Definitions

chemical industry

chemical industry

chemical industry, the business of using chemical reactions to turn raw materials, such as coal, oil, and salt, into a variety of products. During the 19th and 20th cent. technological advances in the chemical industry dramatically altered the world's economy. Chemical processes have created pesticides and fertilizers for farmers, pharmaceuticals for the health care industry, synthetic dies and fibers for the textile industry, soaps and beauty aids for the cosmetics industry, synthetic sweeteners and flavors for the food industry, plastics for the packaging industry, chemicals and celluloid for the motion picture industry, and artificial rubber for the auto industry.

History

Chemical industries can be traced back to Middle Eastern artisans, who refined alkali and limestone for the production of glass as early as 7,000 B.C., to the Phoenicians who produced soap in the 6th cent. B.C., and to the Chinese who developed black powder, a primitive explosive around the 10th cent. A.D. In the Middle Ages, alchemists produced small amounts of chemicals and by 1635 the Pilgrims in Massachusetts were producing saltpeter for gunpowder and chemicals for tanning. But, large-scale chemical industries first developed in 19th cent. In 1823, British entrepreneur James Muspratt started mass producing soda ash (needed for soap and glass) using a process developed by Nicolas Leblanc in 1790. Advances in organic chemistry in the last half of the 19th cent. allowed companies to produce synthetic dyes from coal tar for the textile industry as early as the 1850s.

In the 1890s, German companies began mass producing sulfuric acid and, at about the same time, chemical companies began using the electrolytic method, which required large amounts of electricity and salt, to create caustic soda and chlorine. Man-made fibers changed the textile industry when rayon (made from wood fibers) was introduced in 1914; the introduction of synthetic fertilizers by the American Cyanamid Company in 1909 led to a green revolution in agriculture that dramatically improved crop yields. Advances in the manufacture of plastics led to the invention of celluloid in 1869 and the creation of such products as nylon by Du Pont in 1928. Research in organic chemistry in the 1910s allowed companies in the 1920s and 30s to begin producing chemicals for oil. Today, petrochemicals made from oil are the industry's largest sector. Synthetic rubber came into existence during World War II, when the war cut off supplies of rubber from Asia.

Since the 1950s growing concern about toxic waste produced by chemical industries has led to increased government regulation and the establishment of the Environmental Protection Agency (1972). The leakage of toxic chemicals at the Union Carbide plant in Bhopal, India (1984), was the worst industrial disaster in history and heightened public concern about lax environmental regulations for chemical companies in developing countries. Beginning in the 1980s, U.S. corporations faced expanding competition from foreign producers, including some Third World oil producers who have set up their own oil refining and petrochemical industries. In 1997 the U.S. chemical industry produced about $389 billion worth of products and employed 1,032,000 workers. It exported about $71 billion worth of chemicals.

Bibliography

See K. Lanz, Around the World with Chemistry (1980); G. Taylor, Du Pont and the International Chemical Industry (1984); W. Morehouse, The Bhopal Tragedy (1986); F. Aftalion, A History of the International Chemical Industry (1991); A. Heaton, ed., The Chemical Industry (2d ed., 1994).

The chemical industry comprises the companies that produce industrial chemicals. It is central to modern world economy, converting raw materials (oil, natural gas, air, water, metals, minerals) into more than 70,000 different products.

Products

Polymers and plastics, especially polyethylene, polypropylene, polyvinyl chloride, polyethylene terephthalate, polystyrene and polycarbonate comprise about 80% of the industry’s output worldwide. Chemicals are used to make a wide variety of consumer goods, as well as thousands inputs to agriculture, manufacturing, construction, and service industries. The chemical industry itself consumes 26 percent of its own output. Major industrial customers include rubber and plastic products, textiles, apparel, petroleum refining, pulp and paper, and primary metals. Chemicals is nearly a $3 trillion global enterprise, and the EU and U.S. chemical companies are the world's largest producers.

