The $2 trillion global chemicals industry continues to face challenges as it attempts to rebound from its worst year ever in 2009. The drop-off in demand appears to have bottomed out, but the damage has been done. Demand is rising, but in severely depressed levels — in some cases, declining by 40 percent. Most new growth is in Asia; Middle East producers continue to enjoy competitive advantages, while many assets in North America and Europe are severely impaired.
Further, the economic crisis has accelerated trends already evident in the industry. In petro and basic chemicals, for instance, there is far too much capacity to support viable margins. Making matters worse, new supply from cost-advantaged companies around the world continues to come online, while global demand remains weak. The obvious response would be to initiate consolidation and dramatic cuts in capacity – but so far, North American and European chemicals producers have only made modest attempts to do just that. We expect that only those companies that know where they can win will be able to take a leadership position and ruthlessly push restructuring across the entire industry.
In specialty chemicals, we help our clients to find solutions for creeping commoditization and the changes to business models they require. Products that were once specialties have significantly commoditized, meaning that only producers with cost-advantaged operating models can capture the spread between the semi-specialty price and their low operation costs.
So, as operating models are in significant flux, chemical companies need to ask themselves what their true commercial and operational excellence goals are, and how they can create a solid position in the industry landscape of the future.
Drawing on deep understanding of industry dynamics, extensive experience along the entire chemical value chain, and broad functional capabilities, Strategy& delivers comprehensive support to the chemical industry. Our global capabilities are equally effective in delivering lasting results in North America, Europe, Asia, the Middle East, and Russia. Working side by side with our clients, we assist with strategy development and execution, transaction support, operational excellence, efficiency enhancement, restructuring, and innovation management.