The industry is highly fragmented because of the very large number of chemicals produced. Smaller companies can compete effectively with larger ones because of the practical limit to economies of scale - a small company can operate a chemicals plant just as well as a big company.
Chemical companies use energy and various processes to turn raw materials into useful chemicals.
These basic chemicals are made from mined materials like crude oil, natural gas and minerals, or from crops and other natural substances. The raw materials are called feedstocks. These basic and intermediate chemicals are collectively referred to as commodity chemicals and are produced mainly by large companies and as byproducts of petroleum refining, using manufacturing processes that are widely known. Margins on commodity chemicals are usually low because the chemicals are so widely produced. Commodity chemicals account for about 45 percent of industry revenue.