Product Category Breakdown

Sales of the chemistry business can be divided into a few broad categories, including basic chemicals (about 35 to 37 percent of the dollar output), life sciences (30 percent), specialty chemicals (20 to 25 percent) and consumer products (about 10 percent).

Basic chemicals are a broad chemical category including polymers, bulk petrochemicals and intermediates, other derivatives and basic industrials, inorganic chemicals, and fertilizers. Typical growth rates for basic chemicals are about 0.5 to 0.7 times GDP. Product prices are generally less than fifty cents per pound. Polymers, the largest revenue segment at about 33 percent of the basic chemicals dollar value, includes all categories of plastics and man-made fibers. The major markets for plastics are packaging, followed by home construction, containers, appliances, pipe, transportation, toys, and games. The largest-volume polymer product, polyethylene (PE), is used mainly in packaging films and other markets such as milk bottles, containers, and pipe. Polyvinyl chloride (PVC), another large-volume product, is principally used to make pipe for construction markets as well as siding and, to a much smaller extent, transportation and packaging materials. Polypropylene (PP), similar in volume to PVC, is used in markets ranging from packaging, appliances, and containers to clothing and carpeting. Polystyrene (PS), another large-volume plastic, is used principally for appliances and packaging as well as toys and recreation. The leading man-made fibers include poly-ester, nylon, polypropylene, and acrylics, with applications including apparel, home furnishings, and other industrial and consumer use. The principal raw materials for polymers are bulk petrochemicals.

Chemicals in the bulk petrochemicals and intermediates are primarily made from liquified petroleum gas (LPG), natural gas, and crude oil. Their sales volume is close to 30 percent of overall basic chemicals. Typical large-volume products include ethylene, propylene, benzene, toluene, xylenes, methanol, vinyl chloride monomer (VCM), styrene, butadiene, and ethylene oxide. These chemicals are the starting points for most polymers and other organic chemicals as well as much of the specialty chemicals category. Other derivatives and basic industries include synthetic rubber, surfactants, dyes and pigments, turpentine, resins, carbon black, explosives, and rubber products and contribute about 20 percent of the basic chemicals external sales. Inorganic chemicals (about 12 percent of the revenue output) make up the oldest of the chemical categories. Products include salt, chlorine, caustic soda, soda ash, acids (such as nitric, phosphoric, and sulfuric), titanium dioxide, and hydrogen peroxide. Fertilizers are the smallest category (about 6 percent) and include phosphates, ammonia, and potash chemicals.

Life sciences (about 30 percent of the dollar output of the chemistry business) include differentiated chemical and biological substances, pharmaceuticals, diagnostics, animal health products, vitamins, and crop protection chemicals. While much smaller in volume than other chemical sectors, their products tend to have very high prices—over ten dollars per pound—growth rates of 1.5 to 6 times GDP, and research and development spending at 15 to 25 percent of sales. Life science products are usually produced with very high specifications and are closely scrutinized by government agencies such as the Food and Drug Administration. Crop protection chemicals, about 10 percent of this category, include herbicides, insecticides, and fungicides.

Specialty chemicals are a category of relatively high valued, rapidly growing chemicals with diverse end product markets. Typical growth rates are one to three times GDP with prices over a dollar per pound. They are generally characterized by their innovative aspects. Products are sold for what they can do rather than for what chemicals they contain. Products include electronic chemicals, industrial gases, adhesives and sealants as well as coatings, industrial and institutional cleaning chemicals, and catalysts. Coatings make up about 15 percent of specialty chemicals sales, with other products ranging from 10 to 13 percent.

Consumer products include direct product sale of chemicals such as soaps, detergents, and cosmetics. Typical growth rates are 0.8 to 1.0 times GDP.

