While the recession slowed sales for chemical distributors in 2001, stirrings of economic activity in early 2002 may signal a rebound is on its way.

Chemical distributors responding to PURCHASING Magazine's Top 100 Chemical Distributors Survey report average sales of $143 million for 2001 compared to $150.2 million in 2000.

Much of the drop in average sales occurred among many of the bigger players. Sales among the top 50 chemical distributors averaged $259 million in 2001. A year ago, the corresponding figure was $269 million. Of distributors with sales of $100 million or more, sales for 2001 averaged $508 million down from $530 million in 2000.

Yet, while six of the top 10 distributors saw sales fall in 2001, the relative rankings of PURCHASING's Top 100 Chemical Distributors did not shift much. Most notable change is GW International, number seven on last year's list. The chemical distributor completed sales of assets to Quadra Chemicals and Los Angeles Chemical in 2001, sliding off the list altogether.

Top six chemical distributors remain at the same ranks as in 2001. Vopak Distribution North America tops the list with $3 billion in sales; in 2000, the company had sales of $3.2 billion. With $2.8 billion in sales, Ashland is number two again; sales in 2000 were $2.9 billion. Brenntag recorded sales of $1.6 billion in 2001 to make the distributor number three; sales a year earlier were $1.52 billion.

Movers among the top 10 include: Harcros Chemicals Inc. from eight to seven; Canada Colors and Chemicals from nine to eight; Interstate Chemical Co., from 13 to nine and Hydrite Chemical Co. from 11 to 10.

The news from chemical distributors isn't all bad. While 37% of chemical distributors responding to PURCHASING's survey saw sales fall in 2001, nearly 55% report sales increases. With its acquisition of GW International, Angeles Chemical and Dixco Chemical, Los Angeles Chemical saw a sales gain of $75 million, moving it up from a tie for 46th position on last year's list to 18 this year. A little more than 9% of all chemical distributors on the list saw sales remain the same from year to year.

Along with Los Angeles Chemical's acquisitions, 2001 saw several chemical distributors complete mergers announced in 2000. Vopak acquired Ellis & Everhard just after the first of the year (a year later in February, Chairman Ton Spoor resigned amid a major restructuring of the company). Quadra Chemicals purchased some GW International assets. And Aceto acquired the distribution business of the Schweizerhall Pharmaceutical division of Schweizerhall Holding AG.

Also in 2001: CHEMCENTRAL bought Southwest Solvents & Chemicals; and HCI Acquisitions, a company formed by Harcros managers, purchased the Harcros Chemicals business.

Chemical distributors were busy creating alliances as well. Activity in 2001 includes Omni-Chem 136, an alliance of 13 chemical distributors, forming a partnership with the European Chemical Distributor Alliance. Also, the alliance added Solvents & Chemicals to replace Southwest Solvents & Chemicals, which dropped out as it was purchased by competitor CHEMCENTRAL. CHEMCENTRAL, meanwhile, formed a partnership called the CHEMWORLD Alliance with Albion Chemicals, which is based in the United Kingdom and Ireland, and Solvadis International, of Germany and France. Cole Chemical & Distributing joined the Chemical Distribution Network.

"We see the trend toward industry consolidation continuing," says James L. Kolstad, president of the National Association of Chemical Distributors (NACD). "The economic climate over the past six to seven months has been so poor, however, I think it had a dampening effect on mergers and acquisitions perhaps still in the works. These haven't taken place because people are concerned and would like to see a definite upturn in the economy. The upturn is not so visible to the chemicals industry right now. NACD members are not reporting particularly positive news."

Cyclical data from the NACD suggest the bottom of the economic cycle is here. "Whether activity bounces along this bottom or whether the shape of recovery as a V, U, or W remains to be seen," reports a recent issue of Chemical Distributor, the association's monthly publication. "Plagued by significant overcapacity, this [down] cycle has been the longest in duration since the 1930s and one of the most severe (in volume) during the post-World War II period."

Battered most by the recession were basic chemicals, the organization reports. Sales of fertilizers seem to have rebounded and inorganic chemicals, petrochemicals and intermediaries and some derivatives have bottomed out. (Volumes are off about 10% compared to last year and selling prices have declined as well.) Also starting to pick up: some specialty chemicals.

Results of PURCHASING's Top 100 Chemical Distributors survey show chemical distributors increased the number of stocking locations they manage from an average of 11.8 at the end of 2000 to 12.1 at the end of 2001. Of those responding to the survey question, 9.4% added stocking locations last year; 69.8% kept their number the same; and 20.8% closed locations.

Of distributors at the top of the list (those with $100 million or more in annual sales), 17.4% increased their number of stocking locations. Forty-seven percent report that the number stayed the same as last year.

Chemical distributors on PURCHASING's list have stocking locations mainly in the U.S. and Canada. Many also have branched out as 66.7% of respondents report stocking locations in Mexico and Latin/South America. Others sell product in Europe (66.7%) and Asia (50%).

When asked about bulk storage capacity and warehouse space for 2001, chemical distributors' responses average out to 3.4 million gal and 359,000 sq ft, respectively.

In 2001, chemical distributors on Purchasing's list sold product to buyers in these industries: paints and coatings (84.8%), cosmetic/personal care products (77.8%), soaps and detergents (74.7%), pharmaceuticals (72.7%) and primary chemical processing services (71.7%).

Sales through chemical distributors on this year's Top 100 list come mainly from these product categories: surfactants (70%), inorganics (69%), food additives (61%), amines (60%) and esters (56%). In last year's report, much of chemical distributor sales came from surfactants (73%), inorganics (69%), amines (64%), alcohols (63%) and solvents (61%). Comprising a smaller percentage of annual sales in 2001 are catalysts (27%), aldehydes (20%), adhesives & sealants (15%); institutional maintenance (15%); and industrial gases (10%).

Twenty percent of the chemical distributors responding to the survey did not add product lines in 2001. Of the companies that did, products they started to distribute last year include epoxy resins, food additives, and pigments. On the flip side, 56% of respondents did not drop any products in 2001. Those that did drop products stopped selling such things as fiberglass, titanium dioxide, fiberglass, hydrocarbon resins, rubber chemicals and various solvents.

Thirty-seven percent of chemical distributors on PURCHASING's Top 100 list plan to add products in 2002. Among those mentioned by survey respondents: resins, phosphate blends, food products and pharmaceuticals, esters, pigments, polymers, and solvents. Besides delivery and warehousing, chemical distributors offer: blending (63%), packaging (49%), technical training (39%), manufacturing (37%), and safety training (37%). These same five services were at the top of distributors' lists in 2000.

About half (49%) of chemical distributors responding to the survey are involved in e-commerce sales programs with their customers. And, while just 2.8% of sales in 2001 were Web-based, 31% of respondents say this figure represents an increase over Internet selling activity in 2000. No respondent saw a decline in Web-based business last year.