Home Blogs Asian Chemical Connections Surviving The Crisis Depends On How You React

Surviving The Crisis Depends On How You React

Business, China, Company Strategy, Economics, Oil & Gas
By John Richardson on 20-Aug-2015

By John Richardson

PEOPLE make up chemicals companies – not just ever-more ingeniously assembled molecules. So how people react from now onwards will determine whichCMyHYdgWoAE7nZl companies survive and which companies fail in the New Normal.

The people who are on the boards of the world’s chemicals companies need to tear up their strategies and start again, if they haven’t done so already.

As I said on Wednesday, building this new strategy for China needs to start from the top down, from thinking about what it will need over the next 20 years and how this is changing compared with the previous 20 years.

My Wednesday post focused on China’s environmental needs – cleaning up its water, soil and air, which is a $1 trillion opportunity over each of the next five years, according to China’s government.

And affordability will dominate everything – from providing these environmental solutions to providing the chemicals and polymers that go into the many hundreds of millions more TVs, refrigerators and washing machines that will be sold in China over the next ten years and more.

The chemicals companies which will gain big volume sales in the future will not be the chemicals companies that focus on luxury goods, as it was always entirely wrong to believe that China was rapidly becoming middle class by Western standards. It will instead be the companies with the know-how and the cost efficiencies to supply the raw materials to make say a good quality smartphone that retails for $200 or less.

More immediately, though, companies will be in panic mode if they didn’t see the events of the last few years and weeks coming.

They might be panicking because they thought that somehow the 7% official GDP growth rate that China posted in Q2 made sense, based on their reading of the underlying growth trends. So now they will be shocked as more and analysts suggest that real growth is likely to be in the low single digits. Fathom Consulting this week, for example, put growth at 3.1%.

They will be shocked by China’s decision to allow the Yuan to devalue because they again didn’t think that growth was that bad in China.

And they will also be panicking if they didn’t think that oil prices could go much lower. But now prices are tumbling as supply and demand realities become fully exposed.

How individuals respond over the next few weeks, months and years is therefore, as I said, crucial in the success or failure of chemicals companies.

For the right advice on how to move your teams in the right direction, both in the short and long term, contact ICIS Consulting at john.richardson@icis.com