2017 Chemicals Industry Trends

The structural headwinds in the chemicals industry are blowing like a gale out of the global economy. In a funk since peaking in 2007, global economies have been unable to reach the 35-year GDP growth average of 3.5 percent in six of the past eight years. And the two years of “high” growth were more of a bounce back from the sharp downturn of 2009 than precursors of a sustained turnaround.

'The coming years will be decisive in determining market share for many established chemicals players.'

Strategic choices

The results of the past few years and the unstable landscape ahead for the chemicals industry are indicative of a new normal: a significantly altered industry that is marked by a hyper competitive environment in which companies must vie for profitable growth in global markets that each have their own significant shortcomings and that offer little support.

In this situation, a zero-sum game is all that exists. The coming years will be decisive in determining market share for many established chemicals players. To emerge from this cauldron as an industry leader, chemicals companies should prioritize three strategic activities, described below.

Capture value over volume
Adopt next-generation digitization
Seek portfolio coherence

Conclusion

Uncertainty is certainly the new normal in the chemicals industry. And although the sector has historically swung like a pendulum between good times and bad, it no longer appears likely it will return to robust profitability on the wings of a new, innovative product segment or the unexpected opening of a new market. It has been decades since either of those scenarios played out.

There are, however, strategic steps that chemicals companies can take to at least open doors to profitable growth. But given the unsettled conditions in the industry, they can’t afford to delay in playing their best hands.