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Perspectives

COVID-19 impact on the chemicals industry

The role of the chemicals and materials sector in recovery

The chemicals and materials sector spans applications from automotive to medical devices to institutional cleaners, suggesting that a sector with such economic exposure will be broadly affected by COVID-19. Depending upon the course of the pandemic and economic conditions, chemicals and materials companies may be navigating from recovery to thriving.

What’s the story?

The chemicals and materials sector spans applications from automotive to medical devices to institutional cleaners. 96 percent of manufactured goods contain products of the chemical industry.1 A sector with such broad economic exposure is expected, therefore, to be affected by the initial and sustained changes resulting from COVID-19. Depending upon the course of the pandemic and the impact on economic conditions, chemicals and materials companies can expect threats to vulnerable business models and significant opportunities for growth and transformation.

The Oil, Gas & Chemicals practice tasked a team with developing scenarios, examining trends, and proposing opportunities for market participants across the chemicals and materials ecosystem. This was done through one-on-one interviews with industry executives, deep research, and scenario analyses. The resulting report provides perspective COVID-19 impact on the chemical industry and recommendations for companies as they begin thinking of how to navigate from “recovery” to “thriving” in a post-pandemic world.

View the fact sheet, and contact us to further discuss how our findings could impact your company.

Issues addressed

Considering the COVID-19 impact on the chemicals and materials sector through various lenses, certain issues identified include:

  • Certain key trends have begun to accelerate due to the crisis, reshaping both demand and supply across industries
  • Other trends that are likely to decelerate or stop due to the crisis
  • Trends that, important before the pandemic, are expected to continue to shape the industry
  • Key uncertainties that should be considered in strategy and business planning
  • Detailed consideration of four scenarios that compare the reach of the pandemic versus the industry impact arising from changes in end-consumer behavior
  • A set of both recovery- and thrive-oriented actions for market participants

Prior to the impact of COVID-19 on the chemicals and materials sector, many industry observers were expecting 2020 to be low-to-flat-growth in all geographies outside of Asia and, compared with recent years, muted in China. Operational excellence has long been a hallmark of the chemicals industry, and with the quick lever of reduced capital expenditures at hand, many companies are financially fit to weather a short-term drop in demand from end markets.

The analysis shows that we can expect inevitable long-term impacts, regardless of the eventual course of the pandemic. The workplace anticipates a slow return to pre–COVID-19 practices. Companies that had invested in digital initiatives across the enterprise saw those “pay off” in the environment of the early pandemic days.

Product portfolios and end-market applications have differentiated, and are expected to continue to differentiate, winners from losers. One already sees double-digit percentage differences in impact between companies based on their application exposure (those companies with overly exposed ICE automotive versus those with products used in cleaning and disinfecting).2 Finally, chemical and material companies are rethinking their supply chain strategies, either by their own volition or under pressure from end-market OEMs. The shift is from pure globalization to “glocalization.”

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Endnotes

1 American Chemistry Council (AAC), 2019 Guide to the Business of Chemistry, January 2020

2 Before period there is source 2: Chemical Week, May 25, 2020, pp19-23

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