to excess supply in the market, unless some value like technical expertise, customer services etc. are involved

Contract structures

Multi Year Contract –Consumer Market (pharma/food/personal)

• Length of contract: 3-4 years (to establish a long term relation with client)
• The customer is involved in launching new products based on their customized need
• High switching cost for the buyer

Single Year Contract –Industrial Market (construction/adhesives/paints and coatings) 

• Length of contract: 1 year
• Availability of suppliers in the market for industrial grade
• Low switching cost for the buyer

Pricing Strategy

• Price varies with molecular weight, viscosity, degree of substitution etc.
• Top global suppliers keep prices of both industrial and high purity grades high, as compared to other suppliers, due to use of patented technology and technical support

Global Demand by Application

Global demand for cellulose ether is mainly driven from construction, food, pharmaceuticals, personal care, oil drilling and paints and coatings. The highest growth rate of 5-6 percent is expected in the pharmaceuticals industry.

Demand from Alternate Industries

• Each cellulose ether caters to different applications with its different percentage of consumption in end-use segments and different grades are supplied by different type of suppliers

• For example, industrial grade CMC/HPMC can be supplied by many suppliers as its production does not require high level of specialization. However, pharmaceutical/cosmetic/food grades can only be supplied by limited set of suppliers (highly consolidated), who have different production lines with GMP certification

• Also, the cellulose ether industry is currently underutilized and has enough capacity to meet demand in case of a supply shortage

• Due to the above two factors, a sudden increase from one industry does not impact the supply of cellulose ethers in other alternate industries

Porter’s Five Forces Analysis on Cellulose Ethers and Its Derivatives

The consolidated market with suppliers, such as Ashland, Dow, Shin-Etsu, and low purchasing volume of buyers lead to medium–less bargaining power for buyers of cellulose ethers.

Supplier Power

• The specialty cellulose market is dominated by four major suppliers holding 85 percent of the annual production

• Cellulose ether manufacturers have low–medium negotiation power, due to limited number of specialty cellulose suppliers. However, they engage with multiple suppliers to minimize supply chain risk

• China and India mostly depend on imports for raw material from Brazil, the US, and Europe

Barriers to New Entrants

• Factors, such as technological/patent know-how, need for high quality raw material with customized production process, high capital investment and consolidated market act as deterrents for new suppliers to enter the specialized regulated applications, such as personal, food, and pharmaceuticals

• The cellulose ether market is highly fragmented, especially in China, for low purity, less demanding grades, thus threat from new entrants is high

Intensity of Rivalry

• The market for cellulose ether is consolidated with major industry suppliers. Competition among suppliers exist with respect to introduction of new products customized to industries 

• Established suppliers are facing competition from Asian suppliers, who offer cellulose ether at low price for industrial and consumer market

• This marks the intensity of rivalry from medium–high

Threat of Substitutes

• Major substitutes available for cellulose ethers are synthetic polymers, such as PVA, polyacrylates, and natural polymers, like xanthan, carrageenan, etc.

• High switching cost and time-consuming regulatory approval for new substitutes act as hurdles for pharmaceutical/food and personal care industries to switch. However, other industries, like construction, paper, adhesives, and textiles, are more susceptible to product substitution

• Degree of substitution depends on the type of final product and its application

Buyer Power

• Buyers from industrial applications are consolidated, who procure cellulose ether in high volume from multiple suppliers. Hence, their bargaining power is high

• However, food/pharma/personal care companies source high purity-grade cellulose ethers, which is highly fragmented, and their bargaining power is low. Suppliers offer 2–3 percent volume discounts on bulk buying for pharma companies

Global Market Overview: Specialty Cellulose

• Entry barriers are high considering the complexity involved in the manufacturing process and the time taken to complete supplier qualification with the customers. As a result, firms foray into this market mainly through acquisitions

• Specialty cellulose usually has an alpha-cellulose content of 96-99 percent. The specialty cellulose market is expected to grow at a CAGR of 3.46 percent from 2022-2030, reaching 2.12 million tons in 2030 (F).

• Most of the existing specialty cellulose manufacturers have expanded their capacities, in order to capitalize on high returns, stable demand, and premium pricing

• Venturing into this market requires a huge investment outlay and technical know-how. These reasons have limited the foray of new entrants into the niche market, which has only around 7-8 manufacturers globally

• The top five producers: RYAM, Georgia Pacific, Bracell, Sappi, and Borregaard account for 80 percent of the market share

• Due to high entry barriers, manufacturers foray into the cellulose specialty by acquiring a firm already been in the market for several years

Why You Should Buy This Report

The report gives an outlook on the demand trends, trade dynamics, etc. of the regional and global cellulose ether industry. The report gives the Porter’s five force analysis and lists out the major industry trends in the cellulose ethers market. It provides a pricing analysis of different ethers and breaks down the cost structure. It gives a feedstock analysis and lists the best cellulose ether sourcing practices. The report gives a detailed profile of the key cellulose ethers suppliers.