Intermediate goods can be the ingredients used in producing goods, like the baker's salt that makes the bread he sells to customers.
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Businesses usually sell these goods to other companies to be used to make finished products, or in some cases, to be resold directly to consumers. There are times when intermediate goods are used to make other intermediate goods that are then used to make finished goods.
Because this definition is so broad, a wide array of various items can be called intermediate goods ' everything from salt to steel to semiconductors.
Electronics and transportation are heavy consumers of intermediate goods; these two industries trade more intermediate goods than all other sectors combined. These two sectors use very complex intermediate goods in their products, which are produced from other intermediate goods. For example, making a bus or a computer requires a semiconductor, an intermediate good that requires an input of other intermediate goods such as metals and ceramics.
Another example of an intermediate goods are integrated circuits used by the electronics industry. Others are navigational equipment used in transportation, metal and rubber used by the machinery industry, fertilizer used in agriculture, and girders used in construction.
Businesses can use intermediate goods in various ways to create a range of final goods. Steel, for example, is used in constructing homes and cars, building bridges, and making home appliances, among many other things. Wood is used to make flooring, furniture, and buildings.
Intermediate goods that fit both the intermediate and finished goods inventory classification can be used as ingredients for other things or consumed as a final product. The classic example of this is salt, which the baker can use to make bread, or a consumer can sprinkle on their dinner. Another example is sand, which can be used as an intermediate good to make concrete or glass or sold directly to consumers to fill a sandbox.
Intermediate goods vs. finished goods
Intermediate goods are components or materials used in the production of finished goods. Intermediate goods are also referred to as semi-finished products or producer goods, and are typically sold between businesses, such as a producer selling to a manufacturer. While a key part of production, intermediate goods are often unfinished and not ready for the end consumer.
On the other hand, finished goods are also called final goods or consumer goods. They do not need any further processing and are ready for sale. Finished goods can be sold to other businesses or directly to individual customers.
Take, for example, a computer manufacturer. Their intermediate goods may include microchips, motherboards, and hard drives, which they produce in-house or purchase from another company. Their finished good would be the fully assembled computer that's ready for sale to customers.
Intermediate goods vs. capital goods
Both intermediate and capital goods are used to produce consumer goods. But while intermediate goods are the ingredients of that final product, capital goods are the tools needed to 'mix' them. Capital goods are items that help in the production process.
Capital goods don't get transformed by dissolving or changing shape during the production. For example, when the baker uses the intermediate good salt to create his bread, the salt is transformed into an indistinguishable element of the final loaf. But when he uses the oven, a capital good, the machine doesn't change while baking the loaf. It gets hot but then eventually cools down again and retains the same shape and functionality it had before.
How do intermediate goods help economic growth?
Since intermediate and capital goods are essential for businesses to produce goods and services, a robust market indicates a vigorous consumer sector. Between and , imports of all three categories of goods increased in value in the U.S., according to the United States International Trade Commission. Imports of intermediate goods grew 48 percent to $34.7 billion, second to capital goods, which grew 65 percent to $77.6 billion.
These numbers reflect robust trade flows, which can be enabled by savvy trade policy. International economics account for how tariffs can impact trade costs, bog down supply chains, and affect intermediate goods and final goods' availability and prices.
Intermediate goods and GDP
In macroeconomics, gross domestic product (GDP) measures the total market value of all final goods and services produced within a given economy.
Intermediate goods are not counted toward this total because they are already accounted for in the value of the final good to which they contributed. If you were to count both final and intermediate goods in the country's GDP, you'd end up double-counting the intermediate goods.
When the baker buys the salt for his bread, economists only count it as part of the loaf it is used in, instead of as a product in itself. This method of counting is called a value-added approach.
One way intermediate goods are included in GDP is when they are part of inventory. When intermediate inputs are counted among inventory, they are temporarily 'final' goods, and their value can be added to GDP.
