Chem producers must recognise global ‘megatrends’ - US consultant

22 November 2010 23:01  [Source: ICIS news]

HOUSTON (ICIS)--Chemical producers can step up their game to meet the challenges of the next decade by recognising global “megatrends”, an author of a new consultant report said on Monday.

Tim Hanley, global chemical industry group leader for US-based consultancy Deloitte, said the report, “The Chemical Multiverse”, outlines the need for companies to sharpen their business models and be open to refinements amid global “megatrends”.

Those trends, ranging from an increased focus on sustainability to the rise of a middle class in India and China “are the forces that are going to drive changes in the chemical industry in the near future,” according to the report, which drew on the input of more than 150 chemical industry executives.

The report includes three possible scenarios for the industry in the next decade.

Under one scenario, global domination by North America and Europe deteriorate and developing nations decouple from those regions in favour of a China-centred block.

In the second scenario, developed nations see a decade of lacklustre economic performance and more international friction and political unrest.

Under the final scenario, there is a strong recovery attributed to “astute government management of national economies, while the policy pendulum swings away from reliance on market forces”.

Hanley said one of the challenges for the industry is the capital intensive nature of the business, which makes it difficult for producers to make quick changes.

“I had an interesting conversation with a client in Europe - he described [his company] by saying their backpack is heavy,” Hanley said. The client had many facilities in western Europe, he said, which made it difficult to make new substantial investments in the developing world.

Hanley said chemical producers have opportunities to improve their positions within the industry through various strategies.

For example, he said, executives who took part in Deloitte study recognised the need for world-class marketing strategies. “It has been the lifeblood of consumer product companies but it really hasn’t been the lifeblood of chemical companies,” he said.

The report warned that many chemical companies cannot afford to just wait for the economy to rebound.

According to Deloitte’s previous report, “The Decade Ahead” gross margins eroded for the industry from 1998-2009 from 15% for commodities producers to 7% for integrated and specialties companies.

“Without real structural change and more discipline focus, companies will find it increasingly difficult to function effectively in a global industry that is ever more competitive, commoditised and cyclical.”

To discuss issues facing the chemical industry go to ICIS connect
Paul Hodges studies key influencers shaping the chemical industry in Chemicals and the Economy 

By: Brian Ford
+1 713 525 2653

For the latest chemical news, data and analysis that directly impacts your business sign up for a free trial to ICIS news - the breaking online news service for the global chemical industry.

Get the facts and analysis behind the headlines from our market leading weekly magazine: sign up to a free trial to ICIS Chemical Business.

Printer Friendly