Metal cleaning is considered to be an importance process in the overall value chain of the metal. The quality and the durability of the metals are directly correlated with the process of cleaning and treatment of metals. However, it is imperative to note that no single solution is applicable for all the metals and different solutions are particularly designed for different metal types. The rising incorporation metal related products has been instrumental in driving the market for its cleaning solutions. In fact, the global metal cleaning chemical market is estimated to grow at a CAGR of 4.13% to reach US$11.952 billion in 2025 from US$9.378 billion in 2019. The metal industry has been witnessing stiff competition on the back of slow global economic growth and additional capacity coming online, thus, impacting the margins. The net capacity change – taking into account the new capacity additions and closures, indicates that the global steelmaking capacity is 1.5% up to 2,362.5 mmt at the end of 2019 (source: Organization for Economic Co-operation and Development). Simultaneously, world steel production as a share of capacity has increased from 77.7% in 2018 to 78.2% in 2019, signifying the steady increase in steel demand for various end-use consumption. Moreover, the growth of the metal cleaning chemical market is directly correlated with the global steel output. The global crude steel production increased from 189 million tonnes in 1950 to 850 million tonnes in 2000 (source: WorldSteel Association). As per the latest available data from the association, the crude steel production is estimated to be at 1,766.50 million tonnes in 2019.
Influence of Substitute
However, the metal cleaning chemical industry face tight competition from the laser cleaning solution providers. The ability of the laser cleaning technology to offer precise, controllable, and efficient cleaning solution while simultaneously generating low waste has led to its growing popularity, with the laser cleaning beginning to be accepted as the primary technique for certain applications. The Occupational Safety and Health Administration (OSHA) provides guidelines and regulation that require the employers to provide an environment and working condition which are hazardous free. Moreover, the growing competitive environment is resulting in firms in different industry verticals aiming to optimize the cost of operations in order to generate higher margins. As such, the ability of laser cleaning products to provide high efficiency and cost benefits, while simultaneously providing greater safety to the workers is supplementing its demand globally. Moreover, in 2012, Japan’s Ministry of Health, Labor and Welfare (MHLW) has announced 26 organic solvents to be included under Guidelines concerning carcinogenicity, in accordance with Article 28 of the Industrial Safety and Health Act. Therefore, laser cleaning systems are steadily being adopted by metal industry among others. Owing to the early adoption of laser cleaning solutions in the United States, Europe, and Japan, there are a number of service providers present in the country offering state-of-the-art and cost-effective systems to vendors across industries. Some of the major industries using laser cleaning solutions are automotive, electronic manufacturing, metallurgy, aerospace and defense among several others.
China Holds a Significant Share in The Market
The global manufacturing value added has increased from US$12.232 trillion in 2016 to US$13.809 trillion in 2019 (source: World Bank). China is estimated to be the largest metal consumer – which is also signified from the fact that country represents 28.21% of the global manufacturing value added. China is one of the world’s fastest-growing economies in the last decade with the largest population also leads the world in steel production, pouring nearly half of the global crude steel. It is primarily because of the conducive business environment which attracts foreign firms to open their manufacturing hub in the country. According to the World Steel Association, China is the largest producer of crude steel in 2018 producing 928 million tonnes of steel, also in 2019, the steel demand in China grew by 7.8% which is nearly double than the global average.
However, the companies that are targeting the United States as their market are setting up there manufacturing facility closer to the country, primarily in Brazil and Mexico as a result of improved trade relations. The metal industry of brazil is poised for high growth during the forecast period on account of growing focus by the government of the United States to strengthen its domestic manufacturing. Since, the United States constitutes more than 40% of the share of Brazil’s steel exports, the growing demand from the United States for steel will drive the production of steel in Brazil. Furthermore, in March 2017, the president of Argentina launched a new plan for the automotive industry – ‘1 Million Plan’ in which the country aims to manufacture 750,000 cars annually by 2019 and one million units annually by 2023, which is projected to drive the consumption of metal. On the other hand, India is an industrial hub for multiple manufacturing plants across industry verticals. It produces automobiles and auto-parts, brassware, metal (including metal processing), and more. These industries allow for a substantial scope in the growth of the market during the forecast period.
Despite the growing number of COVID-19 related cases, aluminum production in China – which accounts for more than 50% of production globally rose by approx. 2% in the first two months of 2020. However, the hit taken by the automotive industry as a result of COVID-19 pandemic is expected to impact the aluminum. with the aluminum prices are forecast to decline by 10.8% in 2020. Similarly, the metal intensive industry in the United States, Europe and China collapsed as the toll of COVID-19 increased globally, thus, dampening the demand of copper. Moreover, the world demand for steel is also expected decline by 6.40% in 2020 as a result a lower level of industrial output expected due to temporary closure of factories as a result of lockdown measures imposed by the government of different countries.
However, the second half of 2020 and more particularly the last quarter of 2020 is expected to be the phase when signs of gradual recovery starts appearing. In fact, the Worldsteel Association projects a 3.80% growth in the steel demand in 2021, with the pre-crisis level demand anticipated to be achieved in 2022. The demand for aluminum and copper are also expected to witness steady improvement in the comparison to the 2020 level. Thus, the metal cleaning chemical market is expected to follow a similar pattern in demand and revenue generation opportunity.
The latter half of the forecast period is anticipated to be relatively lucrative for metal cleaning chemical solution provider as the global economy is expected to behave like the no COVID-19 scenario in that phase. Moreover, the anticipated improvement in the economic scenario in Europe with regards to Brexit, expected positive development in the United States and China trade relations and the overall inclusiveness of global trade is expected to foster the development in the overall metallurgy industry, thus, providing high revenue generation opportunity for the metal cleaning chemical solution providers.