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Final thoughts
As intermediate goods are in an unfinished state and still need to undergo further processing, it's important to keep track of each step in the overall production. You can most easily account for all the goods in your warehouse with inventory software that automates your end-to-end inventory management.
By seeing real-time movements of your own intermediate goods, all the way until the production of final goods, you can better increase efficiencies in your overall operations.
Chemical Intermediates Market size is forecast to reach around $132.1 billion by , after growing at a CAGR of 8.2% during -. Chemical intermediate is used for manufacturing drugs and agriculture chemicals such as pesticides and fertilizer. The primary occupation of every country is agriculture, and the growing acceptance of sustainable farming is driving the market growth. The increasing demand for food coupled with surging population further drive the growth of agriculture sector, which in turn propel the market growth in the coming years. Efficient crop production with better quality is required to satisfy this growing demand. The demand for agrochemical products is projected to be driven by these factors, thereby positively impacting the demand of the chemical intermediates market. Moreover, the development in the end-use industries such as petrochemicals, paints, building and construction, and pharmaceutical are driving the Chemical Intermediate Market growth during the forecast period.
Impact of Covid-19
Due to the outbreak of the COVID-19, the demand of chemical intermediates in end use industry has reduced drastically, which tends to reduce the consumption of chemical intermediates, and thus constraining the growth of the market during the forecast period.
The 'Chemical Intermediates Market report ' Forecast (-)', by IndustryARC, covers an in-depth analysis of the following segments of the Chemical Intermediates Market.
By Form: Solid, Liquid, and Gas
By Product: Ethylene Amines,Ethylene Amines, Monochloroacetic Acid (MCA) , Caustic Products, Hydrochloric Acid, Chloromethanes, Hydrogen Peroxide, Sodium chlorate and Others.
By Application: Pharmaceutical, Agrochemical, Automotive, Petrochemical, Lubricants and Others.
By End Use Industry: Chemical & Petrochemical, Energy & Power, Transportation, Food & Beverages, Healthcare, Paint and Coatings, Agriculture, and Others.
By Geography: North America, South America, Europe, APAC, and RoW.
Solid segment held the largest share of more than 45% in the chemical intermediates market in . The largest form of chemical intermediates is produced in solid form. It is suitable for a wide variety of applications along with the easy storage and transport and low-cost compared to liquid chemical intermediates. Most of the solid sodium chemical intermediates will be dissolving into the water for converting into a liquid form to use in the applications like pharmaceutical, agriculture, automotive, petrochemical, lubricants and others.
Ethylene amines held the largest share of more than 40% in the chemical intermediates market in . In particular, ethylene amines are volatile compounds that have the potential to alter the properties of chemicals. Ethylene amine is commonly used in gas sweetening, building and construction additives, oil cutting, seed protection, and other uses. The benefits of ethylene amine is low environmental impact, low energy consumption, and high yields when compared with other product type, which boost consumer demand.
Pharmaceutical sector held the largest share of more than 30% in the chemical intermediates market in , and is growing with a CAGR of 10.8% during the forecast period -. Chemical intermediates have an important use in the pharmaceutical industry, and the growing use of chemical intermediates in the manufacture of medicinal products is driving the consumer demand. Due to the growing prevalence of illnesses, drug availability, and favorable government policies, the development of the pharmaceutical industry is driven by medical advancement. With innovations in science and technology, research in pharmaceutical industry is entering a new age in the production of drugs, resulting in reduced mortality. For example, some of the new advances in medical science responsible for lowered mortality are the regulation of high blood pressure and cardiovascular disease through antihypertensive and cholesterol-lowering drugs, and the control of cancers by targeted treatment. It is expected that developments in medical research will lead the pharmaceutical industry to have a positive effect on the global chemical intermediates market.
