2022’s Chemical Industry Outlook: On Path of Strong Recovery
US chemical market has seen a significant resurgence, with demand increasing from important end markets such as construction and health and safety Since the beginning of 2021
Format : PDF | Report ID : SMR_440
2022’s Chemical Industry Overview:
Since the beginning of 2021, the US chemical market has seen a significant resurgence, with demand increasing from important end markets such as construction and health and safety. This was driven in part by a recovery in US GDP, which was expected to grow between 6% and 6.50% in 2021 after falling by 3.50% in 2020. Extreme weather events disrupted the industry's supply chain in the first half of 2021, when considerable chemical facilities along the US Gulf Coast went idle. Idle capacity should come back online and assist inventory growth as supply chain problems ease. On a year-over-year basis, several commodity chemicals have already reached pre-pandemic sales levels in Q3 of FY-2021.
The post-pandemic recovery of the US chemical sector could be complete by 2022. Strong demand for both basic and specialty chemicals should keep prices stable throughout the year as the industry heads into 2022. As key industry companies focus on increasing capacity and expanding into new end markets through both organic and inorganic methods, the industry may see higher capital investment. However, due to raw material cost inflation, which is expected to continue strong through the first half of 2022, the industry may suffer margin constraints. Additionally, if pent-up demand begins to dissipate by the end of 2022, industry margins may be put under increased pressure.
Returning people to work will be a major concern for many chemical key players in 2022. While the chemical industry quickly incorporated the essential safety regulations, the changing talent environment is likely to most certainly compelling chemical companies to adjust even more. Changing demographics and skill needs should attract a more diversified workforce than ever before to chemical companies. Sustainability and decarbonization are likely to be one of the most important areas of concentration for most US chemical businesses in 2022. Many chemical businesses are expected to enhance their R&D spending and take advantage of developments in decarbonization and recycling technology to reduce their own and their customers' carbon footprints while also reducing plastic waste. More industry players should set targets and plans for reducing emissions and monetizing waste by 2022.
Growth in the End-Market:
- In the phase of growing expenses, the chemical industry is preparing for a robust resurgence in key end markets.
As economies reopen and restrictions are lifted, the US chemical industry is positioned for a significant recovery in 2022, which may drive plant utilization rates that were affected hard by the pandemic. In the United States, industrial production is expected to increase by 5.50% in 2021 and 4.30% in 2022. Chemical volumes in the United States are expected to rise by 1.50% in 2021 and 3% in 2022, while shipments are expected to rise by 8% in 2021 and 2022, following a 13.50% fall in 2020.
Another growth driver is the automobile industry, which is forecast to surpass 17 million units in 2021 and 2022 despite production difficulties caused by shortages of critical raw materials such as semiconductor chips. In 2022, demand for basic chemicals and performance plastics should be driven by the automobile industry's growth. SMR’s analysis of key chemical companies’ quarterly results found that supplies to the automotive industry experienced high sales growth in the first two quarters of 2021, and this trend is expected to continue far into 2022, owing to the strong recovery in global car sales.
The construction industry's strength has been a key growth driver for chemical sales; housing starts in the United States were expected to reach US $1.6 million in 2021, as companies across industries have migrated to work-from-home, resulting in increased consumer investments in homes as a medium to invest their discretionary income. This upward trend is likely to continue, with home starts expected to exceed US $1.5 million in 2022. Housing starts should be supported by low benchmark interest rates and normalized lumber prices.
Chemical products such as polyvinyl chloride and methanol would likely be in high demand as a result of the robust construction activity. Methanol producers, for example, saw a 2% increase in contract prices between January and July 2021. Also, the recently passed Infrastructure Investment and Jobs Act, which includes expenditures in health care, public safety, and other public infrastructure, as well as increasing industrial spending, goes well for chemical demand in the non-residential construction sector.
Health & Safety End-Market:
As the threat of coronavirus persists due to variations, demand for personal protective equipment such as masks, gowns, and gloves is expected to continue strong, driving ethylene and propylene sales. Some of the industry's manufacturing capacity might still be shifted to products and materials needed to combat the pandemic, such as isopropyl alcohol and ethanol. Antibacterial wipes, disinfectants, and surfactants for soaps and hand sanitizers are expected to be in short supply, according to industry players.
Chemical exports from the United States are also likely to increase dramatically when major economies reopen and import demand in partner economies improves, particularly as trade between the United States and China resumes. Chemical imports are likely to remain high in 2022 thanks to China's significant recovery in the automobile sector. Chemical exports are likely to grow between 5.50% and 6% in 2021, returning to pre–COVID-19 levels by the end of 2022, after falling 7.60% in 2020.
