Covid-19, financial downturns and geopolitical disruptions have created a host of new realities for chemical companies. Demand is on the decline for many products, and some companies, especially those with significant exposure to heavily impacted sectors such as automotive and aerospace, are struggling to survive the current crisis. In addition, border closings and travel bans are causing significant disruptions to supply chains and business as usual.
Reduced cash flow is another concern, with many customers delaying purchases or falling behind on payments, while inventory is tied up throughout disrupted supply chains. Meanwhile, unprecedented health measures are driving companies to rationalize headcount, re-organize on-site work, expand remote working, and rethink customer service procedures and other practices.
Compounding all these issues are historic changes in the global oil & gas industry. Demand shocks and the recent Saudi-Russian price war have shifted the short-term narrative to massive oversupply and market volatility. Even the cost advantage in the US from the “shale boom” has been reversed recently with North American polyethylene (PE) margins for ethane falling well below the naphtha-based PE margins in Europe (temporarily, for now).
These are the new realities of the global chemical industry. To remain successful, companies will have to adopt dramatic step-changes.