Future of the Chemicals Value Chain


Future of the chemicals value chain in Europe

What will the European chemicals value chain look like in 2040?

The chemicals industry in Europe is not only a vital and important part of the European economy, but also a major and critical supplier to key industries like Automotive. Furthermore, it provides crucial contributions to solve the societal, economic and technological challenges of the future, hence representing a cornerstone of European’s future competitiveness. Therefore, it is important to understand what drivers are affecting the future of chemical production and how the future of the chemicals value chain in Europe may look like.

The strong historical foundation might distract from the fact that the chemicals industry in Europe will face a number of challenges in the future. Even with the percentage of exports to regions outside Europe increasing, the strengthening global competition, especially from incumbents of growing economies, has resulted in a sharply decreasing global share of the European chemicals industry. Our scenarios address the strategic core of chemical companies, imbedding issues such as long investment cycles, long-term research and development projects, and locations of intellectual property centers.

“The future is uncertain… but this uncertainty is at the very heart of human creativity“

Ilya Prigogine, Nobel Prize Laureate in chemistry, 1977   



Driver evaluation according to degree of impact and degree of uncertainty

Extensive research based on Natural Language Processing algorithms, desk research, and detailed expert and industry participants’ insights generated a long list of drivers that could shape the future of the chemicals value chain in Europe.

The four scenarios for the future of chemicals

But what will the future look like? European chemical companies (most of them acting in the global market) are carefully considering where to invest in new assets and intellectual property, and the shift toward emerging markets with a focus on China/Asia is known.

To develop a view on the future of the chemicals industry in Europe, Monitor Deloitte focused on a unique, fresh, and unbiased view on the industry and to serve as guidance for industry leaders who do not want to merely react but instead actively shape the future of the chemicals industry in Europe.

We chose a combination of critical uncertainties that would generate the most challenging, divergent, and relevant scenarios and placed them in a matrix as a basis for scenario analysis using two axes:

  • Value creation model of circular economy
  • Competitiveness of European chemical assets

Leading into our sustainable future
A world in which social and technological events drive circularity to become profitable. Thus, creating a thriving, local, collaborative, green-energy-driven market where the chemical industry wants to play and deliver its impact.

Cracking under pressure
In this world, green governments and social pressure force the chemicals industry to comply with higher environmental standards, and create a more regulated market.

Managing decline
This is a world in which heavy lobbying leads to a shielded market for European chemicals players, thus, protecting them from outside competition and regulations but also making them progressively less competitive.

Managing circularity
In this world, circularity becomes profitable, supported by limited changes from the chemicals industry and public opinion; this leads to targeted innovations and collaboration across the industry to produce the best new products. 

What does that mean for the future of the chemicals value chain in Europe?

To assess the potential impact of each scenario on the chemical players and the different sub-sectors, Deloitte developed a heat map that gives a first overview on the impacts on a sub-sector level resulting in the following key questions to be answered company-specific:

  • What is the future of my product/service portfolio in the base case, what are the future key success factors, and where do I need to adapt?
  • What does each scenario mean for the supply side of my business, and what are the potential changes I have to manage?
  • What does each scenario mean for the demand side of my business, and what will the future requirements be?
  • What are my established and potential competitors doing?
  • What are the consequences for my European assets in terms of localization, global competition in Europe, and opportunities outside Europe?
  • Which scenarios play to my own strengths – or, what are the competencies/ capacities that must be added for the future?
  • What are the key drivers that push that scenario in my business context, and how do I monitor them?

2021 Update Assessment

The four plausible scenarios described above were developed and published exactly two years ago by Monitor Deloitte and the Center for the Long View. As a result of continued shifts in social, technological, economic, environmental and political contexts, the chemical industry has experienced exponential change and is undergoing significant transformation on numerous fronts. Like many other industries, the global chemical industry has had to contend with unexpected developments over the last years:
The COVID-19 pandemic and the ensuing economic turbulence has hit industries that were already wrestling hard with longer-term challenges. In the light of these significant developments over the past two years, Monitor Deloitte has reflected on the scenarios that were developed two years ago, and on the drivers and uncertainties shaping the future of the chemicals value chain, and assessed their development and validity in current times. Although still confronted with some of the same uncertainties, we have successfully identified a trend in the way the chemical industry is developing in several key areas. 

The original scenarios in the study “What will the future of the chemicals value chain in Europe look like by 2040?” remain valid and realistic; however, we now expect the industry in Europe to further develop in the direction of the scenarios on the right-hand side, namely, “leading into our sustainable future”, and “cracking under pressure”. With several value creation/ innovation developments and regulatory changes expected in Europe (and globally) in the coming months and years, we will need to closely monitor developments in the areas of sustainability and circularity parallel to the recovery from the COVID-19 pandemic.

For whom is it of interest?

First and foremost, the study is addressing chemical industry executives and all parties involved in mid-to long-term planning and developing strategic perspectives for the chemical industry in Europe. This includes Europe headquartered companies as well as companies from outside Europe with a vital interest in the European market – be it through an European asset base or business interests.
Moreover, the study is of interest for suppliers and customers of the chemical industry alike as well as other stakeholders, e.g. regulators and NGOs involved in the topic of sustainability.

Download the Deloitte scenario analysis “Future of the chemicals value chain in Europe” and read more about how the chemicals industry can address the challenges ahead. 

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