Review of World Chemical Industry – India Emerges among the Top Countries

The country’s chemical sector could double in size. A shift toward sustainable products, regionalization, and emerging value pools offers an opportunity to fulfill Mexico’s potential.

· In the past decade, global demand for chemicals has risen 3.5 percent per year, faster than global GDP. Emerging markets accounted for most of the growth. China contributed almost $1 trillion to the increase in demand,1 representing half of the global growth.

· This demand growth, coupled with feedstock and technology advantages, allowed the global chemical industry to deliver TSR of more than 10 percent a year since 2010, outperforming the MSCI World Investable Market Index of 8 percent.2 All the industry’s subsectors—petrochemicals, specialty chemicals, and agrochemicals—have delivered similar results.

· North America and the Middle East, benefiting from advantaged gas feedstocks, have increased petrochemical output by 18 and 30 percent in the past decade, respectively.

· Mexico’s manufacturing industry is large, representing 20 percent of the country’s GDP. This is higher than those of economies such as Brazil, the European Union, India, and the United States, where manufacturing accounts for 12 to 17 percent of GDP.

· Mexico relies heavily on imported chemicals for its manufacturing industry.

· India fifth in Chemical Patents application, Numbers down 10% China plus 90%, hitting past 2 lakh per year

· Growth in the market for sustainable materials and circular economy

· The energy transition’s impact on decarbonization

· Nearshoring and regionalization trends could spur new investment.

· Regionalization is gaining momentum.

In the early 2000s, the Mexican chemical sector supplied most of the local manufacturing industries in the country. In the past two decades, however, Mexico has lagged behind a thriving global chemical sector. Mexico has increasingly relied on imports, with the domestic sector facing structural challenges such as feedstock shortages, high energy costs, and limited innovation.

Profound shifts are under way that could revive Mexico’s chemical industry, including a move toward sustainable products, chemical-chain integration, and new value pools. Mexico is well positioned to capture those industrial shifts given its sizable market, location, robust recycling chain, and renewable resources.

In this article, we first review the challenges facing the Mexican chemical industry, its strengths, and global trends that could influence its direction. Then we offer four possible pathways: staying the course, focusing on specialty chemicals and value-added solutions, rejuvenating the industry base, and reimagining the industry. In these pathways, growth will depend on infrastructure development, the approach to feedstock sourcing, and the ability to innovate and invest at scale.

Mexico has the potential to double its chemical production output by 2035, add 4 percent to overall GDP growth over the next decade, benefit the manufacturing sector overall, and ease prices for consumers through lower-cost supply. Shorter supply chains could also lead to higher service levels and lower carbon emissions. Capturing the opportunity would require long-term investments that could also deliver sustainable and inclusive growth.

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