Inflation is one of the threats to this strong recovery. Brent crude oil spot prices, for example, returned substantially in September 2021 and remained at an average of US $74/barrel. The September 2021 inflation numbers show that the supply of raw resources and labor is struggling to keep up with increased demand. Once the global recovery finds a better foothold and government support programs are withdrawn, central banks in the United States and Europe expect supply constraints and inflation to improve in 2022.
Demand is Shifting:
- Asset portfolios are being restructured to help investors withstand the volatility.
After overcoming severe market conditions in 2020 and 2021, chemical industries are approaching 2022, with COVID-19 adding volatility to an already unpredictable decade. Divergent demand for plastics and specialty materials resulted from the pandemic, putting corporations' asset portfolios to the test. Chemical spending fluctuations are partly driven by commodity price volatility, but they are also influenced by longer-term trends such as petrochemical expansion in the US Gulf Coast and the expansion of Asian chemical production capacity. Similar pricing and demand instability is expected in 2022, and the chemical industry will need to react, especially as the energy shift continues. Despite continuous volatility and uncertainty, businesses should decide how to best position themselves for growth.
Chemical companies are likely to concentrate on repositioning their asset portfolios and balancing trade-offs between various strategic options, taking into account crucial factors such as scale, product scope, and growth potential. Companies may consider enhancing their product and service portfolios more to produce higher growth and improve financial performance, reviewing many areas:
Getting Rid of Non-Core Assets:
In 2022, some chemical businesses may reduce expenditures in established products and services to free up resources for more forward-thinking projects. Some corporations are transferring their investments from gas to liquids and refining projects to unique performance chemical applications. Many other businesses may certainly face similar dilemmas soon, although the range of options may shift as technology and markets advance.
Making Investments in Higher Value-Added Opportunities:
Companies should consider not only selling non-core assets but also investing in higher-value-added ventures. This entails focusing on major end markets and products where technical and market expertise may be combined with economies of scale to drive profitability.
Forecasting Customer Preferences:
Chemical businesses' evaluations of prospective greater value-added prospects, as well as how they would likely invest in them to alter their portfolios over time, maybe shaped by technological advancements and consumer preferences. Those who can balance their future-focused investments with their existing core-focused assets may be in a better position to face any obstacles that may arise. To that end, businesses should figure out how to capitalize on emerging prospects like zero-waste technologies while still managing their existing, more traditional asset portfolio. Companies should position their existing portfolios to fit with higher-growth end markets in particular.
The industry's financial performance has been flat to deteriorating during the last two years. Companies should discover how to enhance their portfolios through mergers and acquisitions (M&A) and organic investment by balancing the trade-offs between scale, scope, and growth to overcome possible headwinds. Companies should reinforce their present products and services while growing into new sectors, whether that means new locations, end markets, or technology, as they restructure their asset portfolios. Despite the volatility and unpredictability, companies that better use their existing competitive positioning as well as possibilities to innovate could develop sustainably until 2022.
Transformation to The Digital Age:
- Using digital technologies to accelerate corporate change.
Advanced data analytics and digital technology have enormous but mostly untapped potential to change the chemical industry. Today, digital tools and technology offer a cost-effective alternative for increasing efficiencies in existing processes and creating new products and processes. In 2022, significant progress can be expected in three areas: data availability, data processing, and engineering and materials research, thanks to the convergence of rapid improvements such as advances in sensors, cognitive computing, and analytics.
Chemical companies have traditionally adopted advanced data analytics and digital efforts in silos, which has resulted in slower processes, higher costs, and ambiguous benefits. Chemical companies, on the other hand, are increasingly realizing that digital transformation entails synchronizing culture, people, structure, and tasks, as well as introducing more and better technologies.
Creating and responding to customer requests consumer expectations and interactions to meet or surpass them. As a result, customer happiness, loyalty, and advocacy may rise.
Creating value through human-machine collaboration, in which robots assist humans with manual activities and employees use digital technology to boost productivity and execute jobs more efficiently.
Asset Performance & Reliability
Using modern digital technologies like IoT (Internet of Things) and remote monitoring to improve asset dependability.
Innovation in Material System
Taking advantage of digital revolutions to improve R&D efforts.
Collaboration Amongst Ecosystems
Solving complicated challenges in collaboration with numerous entities (such as companies, universities, and national labs) to better serve customers and markets.
Chemical businesses can become more flexible, innovative, responsive, and efficient by embracing modern data analytics and digital technology. The road will undoubtedly provide several obstacles, but how organizations respond to these obstacles will determine who wins and who loses in 2022 and beyond. A well-designed and well-implemented data and digital strategy could represent one of the biggest-ever opportunities for the chemical sector in the post-COVID-19 era, especially if it is guided by a clear business plan.
