Analysis

The feedstocks prism

Unveiling value in volatile and complex petrochemicals

A new puzzle for a new century

The face of the global chemical industry, chemistry, and chemical manufacturing has changed. It did not come about all at once and it is not apparent from every angle. But, for those taking notice, this new look could mark a time of accelerated transformation. While numerous articles have been written about megatrends and their impact on demand, societal change is only part of the story. This transformation can also be attributed in large measure to how changes in information technology, digital design and discovery, materials systems commercialization, biotechnology, manufacturing technology, and trans-ecosystem collaboration are being deployed and by whom.

In contrast, there is a historically attractive and resilient core global chemical industry. From that angle, many long-time industry watchers would suggest the industry will grow apace with gross domestic product (GDP) like always. However, there are challenges with this prediction. A closer examination of the competitive environment shows that certain market challenges are intensifying, and potentially to disruptive levels.1 Some companies, especially those that are already disadvantaged relative to their peers, may find it difficult to compete, remain independent, or even survive. Especially in a volatile environment.

Now 15 years into the new century and the core chemical industry is essentially operating as it did throughout the last one, with incremental change remaining very much the norm for the majority of companies. While on paper, most companies have remained successful with this approach. The question remains if more than a few companies believe that incremental changes in the industry, technology, and business models can be the norm.

This is a gigantic industry. It is largely a mature industry with a dominant trend of profits that are gradually yet steadily compromised by competition. While traditionalists would argue that this situation has been a fact of life in the industry for decades, the erosion of economic benefits has limits. Eventually, more seismic structural changes will take hold. More than ever, the Darwinian principle of survival of the fittest will likely play a greater role than it has in the recent past in determining the fates of companies; as predators are growing bigger and stronger and as weaker prey is consumed. The current environment is less forgiving and more challenging, making it difficult for disadvantaged competitors to survive. This is a central concern for the global chemical industry today.

The feedstocks prism. Unveiling value in volatile and complex petrochemicals
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