ICIS WEBINAR: Weak chem demand through 2020, but 2021 will be better

HOUSTON (ICIS)–This year will be “a bit of a write-off” in terms of global chemical demand but 2021 should see a pickup – assuming there are no second waves of coronavirus (Covid-19) infections, Rhian O’Connor, ICIS senior analyst, said.

O’Connor, who was speaking during an ICIS webinar on Tuesday, argues that in assessing 2021 demand, one should look to 2019, rather than 2020.

She bases her projections on ICIS’ new integrated demand model.

The model divides the world into 11 large demand regions. As chemicals feed into most sectors of the economy the model splits demand into the key application end markets.

The question is whether 2021 demand will match or exceed 2019, or whether it will be lower, she said.

She cautioned that post-crisis consumer behaviour is difficult to predict.

Unemployment and high debts will hamper consumer demand.

At the same time, uncertainties and a “fear factor” may prompt better-off people, who kept their jobs, to save more, she said.

Also, consumers will have in mind the likelihood of future tax increases as governments need to finance their massive coronavirus relief programmes, she said.

Regionally, in China – “still a growing economy” – most end markets should see higher demand and production in 2021 than in 2019, the analyst said. The main exceptions are motor vehicles and textiles, she said.

Meanwhile, in the US “there will be a lot of industries” that will be lower in 2021 than in 2019. Those sectors will include textiles, motor vehicles, and domestic appliances.

On the other hand, industries such as food, beverage or soaps, for example, will to better.

“Any plastics or any chemical that is exposed to those industries will have an advantage,” she added.

RESHORING
She also said that the coronavirus crisis will lead “to reshoring” of supplies, as opposed to the offshoring manufacturers have practised for many years.

“Many people, going into the crisis, found they were overexposed to China as a source of raw materials at some point in the logistics chain,” she said.

Reshoring will not happen over night, she said.

However, when new decisions about logistics and raw materials will have to be made again, “there is a strong possibility [companies] will go closer to home”, she said.

SUSTAINABILITY
With regard to the environment, the issue of single-use plastics “has gone out of the window” during the health crisis as people came to appreciate the sanitary advantages of plastics, she said.

At the same time, lower oil prices have made single-use plastics cheaper, relative to recycling or other alternatives.

Those trends could push back environmental sustainability by “a couple of years, and we may have a higher [plastics] packaging boom than we ever expected in the midterm”, she said.

Visit the ICIS coronavirus topic page for analysis of the impact on chemical markets and links to latest news.