The global chemicals industry has doubled in size since 1999, but the growth rate has slowed over the past five years, a report by business advisory firm Deloitte finds.
Analysis of the financial and operational performance of 231 global chemical companies over a ten-year period (19982008) shows that profitability has not improved in either the commodity or speciality chemicals sectors during that period.
Unless chemical companies take decisive action to respond to the current challenges facing the sector, there is a risk that profits will either stagnate or may even continue to spiral downward, Mark Adams, chemicals partner at Deloitte comments.
He asserts that planning for a range of alternative possibilities is critical to ensuring that profitability returns to the sector. By analysing three macro trends economy, regulation and technology companies can strategically plan for the uncertainty ahead and incorporate adaptive and innovative approaches to achieve sustainable growth.
The report predicts that as the industry prepares for the future, the commodity sector will focus on preserving cash, managing excess capacity, and securing access to capital.
As chemical companies are broadening their geographic scope, Western commodity chemical companies will focus on growing opportunities in the Asia-Pacific region and other areas within the developing world. With a small but growing share, the Middle East has significant potential advantages in low-cost hydrocarbon feedstocks and therefore continues to attract significant new capacity.
It is forecast that China and the Middle East will contribute 78% of new capacity by 2013. Meanwhile, the chemicals industry continues to play a key role in the economies of the US and Europe.