Sustainability plans and Asian growth present opportunities for sector slowed by sluggish global economy
Chemical formulations are central to a wide range of consumer goods from soaps and shampoos to automotive tyres and plastics. So it is unsurprising to note that the fortunes of the global chemicals industry usually follow the peaks and troughs of economic cycles. If consumers cut back on their spending, it will be felt by producers.
Added to that challenge is the fact that feedstock prices and energy costs are currently high. These represent additional costs that most producers are unable to fully pass on to customers.
There are always exceptions of course. For example, producers of ingredients used in medicines tend to enjoy a degree of immunity. However, the majority of the wider industry is currently feeling the pinch of the economic downturn.
Tiger balm? Asia represents industry outlier
Beyond pharmaceuticals, the chemicals industry is also enjoying some growth in China, where in common with other local industries, it is capitalising on the end of the zero-Covid lockdown policy and the growth of middle-class spending power.
In India the story is even more positive. All signs suggest the industry is outpacing global chemicals growth. As with China, much of the growth is being driven by domestic demand. In addition, there is a strong political drive to support the industry and it will be interesting to see whether places have been shuffled on the global stage once the more established markets in the west pick up pace next year.
Net Zero and green options drive agenda for change
Net Zero pledges and commitments to remove hazardous chemicals from the environment (such as the EU’s REACH programme and Farm to Fork strategy) are trying to clean up the industry. As with any change project these represent both risk and potential reward for the industry.
Substantial investments will be needed to achieve Net Zero goals, especially in energy intensive industries such as fertiliser or cement production. Can all businesses afford this? Probably not. Will all businesses survive transition? Probably not.
However, perhaps a better question is can the industry afford to ignore a sustainability agenda? The answer here is definitely not. Whether through consumer demand or legislative penalties for non-compliance, the industry is facing a period of change. Whether this represents opportunity or risk will depend on how each business approaches it.