Global Capacity-Demand Analysis
- The global market size was 811KT in 2017, and it is expected to grow at a steady rate of 4-5 percent, due to an increased demand from construction, pharmaceutical , F&B and personal care industries
- Construction industry (40 percent) is the major end-use industry of cellulose ethers, followed by the F&B (16 percent) and pharmaceutical/personal care industry (8 percent). The pharmaceutical industry is growing at a higher rate of 5-6 percent mainly due to demand from modified drug release technology
Industry Best Practice
- 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
- 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
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
- 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
Market Drivers and Constraints
Global supply of cellulose ethers is sufficient to meet the increased demand from varied industries. Hence, no supply crunch is expected in the near future.
- Drivers: Demand from end-use industries mainly food, pharmaceutical, construction and personal care, as it is derived from natural renewable source, i.e. wood pulp
- Constraints: Declining demand from the oil and gas industry, and availability of substitute like guar gum (for CMC)
Global Suppliers Market
- The global cellulose ether market is dominated by players from the developed market, i.e. Dow Chemicals, Ashland and Shin-Etsu, together holding global market share of >50 percent in 2016
- In MC and its derivatives, these players together had market share of ~75 percent in 2013
- Similarly, in highly purified CMC, the market is consolidated with four major players, CP Kelco,Ashland, and Dow, accounting for almost ~75 percent in 2016
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
Global Trade Dynamics–Cellulose Ether
- North America: US is exporting more than 60 KT of cellulose ether, and it imports cellulose ether mainly from Germany and Korea.
- Europe: EU is exporting more than 500 KT of cellulose ether mainly to the US and Turkey.
- Asia: China is exporting more than 85 KT of cellulose ether, mainly to India and Brazil.