Every year, the American Chemistry Council tabulates the U.S. production of the top 100 basic chemicals. In 2000, the aggregate production of the top 100 chemicals totaled 502 million tons, up from 397 million tons in 1990. Inorganic chemicals tend to be the largest volume, though much smaller in dollar revenue terms due to their low prices. The top 11 of the 100 chemicals in 2000 were sulfuric acid (44 million tons), nitrogen (34), ethylene (28), oxygen (27), lime (22), ammonia (17), propylene (16), polyethylene (15), chlorine (13), phosphoric acid (13) and diammonium phosphates (12).

Companies

The largest corporate producers worldwide, with plants in numerous countries, are BASF, Dow, Shell, Bayer, INEOS, ExxonMobil, DuPont, SABIC, and Mitsubishi, along with thousands of smaller firms.

In the U.S. there are 170 major chemical companies. They operate internationally with more than 2,800 facilities outside the U.S. and 1,700 foreign subsidiaries or affiliates operating. The U.S. chemical output is $400 billion a year. The U.S. industry records large trade surpluses and employs more than a million people in the United States alone. The chemical industry is also the second largest consumer of energy in manufacturing and spends over $5 billion annually on pollution abatement.

In Europe, especially Germany, the chemical, plastics and rubber sectors are among the largest industrial sectors. Together they generate about 3.2 million jobs in more than 60,000 companies. Since 2000 the chemical sector alone has represented 2/3 of the entire manufacturing trade surplus of the EU. The chemical sector accounts for 12% of the EU manufacturing industry's added value.

The chemical industry has shown rapid growth for more than fifty years. The fastest growing areas have been in the manufacture of synthetic organic polymers used as plastics, fibres and elastomers. Historically and presently the chemical industry has been concentrated in three areas of the world, Western Europe, North America and Japan (the Triad). The European Community remains the largest producer area followed by the USA and Japan.

The traditional dominance of chemical production by the Triad countries is being challenged by changes in feedstock availability and price, labour cost, energy cost, differential rates of economic growth and environmental pressures. Instrumental in the changing structure of the global chemical industry has been the growth in China, India, Korea, the Middle East, South East Asia, Nigeria, Trinidad, Thailand, Brazil, Venezuela, and Indonesia.

Technology

As accepted by chemical engineers, the chemical industry involves the use of chemical processes such as chemical reactions and refining methods to produce a wide variety of solid, liquid, and gaseous materials. Most of these products are used in manufacture of other items, although a smaller number are used directly by consumers. Solvents, pesticides, lye, washing soda, and portland cement are a few examples of product used by consumers. The industry includes manufacturers of inorganic- and organic-industrial chemicals, ceramic products, petrochemicals, agrochemicals, polymers and rubber (elastomers), oleochemicals (oils, fats, and waxes), explosives, fragrances and flavors. Examples of these products are shown in the Table below.
Product Type Examples
inorganic industrial ammonia, nitrogen, sodium hydroxide, sulfuric acid, nitric acid
organic industrial acrylonitrile, phenol, ethylene oxide, urea
ceramic products silica brick, frit
petrochemicals ethylene, propylene, benzene, styrene
agrochemicals fertilizers, insecticides, herbicides
polymers polyethylene, Bakelite, polyester
elastomers polyisoprene, neoprene, polyurethane
oleochemicals lard, soybean oil, stearic acid
explosives nitroglycerin, ammonium nitrate, nitrocellulose
fragrances and flavors benzyl benzoate, coumarin, vanillin

Although the pharmaceutical industry is often considered a chemical industry , it has many different characteristics that puts it in a separate category. Other closely related industries include petroleum, glass, paint, ink, sealant, adhesive, and food processing manufacturers.

Chemical processes such as chemical reactions are used in chemical plants to form new substances in various types of reaction vessels. In many cases the reactions are conducted in special corrosion resistant equipment at elevated temperatures and pressures with the use of catalysts. The products of these reactions are separated using a variety of techniques including distillation especially fractional distillation, precipitation, crystallization, adsorption, filtration, sublimation, and drying. The processes and product are usually tested during and after manufacture by dedicated instruments and on-site quality control laboratories to insure safe operation and to assure that the product will meet required specifications. The products are packaged and delivered by many methods, including pipelines, tank-cars, and tank-trucks (for both solids and liquids), cylinders, drums, bottles, and boxes. Chemical companies often have a research and development laboratory for developing and testing products and processes. These facilities may include pilot plants, and such research facilities may be located at a site separate from the production plant(s).

