Tank storage has always played a key role in the chemical supply chain. Bulk tanking terminals help to ensure supply against fluctuating demand, provide intermediate storage capacity, support specialized services such as blending, manage changes in transport, and address local regulatory requirements.
In general, bulk terminal capacity is expected to grow, at least in the short term, at rates between a few percentage points in developed countries to 12 percent in China (see map: Bulk terminal capacity growth).
A complex industry of specialists
The complex, fragmented and localized aspect of the global chemical value chain is ideal for third parties. Of the top 15 third-party storage companies, 10 focus on bulk chemicals and 4 handle specialty chemicals.
The chemical bulk tanking market is also highly fragmented, with the top 15 companies serving less than half of the market. However, the industry is showing a gradual trend towards consolidation and infrastructure development, and the top 15 companies have steadily increased their share of the market over the past several years.
Drivers for third-party growth
Global chemical sales are expected to expand at a modest but steady rate for the rest of the decade. Between 2000 and 2010, global chemical sales reflected an annual growth rate of 5.1 percent. Between 2010 and 2020, it is projected that growth will continue, but only by 3.7 percent annually.1
Three major drivers impacting the future of the chemical tanking industry can be identified: greater imbalance in supply and demand, growth in China, and increased risk involving regulations, operations, natural events, geopolitical disturbances and other factors.
Trade imbalances between demand and supply
Along with overall growth in chemical production, the industry will see different growth rates of production and demand across multiple geographic regions. This situation will affect trade imbalances and increase the need for more storage and more locations providing storage.
Growth in China
While still remaining a major importer of chemicals, China will continue current trends towards self sufficiency. Accordingly, the country is upgrading its domestic value chain and investing in the production of specialty and fine chemicals. Between 2010 and 2020, the self-sufficiency rate of China is expected to grow from 48 to 56 percent2. Local chemical production is expected to increase at an annual rate of 6 percent until 2020.3
Increasing risk
Strategies for risk management have changed significantly over the years, mainly because of the growing costs of risk, financial and otherwise. As a result, many chemical companies are turning to third parties to transfer or mitigate risks involving regulations, operations, business strategies, external events and supply.
Conclusion
As the global chemical industry continues to expand and supply chains become more complex, third-party players with their specialized capabilities and flexibility may well represent the future of the chemical bulk storage industry.
By:
Frobert van Zijl
Senior Manager, Advisory
KPMG in the Netherlands
1 Eurostat, Cefic Chemdata International
2 Chemical Market Associates Inc. (CMAI)
3 Ibid.