THANK YOU FOR SUBSCRIBING
Manufacturing Technology Insights | Monday, June 07, 2021
Management teams in the chemical sector should prepare for the accelerated change as soon as the fight against COVID-19 permits.
FREMONT, CA: A few years ago, there is a change in investor sentiment toward the chemical sector and speculated about the potential reasons. The relative share performance of the chemical sector has continued to deteriorate as these hurdles continue to be in effect. There is an ongoing decline in the growth rate of the demand for chemical products. Major trends like accelerating deglobalization and potential regulation to curb climate change will not make it any seamless. Here is how the strategic context of the chemical sector is changing and discusses how COVID-19 might influence these considerations.
Stay ahead of the industry with exclusive feature stories on the top companies, expert insights and the latest news delivered straight to your inbox. Subscribe today.
The sentiment of investors toward the industry continues to change. The conventional overperformance of the chemical sector has slowed over recent years and turned into a concerning underperformance from 2017 to 2019—and thus totally independent of the COVID-19 crisis. The enormously scaling intensity of economic human activity has resulted in several concerning ecological developments, like climate change, water shortage, the reduction of biodiversity, and other hurdles. One will be to drastically mitigate consumption in industrialized nations to meet the acceptable maximum CO2 emissions in a framework that prevents a two °C temperature increase by 2050. Unfortunately, if humans fail in managing climate change, they will face the impacts.
As a result of political instability, the chemical sector must confront diverging standards in supply chains and other economic restrictions. Various indicators suggest diverging standards will likely continue and even develop. Luckily, most chemicals are multiregional rather than truly global products. Yet intercontinental trade is still drastic for several players, such as those with access to advantaged feedstock or labor costs, and many chemical firms are dependent on customers that ship their products from continent to continent.
The COVID-19 far from over, and no one can foresee any revolutionary developments. Short of a comorbid event, COVID-19 is another crisis—of which the sector has experienced time and again. Revenues of the industry are tied to GDP development, and the top line of chemical firms will dip a little more than the GDP while enterprises downstream in the respective value chains will empty their warehouses. In return, the uplift after the trough of the issues will be much higher than the increase in GDP since the very same downstream companies require restocking.
More in News