EPCA ’20: Chems sector to emerge leaner from the pandemic, project pipeline to narrow – Dow CEO

Author: Tom Brown

2020/10/05

LONDON (ICIS)--The chemicals sector is likely to emerge from the coronavirus pandemic leaner and more focused following the tough decisions required during the downturn, and the number of new projects moving forward is likely to fall, according to the CEO of Dow.

The pandemic has led companies to become leaner operators and for management teams to drastically pare down operating expenses to preserve margin and liquidity during the economic contraction seen this year, according to Dow chief Jim Fitterling.

This means that the new operating environment for the chemicals sector is similar to previous economic backdrops, dominated by tighter spending and efficiency, he added.

“The new normal will resemble the old normal that we’re familiar with, forcing us to be leaner and more focused,” he said, speaking at the virtual annual meeting of the European Petrochemicals Association (EPCA).

“High cost and vulnerable assets have already been cancelled or closed down and participants in our industry in every region have implemented shutdowns, accelerated rationalisations or cancelled projects that are not competitive or lack integration,” he added.

The challenging environment that has dogged the industry and the wider economy this year will either prove or disprove the strength of each company’s operations and strategy, with players defaulting to their most competitive positions, Fitterling said.

The need to trim the fat has shaken the rationale for less integrated projects, meaning  that the pipeline for new investments may not be as strong in the coming years, he added.

“I expect the industry to be leaner coming out of the pandemic with even fewer new projects finding the capital to move forward,” he said.

The players that will fare best are the ones best-positioned to capture the upswing in the economic cycle as it arrives, with “substantial upside” to capture, according to Fitterling.

Despite the increased focus on cost and efficiency, the pandemic has accelerated the momentum of the trend toward sustainability, as well as of digitisation, he said.

“A lot has changed, the demand for more sustainability was not one of the changes,” he said, noting that the pandemic has confirmed for Dow management that environmental, social and governance (ESG) trends are here to stay.

The coronavirus outbreak has made digitalisation “critical” for the industry, he added.

“The chems industry is always worried about raw materials but data is the new fuel for our industry,” he added.

The EPCA annual meeting  runs 5-7 October.

ICIS is pleased to offer a complimentary seminar during EPCA week, covering the key developments, potential risks and opportunities in the global chemicals markets. Join our market experts on 9th October as they uncover the emerging trends in geopolitics, macroeconomics and global markets. Register for free here

(Thumbnail picture: Dow's headquarters in Midland, Michigan. Source: Dow)