Chemical distribution

Over 100,000 chemical substances are used to make an almost infinite number of products –  from cosmetics to cola cans and from paints to plastics. Chemical distributors play an essential role by supplying these materials reliably, safely, securely and sustainably.  

Chemical distributors help their (upstream) suppliers to sell the chemicals they manufacture. Thanks to their deep knowledge of local markets and supply chain expertise, chemical distributors can reach hard-to-serve customers. Such customers might be far away, fragmented or highly specialized. Chemical distributors reduce complexity for suppliers, allowing them to focus on their chemical manufacturing processes. 

For their (downstream) customers, chemical distributors offer reliable on-spec service and safe delivery. They support customers with developing safer or greener products thanks to their deep chemical knowledge and in-house laboratories. As a one-stop shop for chemicals, chemical distributors enable their customers to simplify their sourcing processes.  

The flexibility and ability of third-party chemical distributors to absorb regulatory and logistical complexity allows them to add value for their suppliers and customers. This added value is exemplified by growth of chemical distribution across regions and chemical sectors. The chemical distribution industry is expected to grow from € 283bn in 2019 to € 501bn in 2027, outperforming the forecasted GDP growth in the same period. The outlook is particularly bright for the APAC region,  as chemical distributors are increasingly aligning with international standards and professionalizing supply reliability. 

Chemical distributors can add value by offering the following services:

Connecting supply and demand: Chemical distributors help chemical producers sell hard-to-reach customers, while helping their customers to find the products they need as inputs for their processes.

Handling services: Chemical distributors offer a wide variety of handling services, from storage and transport to blending, formulating, repackaging and relabelling.

Quality assurance: Chemical distributors pride themselves in delivering the chemicals on time and on spec, often using lab tests for quality assurance.

Safety measures: Chemical distributors often work with dangerous chemicals. It is up to them to ensure the safe and secure storage, transport and delivery of these products.

Regulatory compliance: Chemical distributors make sure their products comply with local laws. This includes regulations for substance registration, labelling, packaging, customs clearance and import/export.

Financing assistance: Chemical distributors may help customers with financing, for instance by offering the possibility of payment schedules.

Advice: Over 60,000 chemical substances are listed in the product portfolios of chemical distributors globally. Chemical distributors help their customers choose the right product based on their performance and sustainability profile.

Sustainability: In addition to reducing the impact of their own operations, chemical distributors help customers with improving their products, optimizing production processes or substituting dangerous substances with safer ones.

Growth Drivers in Chemical Distribution

The chemical distribution market has experienced robust growth, with an acceleration in recent years due to a combination of factors. Between 2008 and 2015, the market expanded by over 60%, and similar trends have continued since. The increasing demand for chemicals across various industries, including pharmaceuticals, agriculture, and manufacturing, has been a significant driver of this growth. Furthermore, BCG highlights that growth is not solely driven by rising chemical consumption but also by changes in how chemicals are distributed.

More producers are outsourcing their distribution to third-party specialists, allowing chemical distributors to capture a larger share of the market. This shift towards outsourced distribution enables producers to focus on core operations while leveraging the expertise and networks of distributors to reach diverse customer segments more efficiently. The global share of chemical consumption handled by distributors is projected to grow significantly, from around 9.7% in 2008 to 12.3% by 2022, with the highest growth rates expected in China and other Asia-Pacific markets.

The chemical distribution industry has experienced significant growth in recent years. After rebounding from the COVID-19 pandemic with a compound annual growth rate (CAGR) of 9.7% from 2019 to 2021, the market saw an unprecedented CAGR of 31.0% from 2021 to 2022. This surge was primarily due to distributors passing on higher prices resulting from tight product availability and supply chain disruptions. However, over 80% of this growth can be attributed to price increases, with volume increases being negligible during this period.

For 2023, a slight decline is expected, with a projected CAGR of -0.5% from 2022 to 2023, due to decreased demand for chemicals, exemplified by destocking trends among end customers. Despite this, the global chemical distribution market is anticipated to resume growth with a CAGR of 3.5% from 2025 to 2027, outpacing the forecasted global GDP growth rate of 3.0% for the same period. The market is projected to reach approximately €500 billion by 2027, with a CAGR of 2.4% from 2022 to 2027. This growth is expected to be more robust in specialty chemical distribution compared to commodity chemicals.

Regionally, the Asia-Pacific (APAC) region represents about half of the market and is expected to experience substantial growth, with a CAGR of 3.1% from 2022 to 2027, reaching a market size of €74 billion by 2027. This growth is driven by rapid industrialization and improvements in local distributors’ capabilities, aligning with international standards and expanding service portfolios. In contrast, Europe and North America have lower expected CAGRs of 0.9% and 1.5%, respectively, for the same period, indicating market maturity and saturation.

Overall, the chemical distribution industry continues to be a vital component of the global economy, adapting to market dynamics and evolving to meet the needs of both producers and consumers in an ever-changing landscape.

Value-Added Services and Digital Transformation

One of the critical factors in the success of chemical distributors today is their ability to offer a broader range of value-added services. These services go beyond traditional logistics and include technical support, regulatory compliance assistance, custom formulation, and digital tools that streamline procurement and inventory management. By offering these services, distributors add value for their customers and help differentiate themselves in a highly competitive market.

Digital transformation is also reshaping the chemical distribution industry. Distributors are increasingly investing in digital platforms to improve customer service and operational efficiency. Digital tools such as e-commerce portals, data analytics for predictive ordering, and automated inventory tracking are helping companies to optimize their supply chains and better serve customers’ needs. The adoption of digital solutions is becoming a competitive necessity, as customers increasingly expect seamless online interactions and data-driven insights from their suppliers.

Regional Dynamics and Future Trends

While the chemical distribution market is growing globally, regional differences play a significant role in shaping the pace and nature of this growth. The Asia-Pacific region, particularly China, continues to lead in market expansion, driven by rapid industrialization, increasing regulatory complexity, and a growing middle class demanding higher-quality products. In these markets, the compounded annual growth rate (CAGR) for chemical distribution is expected to outpace GDP growth significantly.

In contrast, Europe and North America are experiencing slower growth but still present opportunities for value creation through consolidation and specialization. Many distributors in these mature markets are focusing on niche segments and high-margin specialty chemicals to sustain growth. Moreover, regulatory changes such as stricter environmental laws are pushing distributors to offer more sustainable solutions, creating additional growth opportunities for companies that can meet these demands.