Chemicals Industry Trends

The PricewaterhouseCoopers 22nd annual Global CEO Survey included insights from 3,200 CEOs to look at specific industry trends and provide strategic recommendations for the future. In the Chemicals industry, optimism has turned to caution when looking beyond 2019.

Per the report, “Just a short time ago, there was a notable dose of optimism evident in the chemicals sector. Having confronted extraordinary pressures for more than a decade—chiefly from product commoditization, raw materials volatility, fluctuating markets and rapidly expanding competition—2018 initially delivered some strong results. Profits were up, capacity was tight and global demand was on a positive trajectory.”

For the coming year, more than 90% of chemicals company CEOs were bullish on their revenue outlook. However, when asked about their three year growth outlook, the results are at a five year low. With trade relations worsening and economies globally showing signs of slowing down, some chemicals companies are already cutting back on their earnings outlooks.

While these macroeconomic issues are of concern, even more worrisome to CEOs is the area of sustainability, including the impact of resources and materials substitution, decarbonisation, renewable energy, and waste elimination. As a leading industry in the use of fossil fuels, climate change, and pollution, sustainability presents serious questions to chemicals executives.

But the news is not all bad, the increased focus on sustainability trends provides chemical companies with growth opportunities in developing materials that can improve energy efficiency and greenhouse gas reduction across sectors that provide improvements downstream in the energy industry. Innovation is a key component as chemical companies evolve from product sellers to solution providers. 65% of the CEOs in the industry are looking at new products or services to drive revenue growth.

The industry also has to look inward in the effort to create sustainability initiatives. The International Energy Agency (IEA) recently provided an analysis that notes petrochemicals are quickly becoming the top driver of global oil consumption. They will account for ⅓ of the growth by 2030 and half by 2050. This is more than trucking, aviation, and shipping.

The same report also notes that chemical companies rank third among industrial CO2 emitters. This is primarily from the carbon in chemical feedstocks final products that are released during decomposition or when being burned. As the report notes, “Given that much of the industry’s CO2 emissions come from energy rather than feedstock inputs, decarbonisation of energy sources presents the greatest opportunity to reduce CO2 impact.”

“The strategic direction for the chemicals industry is clear but the roadmap to navigate it is uncertain. The coming decade is likely to see the sector come under increasing pressure on a range of sustainability measures. The good news for CEOs is that the window of opportunity will remain open for some time for companies to show they are part of the solution, rather than the problem. As many companies are beginning to demonstrate, there is considerable opportunity for innovation —rather than regulation—dictating the pace, and the future.”

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