An integral part of the chemical supply chain, specialty chemicals are high end versions of a chemical. They are used in small proportions as compared to their counterparts. The chemicals add to the performance of the end products and increase their functionality. The specialty chemicals industry is set to grow by leaps and bounds in the coming years. Emerging markets like India, China, Korea and Brazil show a promising future for the industry. As more and more companies are moving their manufacturing base to low cost locations, the demand for chemicals is expected to increase. There is also a substantial increase in the exports of the products which is due to the rise in global demand for niche chemicals. Governments in emerging economies are also developing policies that help in the growth of the industry and encourage global players to make investments.
 
The market is expected to show a CAGR of 5.08% by 2023. The demand for coatings is on the rise due to multiple applications across different industries including aerospace, concrete structures, processing equipment, oil and gas, paper and pulp, marine, mining and architectural industries. There is a rise in the infrastructure development across emerging companies which has led to the increase in global demand. Further, there is an increase in automotive production in Europe which has driven  the growth. Also, the rise in furniture production and the revival of the construction industry in Europe is a major factor which drives the demand for paints and coating industry.
 
Currently the Asia Pacific has the highest market share of about 42% of the global specialty chemicals market. One factor that has driven growth is the surge in the innovation and technology implementation. A lot of manufacturing plants are based in the Asia Pacific region. The industries are widely fragmented as most companies sign short term contracts for the chemicals from local manufacturers. The top players in Europe have a small share in the market but their rate of forward integration is very high. This allows them to maintain a consistent supply of chemicals for regions that have high demand. Any new entrants in the industry may face strong competition from the current players in Europe as they possess the advantage of economies of scale and has a cost based competitive edge over new entrants.
 
Europe has seen a rise in the labor costs over a period of time and this has led to the slowdown of the growth of the industry. The current competitive environment shows that the European companies are well positioned in the home market but have a weak position in the global market. There are a number of companies that have dominated the global market and majority of them are based in Asia. In Europe, the companies play by rules and they are highly interested in China for its growth rate and the potential. The companies in Europe need to build a strategy to manage rapid growth and to target the growing market. They need to stop focusing on the traditional saturated market and enter the global market by articipating in Asian growth. Currently the biggest challenge for European industries is the plant closure and the migration in Asia. There are inherent advantages of local production that could outweigh the advantages of low labor in Asia. The companies need to select the right business model and build a platform for growth. There are high growth opportunities in innovative products that are related to global mega trends. These include alternative feedstock, environmental technology, nutrition, intelligent materials, alternative energy and efficiency. Innovative solutions can help the industries generate value beyond the traditional model.