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July 24, 2000
Volume 78, Number 30
CENEAR 78 30 pp.26-29
ISSN 0009-2347
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Global Top 50
Patricia L. Short
C&EN London

For the fourth year in a row, Germany's chemical giant BASF leads the ranking by Chemical & Engineering News of Top 50 chemical producers worldwide. The remainder of 1999's first four producers also duplicated their rankings from the previous year: DuPont in the number-two slot, followed by Germany's Bayer and Dow Chemical . Rounding out the top five, however, is ExxonMobil , last year listed simply as Exxon, which has jumped three notches following the combining of its chemical businesses with those of merger partner Mobil Oil.

Table: Consolidation, sales growth mark global Top 50 in 1999

At number six for 1999 is the U.K.'s ICI, which has transformed itself from a petrochemical producer to a specialty chemicals company through its acquisition of the specialties businesses of Unilever. And filling out the top 10 are Shell Chemicals, Anglo-Dutch Akzo Nobel, and two mega-merger results: Germany's Degussa-Hüls and the chemical operations of BP Amoco.

Degussa-Hüls thus ensures that there remains a "Big Three" of German chemical companies, even though it does seem peculiar to industry observers to no longer have Hoechst in the equation. And Degussa-Hüls's presence in the Big Three will soon be boosted by its merger with compatriot firm SKW into a new specialties giant that has shed all nonchemical businesses, following the merger of the two companies' respective parent firms. The name of the new company will be simply Degussa, but it will be a far cry from the "Deutsche Gold und Silber Scheide Anstalt" that was founded in 1843 on precious metals.

Last year, 1999, was a good year in terms of sales for the Top 50 chemical companies worldwide: The total rang up by the group was $397 billion in chemical sales, up 5.9% from 1998.

The increase was seen across all the regions represented by the Top 50. In the U.S., sales generated in 1999 by the U.S. companies in the listing were up 14.4% over 1998, to an aggregate total of $127.4 billion. In 1999, 16 companies from the U.S. were in the Top 50, the same number as in the previous year's rankings.

Aggregate sales of Japanese companies in the listing were $39.8 billion, up 10.8% from 1998. As in last year's ranking, six Japanese producers appeared in the C&EN rankings. Mitsui Chemicals jumped dramatically because of a change in how C&EN evaluates what constitutes the company's chemical sales.

Areas outside the main producing blocs were represented in 1999 by the same three companies--Saudi Basic Industries Corp. (Saudi Arabia), India's Reliance Industries , and Taiwan's Formosa Plastics --that appeared on last year's list. Their aggregate sales of $13.7 billion jumped 17.4% from 1998.

In Europe, weakness of the euro--the single currency now in nominal use in countries where 16 of the Top 50 companies are based--has held down sales. Even so, the change in 1999 over 1998 was a positive 0.1%, to a total of $216 billion. A total of 25 European companies are on the list, the same as in last year's ranking.

The flat performance of the European region held the share of Top 50 producers there to 54.4% of the total, reflecting the strong growth of the remaining regions. For example, the share held by U.S. companies was 32.1%, up from last year's 30.4%. The share represented by Japanese producers improved substantially, from 8.8% for 1998 results to 10.0% in 1999.

The strongest progress in percentage of total sales, although on a small base, came with the improved share held by the outlying three: SABIC, Reliance, and Formosa Plastics. Reliance, in particular, has seen a dramatic increase in sales, as it has pursued a goal of becoming a major player in the world petrochemical industry.

With the marked buoyancy in sales throughout the top producers, the threshold for the Top 50 was dramatically up. In the listing for the Top 50 in 1998, the cutoff spot was claimed by Occidental Petroleum, with chemical sales of $2.98 billion. For 1999, however, OxyChem dropped out of the rankings, and Chevron claimed the wrap-up slot with chemical sales of $3.54 billion.

Newcomers have appeared on the list for 1999, reflecting in part continuing industry mergers and acquisitions as well as changing criteria for C&EN rankings. These contenders include Aventis and its two spin-offs-- Rhodia , formerly the chemical business of Rhône-Poulenc, and Celanese, formerly the chemical business of Hoechst--and PPG Industries, Equistar, and Lyondell.

Although sales for the Top 50 companies were up, the average operating profit margin was down slightly from the year earlier, strengthening the feeling that the industry is on the down side of its traditional cycle.

Capital spending also turned down, as major projects have come onstream and companies are concentrating on improving capacity utilization rather than further additions. Total capital expenditures that can be identified for the 42 companies that reported spending on new plants and equipment showed a decrease of 16.3% from the spending levels of 1998, to an aggregate of $32.0 billion.

Research and development spending, however, showed an increase, albeit a limited one. Identifiable spending among 28 companies reporting was up 1.6% over 1998 spending for the Top 50, to a total of $11.7 billion. That was just shy of 3% of chemical sales.

Chemical sales during the year were dampened by the impact of currency weakness against the dollar. That was particularly true in Europe, where the euro has suffered since its introduction at the beginning of 1999. The relatively lower, more attractive selling prices charged by European companies have made export selling easier, companies report, although sums received at headquarters are translated to dollars at a lower level.

Had currencies remained stable at the average rate for 1998, for example, aggregate chemical sales of the Top 50 would have been $403 billion--1.5% higher than the reported total. The total for European companies would have been $227 billion, a 5.2% difference from that reported.

On the other hand, ignoring the strengthening of the Japanese yen against the U.S. dollar as the Asia-Pacific financial crisis has been weathered would have knocked nearly 13% off the aggregate total of that country's chemical companies' sales.

This 10th anniversary listing of the Top 50 worldwide chemical producers provides a snapshot of the restructuring forces that have been at work in the chemical industry over the past decade--but one that indicates the changes are not a recent phenomenon but rather have been happening all along.

In the first listing of the global Top 50 by C&EN, Hoechst and Rhône-Poulenc were in the top 10. At the beginning of this year, both names disappeared, merging into the French life sciences powerhouse Aventis. However, the other casualty of the 1989 ranking--Italy's Enimont--disappeared in 1990 when joint-venture partners EniChem, part of Italian oil company ENI, and Montedison withdrew their chemical assets and dissolved the venture.

In the intervening decade, a number of other companies have dropped off the listing. In Switzerland, Ciba-Geigy merged with Sandoz to form Novartis; Novartis appeared on the rankings for a brief time before spinning off its chemical businesses into what became Ciba Specialty Chemicals (this year's number 26). In Germany, Hüls merged with Degussa to form top-10 member Degussa-Hüls. Amoco has merged with British Petroleum, and Mobil with Exxon.

France's Orkem was dismembered by the French government, and its operations were distributed to other French chemical companies. Unilever left the rankings when it sold its chemical operations to ICI. Likewise, American Cyanamid spun off most of its chemical operations as Cytec Industries, but its agrochemicals business stayed with the company, which was eventually bought by American Home Products. This year, this business was sold to BASF. And in Japan, the two smallish producers--Mitsubishi Petrochemical and Mitsubishi Kasei--merged, resulting in the world player Mitsubishi Chemical .

On the other hand, some of the original top 50 have dropped off because their chemical sales have not kept pace with those of other producers. These include Occidental Petroleum; W.R. Grace; Phillips Petroleum; Japan's Takeda Chemical, Sekisui Chemical, and Showa Denko ; Montedison; and Finland's Kemira.

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