Report on Economic Position
Macroeconomic and Sector-Specific Environment
In keeping with expectations, the global economy experienced weakening growth in 2019. According to the International Monetary Fund (IMF), however, projected growth for 2020 should be slightly above the 2019 level. The global economy is thus showing initial signs that its growth momentum is stabilizing.
According to the latest forecasts available from the IMF, the global gross domestic product (GDP) rose at a significantly lower growth rate of 2.9% in 2019 (2018: 3.6%). Despite strong differences between the various regions and between industrial nations and emerging economies, the trend toward weakening growth is visible. While growth in industrial nations fell to 1.7% (2018: 2.2%), the emerging markets and developing countries saw growth of 3.7% (2018: 4.5%). The United States, the world’s largest economy, achieved slightly weaker growth of 2.3% (2018: 2.9%). The same trend is apparent in the eurozone, whose GDP growth weakened to 1.2% (2018: 1.9%), as well as in Asia’s emerging economies, which reported growth of 5.6% (2018: 6.4%). The strongest drivers were again China with 6.1% (2018: 6.6%) and India with a year-on-year slowdown in growth to 4.8% (2018: 6.8%). Japan reported GDP growth of 1.0% (2018: 0.3%), Taiwan registered GDP growth of 2.0% (2018: 2.6%), and Korea of 2.0% (2018: 2.7%).
As in 2018, the organic sales growth of the Group was above the IMF’s global growth expectations in 2019 and came to 5.3%. This growth was supported by all regions. The Asia-Pacific region accounted for the largest share of growth across the Group at 42.3%, followed by Europe at 22.6%, North America at 19.0%, Latin America at 12.5%, and the Middle East and Africa at 3.6%. Overall growth and growth in the Asia-Pacific, Europe, and Latin America regions was driven primarily by the Healthcare and Life Science business sectors, while Performance Materials was below the 2018 figure. Growth in North America was attributable in particular to the Life Science business sector.5.27 KBEXCEL
|Change 20191||Change 2018|
|Global pharmaceutical market||5.7%||5.4%|
|Market for multiple sclerosis therapies2||1.0%||2.7%|
|Market for type 2 diabetes therapies2||12.8%||9.8%|
|Market for fertility treatment2||4.8%||9.2%|
|Market for the treatment of colorectal cancer3||7.7%||4.8%|
|Market for laboratory products||3.2%||3.6%|
|Share of biopharmaceuticals in the global pharmaceutical market2||30.1%||28.0%|
|Growth of wafer area for semiconductor chips||-6.3%||8.0%|
|Growth of LC display surface area4||0.9%||10.1%|
|Global sales of cosmetics and care products||3.6%||4.1%|
|Global automobile sales volumes||-5.4%||-1.2%|
|1 Predicted development. Final development rates for 2019 were not available for all industries when this report was prepared.|
|2 Growth rates based on market data in local currency, translated at a constant euro exchange rate. The IQVIA market data on the growth of indications are based on current figures, including the third quarter of 2019. Annual growth based on the values for the past 12 months. The type 2 diabetes market excludes the United States, since this market is insignificant to the Group.|
|3 Growth rates based on market data stated in U.S. dollars. Market data from EvaluatePharma on the growth of indications are based on published company reports and are subject to exchange rate fluctuations.|
|4 Growth of display area is a pure volume indicator, which is counteracted by a negative price momentum.|
In its latest study (as of September 2019), the pharmaceutical market research firm IQVIA forecast an increased year-on-year growth for 2019 of 5.7% for the global pharmaceutical market (2018: 5.4%). The main contributors to growth were the Latin America and Asia-Pacific regions. Latin America reported significant growth of 12.0% (2018: 9.3%). The Asia-Pacific region also continued to expand and recorded growth of 5.6% in 2019 (2018: 3.8%). Growth in North America slowed slightly in comparison with 2018 but remains solid, especially in the United States at 5.3% (2018: 5.9%). The EMEA (Europe, the Middle East, and Africa) region recorded weaker growth of 5.2% compared to the previous year (2018: 5.5%).
Not only the growth of the pharmaceutical sector as a whole, but also in particular the development of the biopharmaceutical market, is relevant for our business. According to IQVIA, the market volume for biological pharmaceuticals was approximately € 295 billion in 2019, continuing the recent trend of a continuously increasing market share. These products accounted for 30.1% of the global pharmaceutical market in 2019 (2018: 28.0%). The most important market for biological pharmaceuticals is the United States with a 62.4% share of global market volume.
