Page 122 - CW E-Magazine (29-4-2025)

Point of View

APIs. This is a consequence of several unchanged aspects of the industry, notably use of old-fashioned batch reactors that have undergone little
fundamental change, as well as stoichiometric quantities of mainly inorganic reagents in the form of oxidants, reductants, acids, and bases. The
costs associated with treating and disposing these wastes rapidly approached the selling price of the product, turning the economics unviable,
and forcing companies to outsource production.
While the developed triad of Western Europe, US and Japan produced 90% of the APIs required in the mid-1990s, by 2017, China alone
accounted for 40%, as more and more production came to be offshored, particularly generic APIs. In 2019, the top-10 fine chemical companies
of the world included two from China, with several from India close to entering the list. Today, the industry’s structure spans some very large
companies (top-10 having annual sales of $0.5-1.5-bn), several mid-sized ones ($100-500 mn), and hundreds more (mostly in China and India)
with annual sales below $100-mn. The last lot were originally (when outsourcing started) focused on niche/hazardous chemistries such as
cyanation, phosgenation, ethoxylation, halogenation, ozonation, hydrogenation, etc., but have since broadened offerings. Besides, the largest of
the fine chemical companies headquartered in Europe and the US had one or more plants operating in China.

Technology shifts
Three major manufacturing technology shifts are ongoing in the industry: the industrial use of bio-catalysis and advanced chemical catalysis;
the shift towards continuous manufacturing (CM); and the use of digital technologies for process design and process control.
Biocatalysis – involving use of enzymes – is arguably the most fundamental technological change ongoing and is enabling more efficient,
selective, and environmentally-friendly production of fine chemicals, including complex chiral motifs.The breadth of the biocatalysis toolbox
continues to grow because of academic developments, key industrial-academic collaborations, and in-house enzyme discovery efforts.One of
the more recent capabilities, now implemented on scale, is the combination of multiple enzyme-catalyzed steps in one-pot, avoiding the need for
time-consuming, material-intensive, and costly isolation procedures, and so greatly reducing waste generation.
Continuous manufacturing (CM) made its entry into the fine chemicals industry about 20 years ago for the manufacture of patented drugs in
the developed world. This shift came with several benefits over the legacy batch processes: smaller plant footprint; reduced waste generation;
energy-efficient operations; lower capital & operating costs, etc. Real-time monitoring and control of process parameters, facilitated by Process
Analytical Technology (PAT),enabled more consistent and high-quality products. By the early 2020s, CM came to be adopted for the manufacture
of generic APIs and agrochemicals, including in India.Challenges to its wider adoption here include significant upfront costs; and need for a skilled
workforce to design, operate and maintain these plants. Indigenous efforts to develop advanced micro-reactor technologies have been taken up in
India, which should make them more affordable to small and mid-size companies, and at least one publicly-funded industrial research laboratory
is now focused on upgrading the skill-base to operate these sophisticated plants and widen the areas of application.

Digital process design and process control technology such as ‘digital twins’ has moved beyond the petrochemical and basic chemical
industries, and gaining traction in fine chemicals for process design and optimization. With well-developed IT infrastructure, India is particularly
well placed to leverage this technology.

The drive to self-sufficiency
The disruptions caused by Covid to supply chains in critical areas (as medicines) has forced a rethink on the emptying out of fine chemical
manufacturing in the western world. In the US, Japan and EU there is today emphasis on enhancing the security of these critical supplies. Even
before the tariff measures were put in place in the US and others (in reaction), there have been several policy steps taken to localize production,
and/or reduce dependence on single source of supply (which, more often than not, is China).
The US, for one, is targeting to reshore manufacturing of 25% of small molecule APIs. In Germany new legislation is giving preference for
APIs manufactured in the country or the EU. In Japan, the government is supporting measures such as subsidies and purchase preference to
bring back local manufacture of antibiotics, which had all but ceased. India’s Production Linked Incentive (PLI) scheme is also aiding the creation
of new capacity for basic antibiotics and for some critical intermediates largely met by imports now.

How much of a manufacturing renaissance will be seen in the markets that India’s fine chemical industry now caters remains to be seen. Tariff
and non-tariff barriers are a new reality, and the era of globalization is truly over. Bilateral arrangements – several of which are being discussed
with trade partners – will likely take its place but may not make up entirely for the opportunities that the open-trade era that prevailed for well
over three decades afforded.

The fine chemicals industry, like many others, is entering unchartered waters, with much of the challenges ahead coming from factors well
beyond its control. The best it can do is focus on ramping up technological capabilities, manufacturing excellence and broaden portfolios to better
serve the needs of user industries.
Ravi Raghavan

122 Chemical Weekly April 29, 2025

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