Organic chemicals outlook still positive - SOCMA

18 September 2008 19:29  [Source: ICIS news]

By Tom Stundza, Purchasing magazine

BOSTON (ICIS news)--The outlook for the organic chemical industry remains positive - although “somewhat prayerful” - with a large number reporting improved sales this year, the president of the Synthetic Organic Chemical Manufacturers Association (SOCMA) said on Thursday.

But the continuing high price of energy, as well as recent higher costs in emerging markets, means that buyers can expect even more pressure from continuing price increases, said SOCMA’s Joseph Acker.

“Product and service reliability and product quality will remain greater concern than in the past, so buyers will have to get information as far down the supply chain as they can - to their suppliers’ suppliers’ suppliers, especially when buying from offshore,” he said at the Chemical Purchasing Summit organised by ICIS and Purchasing magazine.With the world credit crisis in full contagion and corporate profit margins under extreme pressure, buyers need to ensure that product and service reliability, quality and cost transparency become cornerstones of corporate strategies - no matter where the suppliers are located, he said.

Acker said that product quality issues and concerns inside the organic chemicals supply chain will not go away, making it important for buyers to safeguard the quality of what they buy.

“Purchasing people may need to abandon sole sourcing programs, to become more flexible in decision making, and develop contingency supply programmes that may have as many as four or five alternative suppliers.

Despite these concerns, Acker said a survey of SOCMA members found that four out of every five organic chemical suppliers expect outsourcing by their customers to expand through 2010, mostly because of currency fluctuations and energy costs that make still products more economical when bought from overseas suppliers.

He added that buyers should expect organic chemical suppliers to spend corporate dollars to introduce new product introductions, make process improvements and install new process technologies, make product improvements and abandon non-core technology and products

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