Industry Trends & Challenges

Chemicals companies face a number of opportunities and threats to their businesses. The companies best placed to deal with a challenge will consider it as an opportunity, whilst those poorly prepared will face the challenge as a threat.

Before the COVID-19 crisis, there were several trends that chemical companies were responding to. Some of those have accelerated because of COVID-19 and are likely to continue to be a challenge over the coming years. Those include:

• regulatory control – especially with regard to health and safety
• sustainability and circular economy – consumers are demanding products that have lower carbon footprints, with lower environmental impact
• oversupply in certain segments – reduced demand from the automotive and construction industries in particular led to an exacerbation of already over-supplied segments, especially in the US
• digitalization to aid in process efficiency and product innovation
• enhanced cyber security to support additional remote working
• increase in remote or digital sales channels
• oil and gas price volatility – although price drops generally aided chemicals companies by reducing raw materials and energy costs, it also eroded some sectors’ price advantage.

Chemical demand is different around the world, especially now that specific regions are responsible for a large proportion of global manufacturing. Therefore, chemical companies face the challenge to follow their customer industries. For example:

• new electronics factories in China and Thailand drive growth in demand for solvents used to clean components and connectors
• new car assembly plant in Hungary drives growth in demand for automotive paints and coatings
• the extraction of shale oil and gas from reservoirs in the US needs chemicals to prevent the corrosion of well casings, to reduce drill-bit friction, and to kill bacteria.

What is the current position of the chemicals industry?

The chemicals industry in 2022 is recovering well from the setback it experienced due to the pandemic. Strong rebounds in key end markets such as construction, automotive, and consumer goods bode well for a successful year for many chemicals companies.

However, this recovery brings with it the risk of inflation. Inflationary pressure on key feedstocks such as oil may dampen this recovery by putting a strain on margins.

Sustainability and decarbonization will likely be a key concern in 2022. Many chemicals’ companies are anticipated to boost their investment in R&D capabilities and exploit developments in decarbonization and recycling technology.

The chemicals industry has historically been a slow mover compared to many other industries when it comes to digitalization. However, COVID-19 has highlighted the power of digitalization. Digitalization can expand on current and create new products and services, which will enable chemical companies to:

• achieve 24/7 AI powered customer service
• achieve proactive sales with AI based customer demand
• boost sales with data-driven R&D
• expand customer understanding and identify new markets/applications for products
• improve targets
• utilize advanced analytics for smart maintenance and greater first-time production.

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