Chemicals

The chemical industry bounced back in 2010, as Asian demand and higher prices led to decreased capacity and higher profitability. According to the American Chemical Council (ACC), chemical production volumes improved 8.8% last year (see IBO 12/15/10), driven by a 12.2% increase in emerging markets. Oxford Economics estimates worldwide production of chemicals and man-made fabrics grew 7.2%.

The European Chemical Industry Council (CEFIC) estimates European chemical output grew 10% last year. VCI, Germany’s chemical industry association, estimates that in 2010, Germany’s chemical production increased 11.0%, sales rose 17.5% and R&D spending increased 4%.

The ACC forecasts worldwide production will rise 5.4% in 2011, led by China, India and Brazil. China is expected to become the leading chemical producer and consumer. Emerging markets’ production volumes are expected to grow 8.4%. US output is estimated to increase 3.0%, with US chemical firms’ capital expenditures up 6%. Oxford Economics estimates a 5.7% increase in chemical output worldwide. CEFIC predicts a 2.5% increase in European chemical production in 2011 due to greater competition. VCI forecasts German chemical production will rise 2.5% and sales will increase 4.0%.

Energy

The International Energy Agency (IEA) predicts global oil demand will increase 1.5% this year to 88.2 million of barrels per day (bpd), a decline from an estimated 2.9% increase last year. Emerging markets will continue to fuel demand. Chinese oil demand grew an estimated 10.5% last year, but is expected to slow this year, rising only 3.8%. From 2009 to 2010, oil production rose 87.74 mbd to 88.12 mbd.

Despite weak margins, global refining capacity is expected to continue to increase. The IEA expects 9.2 mbd of distillation capacity (CPU), as well as 15 mbd of upgrades and desulphurization, to be added between 2009 and 2015. Of this new CPU, 70% will be built in Asia and the Middle East, including 40% built in China.

Wood Mackenzie forecasts world oil demand to rise 1.6% in 2011 to an average of 88.1 million bpd. In 2010, 85% of the growth in demand to 86.7 million bpd came from emerging markets. Emerging markets are expected to account for 85% of the growth in 2011 and 2012. Upstream capital spending is estimated to have risen 5.2% last year to $380 billion.

Spending on oil exploration and production is forecast to grow 11% to $490 billion, according to a Barclays Capital survey of 402 firms. Major oil companies are expected to show the largest spending increases, and spending is expected to be the highest in Latin America, the Middle East and Southeast Asia.

The IEA reports that biofuels production increased 16.8% in 2010 to 1,823,000 bpd and forecasts it to increase 10.4% in 2011. Funding was also robust. Bloomberg New Energy Finance reports that new investments in clean energy rose 30.3% last year to $243 billion. Investments in China increased 30% to $51.1 billion. R&D spending by government increased 32.9% to $21 billion, while business R&D spending grew 12.5% to $14.4 billion. Solar power investments increased 49% to $89.3 billion, but biofuel investments fell 2.5% to $7.9 billion. According to the National Venture Capital Association’s (NVCA) December 2010 survey of 330 US venture capitalists and 180 CEOs of venture-backed US firms, 40% expect VC investments in clean energy to decline this year, and 38% expect them to increase.

Pharmaceutical and Biotech

The pharmaceutical industry continued to face tough times in 2010 due to patent expirations and government price containment, but biotech rebounded. In October 2010, IMS Health forecast drug sales to increase to 5%–7% this year to $880 billion, compared with 4%–5% sales growth in 2010 (see IBO 10/15/10). Emerging nations will once again fuel growth, with sales rising 15%–17% this year, a three-percentage-point increase from 2010. Discussing trends in drug development in December, IMS stated the drug makers will continue to focus on cutting costs and development timelines, as well as improving productivity using translational medicine, partnerships and portfolio management.

In its World Preview 2010, published in May 2010, EvaluatePharma forecast prescription drug sales to show compound annual growth (CAGR) of 2.9% from 2009 to 2016 to $785 billion in sales. Sales of biotech drugs are expected to increase 62% to $189 billion from 2009 to 2016 to make up 23% of the total prescription and over-the-counter drug market. Pharmaceutical R&D spending is predicted to increase at a CAGR of 2.3% over the same period to $145 billion.

Burrill & Company estimates that public and private US biotech financing rose 35.2% last year to $25,621 million. Private financing rose 6.8% to $4,513 million. Among public financing instruments, debt financing increased 133.6% to $14,732 million. Biotech and pharmaceutical partnerships generated $30,108 million in funding for US biotech companies, down 18.5% from 2009. Burrill forecasts a similar level of financing in 2011 as well as 25 US biotech IPOs.

The NVCA survey found that 34% of respondents expect biopharma VC to be the same in 2011 as it was in 2010, while 33% each expect it to increase and decrease.

 Bar Graph: End-Market Sales Growth Predictions for Analytical Instruments for 2011

 Chemicals            1.8%

 Polymers             2.4%

 Metals               3.5%

 Oil/Petrochem        3.6%

 Semicon/Elect.       4.8%

 Indep. Test          5.2%

 Pharmaceuticals      5.6%

 Government           5.7%

 Academia             6.2%

 Biotech              8.1%

 Food & Bev           8.5%