SOLVENTS are substances used to dissolve, extract or suspend other substances to form a solution.They have various applications in a wide variety of industries

SOLVENTS are substances used to dissolve, extract or suspend other substances to form a solution.They have various applications in a wide variety of industries.

From simple usage as nail polish removers and paint thinners to chemical syntheses and purification processes in heavy industries, the market for solvents is indeed huge.

A report by research firm Reports and Data estimates that the global solvents market was valued at US$47.37bil in 2018. The market is expected to grow at a compounded annual growth rate (CAGR) of 3.9% to reach US$64.32bil by 2026.

Most solvent products are made to certain specifications and are produced by or sourced from multiple sources, such as petrochemical companies, chemical manufacturing companies and chemical distributors.

One of the biggest drivers for solvent products is growing demand for lab consumables by the life sciences segment. These include the pharmaceutical, biotech and healthcare sectors.

Among the known key suppliers are global companies such as Merck Millipore, Thermo Fisher Scientific and Avantor. Around half a dozen of these European- or American-based companies control around 70% of the lab chemicals market.

The market for high-purity chemical production and distribution is highly competitive. With big names in the game, it is, naturally, difficult for smaller producers to get any attention.

But Elite Advanced Materials Sdn Bhd (EAM) co-founder Tay Feng Huai says the lack of recognition for local producers such as themselves in this region is not a hindrance. As companies start feeling the pressure on their margins, they will start looking for cheaper alternatives, he opines.

The solvent industry within the region and in Malaysia are dominated by similar global brands like Merck Millipore and Avantor. Together, these companies make up more than 75% of the local market. This means that most end users in Malaysia are paying inflated prices due to the cost of logistics and distribution, he says.

“Compared to established players, we are small and have a limited product range. But where we can be competitive is to supply customers with the highest quality products at the most competitive price. In fact, our products can be between 30% and 40% cheaper compared to similar multinational solvent producers, ” says Tay.

EAM is a Rawang-based high-purity solvent manufacturer.

One of the main advantages that the company has as a solvent producer in Malaysia is the access to cheap raw materials, which can be secured at around RM1.50 to RM1.60 per litre.

Once refined into high-purity solvents, they can be sold at about RM30 to RM40 per litre.

The Asia Pacific region is said to be the fastest growing region in the global solvents market due to rapid urbanisation, and, particularly, growing demand for automobiles. It has the highest CAGR at 4.8% and accounts for 25.3% of the market share in the global solvents market, according to Reports and Data.

While EAM is still establishing its presence in the local market, Tay notes that the company is also looking to expand its exports, which currently make up about 20% of sales.

Tay notes that petrochemical companies that partner with global distribution companies such as Brenntag and Nexeo Solutions are preferred suppliers for buyers that want to procure crude solvent and purify it on their own by means of distillation.

Every distributor, he says, has a value-adding function in the supply chain once raw materials are sourced from the chemical manufacturers. This involves purification, blending, packaging, and labeling before selling the product to the end users. They are preferred partners for those who need to buy high-purity solvent in bulk quantities. For small-volume buying, lab chemical distributors are the most suitable.

Solvents have many applications besides being an essential component in the processing of chemicals, says Tay. The company’s products are also used as ingredients in the manufacturing process of other industries, including electronics, pharmaceuticals, personal care, food processing and diagnostics.

Despite the vast applications for solvents, Tay says his own research into the market has found that many of the local chemical companies are in the business of importing, repackaging, trading and distribution of solvents, instead of production.

This means that there is room for actual producers like EAM to jostle for market share given that they would have more control over the cost of their products.

“We can certainly see potential in this segment of the chemical industry, as the entire region in Asean lacks a local champion who can supply the variety and quality that companies across different industries need, ” he says.