The developments in the therapeutic areas of relevance to the Group reflect robust growth, albeit with different trends. The global market for type 2 diabetes excluding the United States followed the positive trend of previous years and reached growth of 12.8% in 2019 (2018: 9.8%). In the therapeutic area of infertility, growth dropped to 4.8% (2018: 9.2%). After a strong upturn in 2018, the growth rate in the market for colorectal cancer reached 7.7% (2018: 4.8%). Growth in the market for multiple sclerosis patients continued the trend of previous years and declined to 1.0% in 2019 (2018: 2.7%).
Our Life Science business sector is a leading supplier of products and services for both research and applied laboratory applications, as well as for formulating, purifying, manufacturing, and quality-assuring drug therapies of chemical and biological origin.
According to the market research firm Frost & Sullivan, growth in the laboratory product market relevant to Research Solutions and Applied Solutions businesses slowed to 3.2% in 2019 (2018: 3.6%). Growth moderated from a peak in 2018 due to negative impacts from macroeconomic and geopolitical factors, despite a positive impact from continued strong demand from customers in the biopharmaceutical industry, specifically emerging biotech.
Our Life Science business sector competes in markets all around the globe. The European market growth slowed to 2.0% (2018: 2.4%), attributable to continuing uncertainties, most notably surrounding the outcome of Brexit. The market in the United States softened, growing 3.5% (2018: 4.2%), also due to increased geopolitical uncertainty, despite solid National Institutes of Health (NIH) funding to academic research customers. The Chinese market growth decelerated to 6.5% (2018: 7.0%) due to slowing GDP growth, trade relations, and imposed tariffs that have led to uncertainties in procurement, though domestic stimulus policies in China are providing some buffer for scientific tools and product investments in the laboratory area. The Indian market grew 7.8% (2018: 8.2%), where increased government spending, recovery from currency reform, and implementation of the national Goods and Services Tax (GST) has contributed to elevated spending.
The demand for Process Solutions products depends heavily on the sales of biopharmaceutical companies with biologics, as well as on the productivity of their research and development activities. According to IQVIA, the market volume of biotechnological pharmaceuticals grew to € 295 billion in 2019 (equivalent to 30.1% of the global pharmaceutical market). This is equivalent to growth of around 13.6% (2018: 13.2%), which is supported by all regions.
The semiconductor industry is the most important market for business with material for integrated circuits (Semiconductor Solutions). The growth in demand for semiconductor materials depends on the wafer area produced for semiconductors. The silicon wafers required as raw materials are used as an indicator to estimate the demand for semiconductor materials. According to the global industry association SEMI.org, the area of delivered silicon wafers decreased by approximately 6% in 2019. The semiconductor industry was in a correction phase in 2019. Demand for semiconductor chips weakened due to the high economic uncertainty in connection with trade restrictions between the United States and China, as well as between Japan and Korea, the export restrictions relating to Huawei, and Brexit. However, due to the expansion of capacity in recent years, this resulted in a significant increase in inventory levels within the entire semiconductor industry. Prices for semiconductor chips, in particular memory chips, thus came under strong pressure and only stabilized toward the end of the year. Semiconductor manufacturers countered this in the course of the year with production cutbacks and delayed further expansion of capacities. Toward the end of the year, however, there were increasing signs that the industry had navigated past the bottom and swung back to its long-term growth trajectory.
With its Liquid Crystals business, the Group is the leading producer of liquid crystal mixtures for the display industry. According to surveys by market researchers at IHS, the growth rate of display surfaces area was about 1% in 2019. This weak growth was mainly due to the low demand for televisions due to uncertainties caused by the trade conflict between the United States and China, as well as an overall weaker economic situation. In addition, inventories of display panels were carried over from 2018 into 2019. Liquid crystals will continue to play a key role in the display industry in the future. OLED technology, for which the Group also ranks among the leading material suppliers, is gaining importance in the high-quality display sector.
The markets for cosmetics and automotive coatings are crucial to our Pigments business. The market for cosmetics and care products grew by around 4% overall in 2019, a slightly slower rate than in 2018. The Asia-Pacific region, particularly China, was the main growth driver. The reasons for the slowdown in growth are the trade conflicts between the United States and China and uncertainties surrounding Brexit. Furthermore, the economic downturn in Europe is leading to a declining price structure.
Global automobile production fell by around 5% in 2019. Due to the major importance of China, the sharp decline in the production figures there was reflected globally. The declining figures in China are primarily due to the trade conflict between the United States and China, the implementation of new emission standards, and high inventories in 2018.