What can chemical companies expect in 2021? We’re all hoping that 2021 will bring a return to “normalcy” in our day-to-day work and personal lives, growth in chemical markets, and business and personal prosperity.
After all, we can all agree, 2020 was not what anyone anticipated!
At the start of 2020, economic outlook reports showed the chemical industry facing headwinds, with the expectation of “no recession” and a fundamentally positive 2020. Hindsight shows that this was not a good representation of what the future 2020 would hold. While we started the year with the knowledge of the rise of COVID-19 in China, and chemical companies with manufacturing and supply chains heavily invested in Asia were feeling the impact, there was little recognition of the impact that COVID-19 would have across the world. And, the year ended in a vastly different place that it started.
Now that we’re starting 2021, there’s lots of expectations and predictions for the year.
Here’s a highlight of trends to watch for:
1. Growth and Economic Recovery across all chemical sectors. There’s no denying that a shockwave was felt across the chemical industry in 2Q2020. And, while the chemical industry was deemed a “essential business”, which enabled it to keep running, and some parts of the chemical and plastics business saw strong demand (surfactants, biocides, and plastics focusing on PPE and healthcare), recovery was slow and inconsistent. The coatings industry, in particular, was hard-hit (ACC reports show almost 20% decrease in production versus 2019.) Recently, ACC recently reported that global chemical production increased for 6 months in a row, with overall net 2.2% decline versus 2019, which is a good lead-in to 2021. Experts are pointing to stronger demand and economic recovery across all segments, driven by availability of the COVID-19 vaccine, a return to consumerism, and a return to travel (personal, if not business.) ACC is predicting 5% demand growth in 2021. (Bring it on!)
2. Acceleration of sustainability and the circular economy
Sustainability and the circular economy are here to stay, and we’ll see an acceleration of activities in 2021. There are a number of things supporting this acceleration:
- An increase in proposed taxes and fees on plastic items to drive a reduction in plastic usage and waste.
- Increasing investment by companies large and small to support circularity in plastics and bio-based or “sustainable” solutions across chemicals and plastics.
- A focus on clean energy, and the knock-on effects to the chemical industry.
3. Geopolitical risks
In 2020, businesses globally experienced supply chain vulnerabilities due to COVID-19 shutdowns. Who remembers shipments being shut-in (and shut-out) of China, due to COVID-related closures? This was on top of trade tensions between the US and China, and China and India, amongst others. With the incoming Biden administration, there is an expected pivot within trade challenges between China and US, but not a total cessation. Indeed, BlackRock characterizes the relations between the US and China as an intense rivalry that will outlast both the pandemic and the new administration. The pandemic and the resultant supply-chain disruptions catalyzed the trend toward deglobalization. Finally, the energy transition, reduced oil trade, and impact on petrochemicals and overall trade balances, will contribute to heightened geopolitical risks and tensions.
4. Digitalization
The digitalization of business processes and practices leap-frogged in 2020. Per Microsoft, businesses made a 2-year transformation in 2 months, and that was just at the start of the pandemic-shutdowns.
It was not just the way that businesses worked with its employees, but also the way that businesses worked with customers and suppliers, across its business interfaces: supply, marketing, sales, manufacturing, logistics. Pilot Chemical won recognition for its sales-enablement activities, rolled out in the 1st half of 2020. And, that’s just one example of many.
The digitalization trend is expected to continue, with businesses and their people – employees, suppliers, contractors, customers – truly appreciating the benefits derived from digitalization across the value chain, and investments continuing to grow.
What trends do you see happening in 2021?
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