- Climate change is pushing efforts to achieve sustainability.
Thanks to increased stakeholder attention, legislative reform, and technological innovation, the chemical industry will likely focus more on decarbonization initiatives in 2022.
The chemical industry is responding by pledging to reduce carbon emissions, recycle, and recover resources. The European chemical industry, for example, has pledged to carbon neutrality by 2050 as part of the European Union Green Deal, as part of its commitment to the COP21 climate resolution. This trend is likely to continue until 2022 as the global energy industry continues to migrate from fossil fuels to renewables and the "Green Deal" gains traction. Industry players may place a greater emphasis on new and innovative technologies such as carbon capture and utilization (CCU), which may receive extra financing and attention as a result of pending government initiatives.
Also, work on steam cracker electrification, advanced chemical recycling, green hydrogen, and carbon capture and storage (CCS) is still progressing. The 90% of chemical industry respondents claimed that to advance decarbonization and sustainability in 2022, they will focus on improving resource and energy efficiency in the manufacture of chemicals and materials. As part of an increasingly circular economy, these advances are likely to help drive renewables, improve energy efficiency, cut emissions, and generate new markets for carbon and other by-products. As a result, collaboration might flourish, spawning new economic models and advancing the energy transition. Large-scale waste-to-fuels initiatives, for example, are becoming more prevalent, typically in collaboration with others in the value chain.
While the chemical industry's carbon emissions are difficult to reduce due to its dependency on process heat, breakthroughs in decarbonizing chemical manufacturing could have a global impact. Because chemistry provides the building elements for numerous value chains, the benefits of decarbonizing chemical enterprises may extend beyond the industry. Given the interdependence of chemicals across many end markets and value chains, resolving this complexity would almost certainly necessitate a clear road map for the sector. However, certain decarbonization approaches, such as expanded electrification, widespread renewable energy use, and enhanced energy efficiency measures, present particular problems. While several chemical companies have said publicly that they intend to become carbon-neutral by 2050, the task lies ahead.
Another question is if demand for many traditional plastics and chemicals will decline as consumers become more aware of end-product environmental implications and are willing to adopt eco-friendly alternatives. People may be prepared to convert to more ecologically friendly products, even if they cost slightly more or perform less well, as they were in 2021.
Visibility Could Be The Key To The Industry's Long-Term Survival:
The experiences over the past two years may have served as a reminder to chemical industries that stronger methods for dealing with disruption are required. In the following year, visibility is anticipated to become the most important capacity for the industry. Increasing visibility (including expenses and prices) is dependent on how a firm is disrupted, and digital technologies may be necessary facilitators. Companies dealing with an increase in demand, for example, should maintain visibility across their supply network when they ramp up production.
Due to the possibility of supply shortages delaying output, chemical companies in this circumstance may want to pursue multisource techniques. Also, businesses that are experiencing demand fluctuations may wish to improve visibility into their operations to assist them to focus on cost-cutting opportunities. They can use the newfound visibility to generate flexibility across their production environment, allowing them to immediately reduce costs to weather low demand and respond more quickly to an eventual rise in demand.
The objective of the report is to present a comprehensive analysis of the 2022’s Chemical Industry to the stakeholders in the industry. The report provides trends that are most dominant in the 2022’s Chemical Industry and how these trends will influence new business investments and market development throughout the forecast period. The report also aids in the comprehension of the 2022’s Chemical Industry dynamics and competitive structure of the market by analyzing market leaders, market followers, and regional players.
The qualitative and quantitative data provided in the 2022’s Chemical Industry report is to help understand which market segments, regions are expected to grow at higher rates, factors affecting the market, and key opportunity areas, which will drive the industry and market growth through the forecast period. The report also includes the competitive landscape of key players in the industry along with their recent developments in the 2022’s Chemical Industry. The report studies factors such as company size, market share, market growth, revenue, production volume, and profits of the key players in the 2022’s Chemical Industry.
The report provides Porter's Five Force Model, which helps in designing the business strategies in the market. The report helps in identifying how many rivals are existing, who they are, and how their product quality is in the Market. The report also analyses if the 2022’s Chemical Industry is easy for a new player to gain a foothold in the market, do they enter or exit the market regularly if the market is dominated by a few players, etc.
The report also includes a PESTEL Analysis, which aids in the development of company strategies. Political variables help in figuring out how much a government can influence the Market. Economic variables aid in the analysis of economic performance drivers that have an impact on the Market. Understanding the impact of the surrounding environment and the influence of environmental concerns on the 2022’s Chemical Industry is aided by legal factors.