History

Chandler (2005) argues the relative success or failure of American and European chemical companies is explained with reference to three themes: "barriers to entry," "strategic boundaries," and "limits to growth." He says successful chemical firms followed definite "paths of learning" whereby first movers and close followers created entry barriers to would-be rivals by building "integrated learning bases" (or organizational capabilities) which enabled them to develop, produce, distribute, and sell in local and then worldwide markets. Also they followed a "virtuous strategy" of reinvestment of retained earnings and growth through diversification, particularly to utilize "dynamic" scale and scope economies relating to new learning in launching "next generation" products.

Companies in 21st century

The chemical industry includes large, medium, and small companies that are located worldwide. Companies with sales of chemical products greater than $10 billion dollars in fiscal year 2005 are shown below. For some of these companies the chemical sales represented only a portion of their total sales; for example ExxonMobil’s chemical sales were only 8.7 percent of their total sales.
COMPANY, HEADQUARTERS 2005 Chemical Sales, billions Rank Country
BASF, AG, Ludwigshafen, Germany $53.2 1
Dow Chemical, Midland, Mich. $46.3 2
Shell Chemicals, Netherlands/UK $35 3
Bayer, AG, Leverkusen, Germany $34.1 4
INEOS, Lyndhurst, UK $33 5
ExxonMobil, Irving, Texas $31.2 6
DuPont, Wilmington, Delaware $28.5 7
Mitsubishi Chemical, Tokyo, Japan $21.9 8
Lyondell Chemical, Houston, Texas $18.6 9
Saudi Basic Industries Corporation, Riyadh, Saudi Arabia $18.4 10
Akzo Nobel, Arnhem, Netherlands $16.2 11
Evonik Degussa, AG, Düsseldorf, Germany $14.6 12
Sumitomo Chemical, Tokyo, Japan $14.1 13
Asahi Kasei, Tokyo, Japan $13.6 14
Mitsui Chemicals, Tokyo, Japan $13.4 15
Air Liquide, Paris, France $13.0 16
Toray Industries, Tokyo, Japan $13.0 17
Huntsman Corp., Salt Lake City, Utah $13.0 18
Chevron Phillips, The Woodlands, Texas $10.7 19
Solvay SA, Brussels, Belgium $10.7 20
Imperial Chemical Industries(ICI), London, UK $10.6 21
Shin-Etsu Chemical Co., Ltd., Tokyo, Japan $10.2 22
DSM NV, Heerlen, Netherlands $10.2 23

References

  • Fred Aftalion A History of the International Chemical Industry. University of Pennsylvania Press. 1991. online version
  • E. N. Brandt. Growth Company: Dow Chemical's First Century. Michigan State University Press. xxii+ 650 pp. Appendices, Select bibliography and index. ISBN 0-87013-426-4. online review
  • Alfred D. Chandler. Shaping the Industrial Century: The Remarkable Story of the Evolution of the Modern Chemical and Pharmaceutical Industries. Harvard University Press, 2005. 366 pp. ISBN 0-674-01720-X. chapters 3-6 deal with DuPont, Dow Chemicals, Monsanto, American Cyanamid, Union Carbide, and Allied in USA; and European chemical producers, Bayer, Farben, and ICI.
  • Micheal McCoy, et al., "Facts & Figures of the Chemical Industry", Chemical & Engineering News, 84(29), July 10, 2006, pp. 35-72.
  • American Chemistry Council. Guide to the Business of Chemistry. Arlington, Va.: American Chemistry Council, 2002.
  • Shreve, R. Norris, and Joseph A. Brink Jr. The Chemical Process Industries. 4th ed. New York: McGraw Hill, 1977.

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