The Extraordinary Growth of Global Chemical Logistics

The explosion of growth in the chemical industry has triggered a corresponding explosion of growth in the ancillary chemical logistics industry, as providers scramble to keep up with the needs for transportation, storage, and distribution.

Global demand for chemicals reached $3 trillion in 2016, but that should not be considered a peak figure, since industry experts predict a rise to approximately $7 trillion by the year 2030. While no one is offering a forecast beyond that time frame, it’s safe to say that the chemical logistics industry will be booming for the foreseeable future.

Industry report predicts 14% growth in Chemical Logistics by 2022 has released a report detailing the anticipated growth of the Chemical Logistics market, and it is quite impressive. Sources for the report included interviews with industry gurus, as well as in-depth analyses of the current market landscape. The net result of those inputs offers the conclusion that the chemical logistics industry will enjoy spectacular growth during the entire four-year period covered.

There are four major factors which have substantially contributed to the recent explosive growth of the global chemical logistics industry in recent years (not in any particular order):

  • Cost reduction through third-party logistics (3PL) providers – In order for chemical companies to reduce their operational costs, they have largely outsourced logistics services and other services related to the supply chain, so that they may focus on their core competencies, and improve company efficiency.
  • Increased governmental initiatives – Governments, especially in some of the less developed countries, have entered into the fray to help develop roads and other transportation infrastructure, notably in countries such as China and Brazil.
  • Greater acceptance of bulk containers – This development has helped a great deal in logistics, because bulk containers can provide the kind of environment required by many chemicals to stay safe during the entire transport process.
  • Intermodal and multimodal transportation – The transportation aspect of logistics has been made considerably easier and less expensive, by the use of intermodal and multimodal transportation. Intermodal transportation provides for several different methods of transport during shipping, with each transport provider having their own contract. Multimodal has made that even simpler – while it may still have the same number of different transport methods, they are all united under a single contract with the chemical manufacturer.

Global chemical logistics trends

Other than the obvious increase in demand for chemical products themselves, sustainability and environmental friendliness is a very strong trend, driving the growth rate for logistics in the market. There has been a tremendous increase of awareness in energy conservation for many industries, and the chemical industry is no exception.

With the consumer demographic highly conscious of sustainability and conservation issues, the chemical industry has been obliged to adopt eco-friendly business initiatives in order to retain customer loyalty and support. One of the biggest ways that it can be realized is through a greater use of modernized, ‘green’ warehouses, which take into account product preservation while also being responsible about energy usage.

Another very strong trend in the Chemical Logistics industry is the increasing competition between major players in the industry. The uptick in demand for value-added services and for customization of supply chain solutions, has fostered intense rivalry among some of the most powerful logistics companies, all to the benefit of the chemical producing manufacturers.

Given the fact that external conditions such as moisture, temperature, and barometric pressure all have a strong effect on chemicals, it’s very important that they are adequately packaged, so as to avoid potential damage to the environment at all points throughout the supply chain. As a result, increased costs incurred by chemical manufacturers, must be offset by cost savings and efficiencies achieved prior to being sold. This, in turn, serves as a driver for manufacturers to seek additional services from logistics providers.

Transportation represents largest increase in logistics

Of all the various segments included in the overall supply chain, the one which figures to become the largest and fastest-growing area for chemical logistics will be the transportation segment. Virtually all chemical manufacturers outsource transportation services, because the cost would be prohibitive to keep the function in-house, especially given the fact that drivers and other transportation personnel are particularly expensive to hire and train.

The primary transportation services affected would be those related to air, ground, ocean, rail, pipelines, and intermodal transport, that combine several different transportation methods to get goods to their final destination. In addition, new logistics issues are being triggered by the fact that many manufacturing facilities are relocating to countries that have extremely low costs for labor.

There’s also been a noticeable increase in intra-regional trading, with a corresponding need for increased distribution capabilities. As there is also a rising need for measures related to safety and security for chemical manufacturers, there will undoubtedly be a rise in the transportation costs offered by intermodal services.

Opportunities in the Asia-Pacific market

Some of the biggest opportunities for growth are being presented in the Asia-Pacific (APAC) region of the world, where there are a number of emerging countries whose economies are just beginning to flex their collective muscles. In these areas, there’s a tremendous need for infrastructure development and the development of adequate safety measures, which must be used throughout the entire supply chain for handling of chemical goods.

Specialty chemical products and pest control mixtures are some of the chemical products in extremely high demand throughout the APAC region, and this is driving the growth in demand for chemical products, as well as the increased need for chemical logistics services. Chemical companies in this region of the world, accounted for well over one-half of the total global market share as recently as 2015. This trend is seen as one which has still not peaked with countries like China, Brazil, Japan, South Korea, and India are all seen as countries where even higher demand for chemicals and chemical logistics will be forthcoming.

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