Throw off the Shackles while Avoiding Traps
Feature story on China Chemical Industry News
In September 2014, Deloitte Global Chemical Industry Leader Duane Dickson and Deloitte Asia Chemical and China Oil & Gas Consulting Leader Yann Cohen accepted China Chemical Industry News exclusive interview to share their points of view on the Chemical Industry, based on a research study conducted by Deloitte Chemical Industry Council in the past five years, monitoring the evolution of Top Global 250 listed chemical corporations with annual revenue over 1 billion US dollars. The study analyzes the changes in terms of feedstock supply and operating decisions to derive a forward looking perspective of the chemical industry. An article named "Throw Off the Shackles while Avoiding Traps" was published as the feature story on China Chemical Industry News. The key viewpoints are as below:
- Over the last 5 years, the average rate of return on capital for global chemical companies raised to 19%, while the gross margin declined. Majority of Chinese chemical companies have quite low asset efficiency and should be more determined to close non-competitive production plants. The whole industry needs to bring management discipline in the decision making before adding new production capacity in the market.
- Global chemical industry is experiencing an unprecedented feedstock diversification, which requires the petrochemical industry to possess a higher degree of adaptability and flexibility. Beyond production, Chinese players must pay much more attention to increasing global trade flows, and their impacts on supply and demand balances across the different geographic regions. For commodity segments, local cost competitiveness and regional ripple effects on trades require Chinese players to build a new set of capabilities to not only go abroad but also defend their home market.
- In commodity segments such as Petrochemicals, Chinese chemical manufacturers should consider to maintain material input advantage in all markets, and continuously benchmark themselves against companies with largest plant scale and lowest production cost. In specialty segments such as Fine Chemicals, all players should implement a superior front-end innovation processes to maintain differentiation advantage in either product technology / performance or value added services, and beyond considering the full value network with the convergence of materials and systems. In parallel, emerging Bio-based materials present huge market potentials with open innovation and collaboration as key success factors.