By Nigel Davis
BUDAPEST (ICIS)--Most chemical companies believe their markets are driven by costs per tonne economics. Indeed, chemicals production, storage and supply networks are seen to operate on this basis. Products are made to strict specifications.
Good storage – in the right place – and well-developed logistics networks, for bulk liquids, solids and gases, help deliver intermediates and polymers effectively to the customer.
Companies put most of their effort into raising production and distribution efficiencies, alongside the back and front office work that cost effectively makes this possible.
But should producers be trying to understand their end-use markets even better and be thinking outside the box when it comes to possibly offering solutions rather than just products?
Speaking at a seminar held prior to the official opening of this year’s European Petrochemical Association (EPCA) meeting in Budapest ICIS consultant John Richardson suggested just that.
Richardson believes that changing social, political and economic drivers demand a new business approach from petrochemical players. Companies used to simply producing and supplying bulk chemicals and first-line intermediates probably do need to better understand the supply chains they sell into.
It is not just a question of understanding the needs of the immediate customer but of what opportunities might exist for tailored solutions, not just products that could be offered to help address the needs of markets driven in many of the fastest growing parts of the world by so-called megatrends.
Providing clean water or better irrigation in some parts of the world is a business opportunity for chemicals makers, Richardson believes.
As more people move into cities, as standards of living and the availability of disposable income changes, as clean mobility and more efficient field to fork practices and systems are adopted, opportunities open up for more solution-led approaches from raw material suppliers.
This is not just a job for speciality chemical makers. Commodity markets, subject to intense competition, are potentially a good hunting ground for the solutions provider.
Think of working closely with automobile makers to offer more effective light weighting using your products. Think clean water provision in the developing world. Think better sanitation in some of the most densely populated countries on earth.
A commodity chemical or plastics maker might think that strategic planning at this level might be overblown given the day-to-day necessities of running plants hard, acquiring competitively priced feedstock and energy, and growing the business through judicious investment.
At the 50th European Petrochemical Association (EPCA) meeting, however, senior executives from a handful of the largest chemical companies in the world, tackled the tricky question of how the sector might evolve over the next half century.
Producers have the tools to better understand end use markets and customers. That understanding and customer interaction can take on many forms.
BASF executive board member, Martin Brudermueller, for instance, suggested on Monday that European petrochemical producers can integrate themselves more closely into key customer sectors in manufacturing, such as the auto industry. Building more competitive value chains in Europe, involving chemical and other players, would go a long way to help preserve and indeed stimulate petrochemicals demand.
Arkema CEO, Thierry Le Henaff, suggested that a more flexible and localised supply base for his company will be essential if the customer and end consumer are to be served better.
“GDP is becoming less relevant as a guide to future development”, he told his EPCA audience. “The external environment is unlikely to provide much support [for chemicals demand growth].”
Le Henaff pointed to the impact of changing demographics on chemicals markets and the opportunities driven by digitisation, disruptive innovations, and the move towards a circular economy. These disruptive forces require a developing approach from producers, he suggested. “Soft skills will be a clear differentiator,” he said.
Le Henaff wants to see Arkema become a “designer of solutions” for its customers tapping into megatrends that require clever applied chemistry.
To do that he believes that Arkema will have to have the personnel structures in place to best foster employee talents and be open and flexible enough to tap into talent in partner organisations.