By definition, specialty and fine chemicals constitute the higher value end of the chemicals business. The former industry segment consists of products often sold based on performance-in-use characteristics rather than price per kilogram (e.g., water treatment chemicals, personal care products), whereas the latter segment is composed of typically high purity pharmaceutical ingredients or food flavor materials. Specialty chemicals markets are created and lost based on the abilities, or lack thereof, of the producer to create differentiation among the available products. In both sectors, innovation is the driver behind better competitiveness, whether innovation takes the form of either developing new or modified products to exploit existing or new applications or developing new process technologies to produce such products. With the recent decline in the rate of research and development expenditures among specialty chemical producers, from 6 percent of sales in the early 1990s to 4 percent now, competition is becoming increasingly intense. In contrast, the pharmaceutical industry, a major component of the fine chemicals sector, has more than doubled research spending during the past 10 years, whereas the number of new chemical entities has remained static. Therefore, the productivity of the research funds appears to have declined, and the current cost to bring a new drug to market is now on the order of $500 million.

What do these recent trends in the fine and specialty chemicals industries mean to capital spending? When companies do invest in assets, they must do so more wisely, using the Best Practices for project selection and planning. Project teams need to focus on delivering the best value to meet the business need and enable the capital project to result in the increased sales, profits, and hence a higher return to the shareholder.

IPA'S APPROACH TO THE FINE AND SPECIALTY CHEMICALS INDUSTRIES

IPA uses data from our Process Plants Database, which consists of data from more than 4,500 projects worldwide, to evaluate specialty and fine chemicals projects. Using data specific to the specialty chemicals project or group of projects being evaluated, we can benchmark and measure risks of all types of projects, from greenfield to revamp to colocated. We have also created tools, such as the Batch Cost Model, specific to the study of cost effectiveness in batch production processes to be used in our evaluations.

All of IPA's benchmarking and individual project risk assessment products (Business FEL, pacesetter, and prospective project evaluation) are applied to projects submitted by companies undertaking projects in these industries.

For more information, contact: Natalia Zwart (+1 703-726-5305) Allison Aschman (+1 703-726-5338).