Healthcare sector held the largest share of more than 30% in the chemical intermediates market in . The rising prevalence of chronic diseases and growing R&D initiatives and activities in the pharmaceutical industry are some of the factors that drive market growth. There has been an increase in the use of emerging technology for improved drug candidate identification, such as high throughput, bioinformatics, and combinatorial chemistry. With new formations of chemical intermediates, drug research has advanced significantly, allowing the method to become more refined, reliable, and less time-consuming and is expected that the use of pharmaceutical chemical intermediates will expand steadily.
Asia Pacific dominated the chemical intermediates market in in terms of revenue with a share of 52.7% and is projected to dominate the market during the forecast period (-) followed by Europe and North America. In APAC, China is dominating due to China's chemical-technology capabilities are rapidly advancing. APAC growth is mainly attributed due to the production technology has been widely available and also easy access for raw materials. The chemical intermediates industry is moving into a new phase of development by shifting toward specialty-chemical growth, reflecting consumer-demand trends and the rising sophistication of industrial output in APAC. These trends are supporting the growth prospects of the chemical intermediates industry.
To produce a broad variety of chemicals, chemical intermediate is used as a building block. Therefore, there is a strong demand in the industry for the manufacture of many types of chemicals. Chemical intermediates are commonly used for the manufacture of essential chemicals for agriculture, including pesticides and fertilizers. As a result, the major growth factor of this industry is increasing agricultural production. The pharmaceutical industry is a frequent user of chemical intermediates where, as needed, they are employed in drug manufacturing. Growing disease prevalence and consistent attempts to produce new medications are factors that promote the development of chemical intermediate market.
The chemical 5-hydroxymethyl-furfural (HMF) building blocks can be obtained with good yield from biomass and has the ability to be transformed into a multitude of interesting products by only few stages. The conversion of HMF to 1-hydroxyhexane-2,5-dione (HHD) has been researched by many groups over the last 20 years. It is possible to transform HMF into HHD by hydrogenation/hydrolytic ring opening reaction in aqueous phase using different heterogeneous and homogeneous catalysts. State-of-the-art HHD synthesis, including mechanistic aspects of its formation, and recent developments in the use of HHD as a building block for many valuable chemicals, including pyrroles, derivatives of cyclopentanone and triols. The demand for chemical intermediates is rising due to the bio based chemical intermediate building blocks.
The raw materials used to produce chemical intermediates are the downstream components of crude oil. The price of raw materials from chemical intermediates is also hampered by demand volatility in crude oil. In the past year, according to the BP Statistical Study of World Energy, the market volatility of crude oil, such as the price of crude oil, rose from $98.95 in to $52.39 in and grew from $43.73 in to $71.31 in . And the price of chemical intermediates is also rising due to this uncertainty about the price of crude oil. The volatility in crude oil prices is therefore projected to be a major challenge for the chemical intermediate industry suppliers, hampering the growth of the chemical intermediate market during the forecast period.
Many of the bio based chemical building blocks currently available are based on staple agricultural goods, such as sugars and vegetable oils, which can differ considerably in price and are costly. A significant amount of feedstock would be required, provided that many chemical building blocks are bulk chemicals. Some are concerned that the ability of the Europe to supply extra sugar and oils is limited, while others claim that the potential for yield improvement of those commodities in Eastern European countries is still strong. As they are both inexpensive and readily available in Europe, the use of waste and residue sources will be desirable. In order to encourage the use of alternate feedstock sources and reduce processing costs, a range of technological challenges, particularly related to downstream processing, need to be resolved, but even if these challenges are successfully solved, it would be important to convince extremely conservative processors to adjust the production process to accept a new feedstock or a product with different properties.
Technology launches, acquisitions and R&D activities are key strategies adopted by players in the Chemical Intermediates Market report. In , the market of chemical intermediates has been consolidated by the top 10 companies accounting for xx% of the share. Major players in the Chemical Intermediates Market are Dow, INVISTA, BASF SE, Akzo Nobel NV, Stepan Company, LG Royal DSM, SABIC, Chevron Corporation, Jay Chemical, Exxon Mobil Corporation, among others.
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