The chemical sector is a cyclical business. It is closely tied with the fluctuations in countries’ GDP, because so many of its products are used in early stages of the manufacturing supply chain. Currently, companies count on the buoyant automotive sector - the chemical industry’s first outlet, ahead of construction and electronics. Combined, these three sectors account for roughly a third of chemical companies’ global revenues.
Estimated at USD3tn (pharmaceuticals excl.), global chemical output experienced a decent year in 2015 as the slump in oil prices brought down the costs of feedstock. However, pass-through to output prices was a drag on worldwide sales increase in comparison to the +3.5% growth in sales volume in 2015. In 2016, we do not expect global sales to pick up despite a growth in volume estimated at +3%.
The collapse in the oil price helps European chemicals companies to catch up with North American competitors, still boosted by their limited exposure to changes in naphtha prices. However, chemical sales are likely to be hit by poor economic performance across emerging countries (Russia and Brazil are prominent examples) while China might face a more gloomy outlook than previously hoped.