Rising standards of living and a growing middle class in emerging markets will drive ongoing strong demand for chemicals, as more end-users in these markets purchase and use appliances, consumer goods, automobiles, and other products that require a growing use of chemicals especially advanced materials involved in additive manufacturing.
But despite this slow but steady demand growth, the industry is experiencing significant disruption as we enter the new year.
Relatively low feedstock prices, low-interest rates, shifts toward modernizing and realigning chemical company portfolios for optimum growth, drops in agricultural prices, a regulatory environment that is changing for the first time in decades, and a retreat on both sides of the Atlantic away from globalism are driving an urgent need for chemical companies to modernize their development, planning, and production processes.
We do not expect most of these trends to abate in the coming year. In fact, many of them will likely intensify and will dominate the industry landscape in 2017. And virtually all of them will be touched by digital transformation.
Four chemical industry trends to watch
There are four broad trends currently defining the chemical industry, each affecting a different element of business, from operations through production and compliance. They were all on display in 2016 and will continue through 2017.
Mergers and acquisitions: 2016 saw notable consolidation in the form of multiple mergers and acquisitions. A result of slow overall industry growth and a desire to consolidate resources and capabilities in the areas of the most promising growth, M&A is also being driven by growing pressure to gather the resources needed for digital transformation. Mega-mergers are radically altering the top of the industry–a fact that has not escaped the attention of farmers, legislators, and regulatory bodies.
A new regulatory environment: Governments and regulatory bodies around the world are overhauling chemical regulations for the first time in decades. Both environmental and industry groups note that these changes could signal a kind of détente between the chemical industry and its watchdogs over the next few years. In other parts of the world, however, the relationship between the industry, activist groups, and regulatory bodies remains more acrimonious.
Investment: After decades of taking a back seat to emerging markets, North America saw a significant wave of investments in new multi-billion-dollar production facilities from a number of chemical manufacturers. Factors involved in this growth include the considerable size and strength of the regional market and favourable political and regulatory environments in American states with significant chemical production segments.
Digital transformation: Rising demand and growing competition have increased the pressure on all chemical manufacturers to adopt advanced technologies and transform their operations and structures. Improved efficiencies, safety, and reliability can be realised through an implementation of advanced technology–all of which can reduce costs for the manufacturer. These transformations are also enabling new business models that could bring chemical manufacturers closer to their suppliers, their direct customers, and even their end customers.
Moving forward in 2017
Rising standards of living and a growing middle class in emerging markets will drive ongoing strong demand for chemicals, as more end-users purchase appliances, consumer goods, automobiles, and other products that require the use of chemicals and plastics.
But to capitalise on the growth opportunities, the trend toward digital transformation has become an urgent need that will enable chemical companies to modernise their development, planning, and production processes.
As the chemical industry looks for ways to differentiate and excel in a fiercely competitive consolidated environment, leading companies will accelerate their digital transformations – via technology, processes, and people. The most successful companies may be those willing to take the most disruptive, challenge-the-conventional-industry-wisdom approaches to their business models.
© Chemical Today Magazine
Read More: The state of the chemical industry: What's ahead in 2017
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