Global Chemicals Report

Global Chemicals Report

What to watch ?

  • China’s economic rebalancing is shifting internal demand from basic to specialized chemicals 
  • Positive effects of low oil prices mostly benefit upstream segments
  • Firms’ capacity to cope with increasing interest rate particularly burden emerging markets 
  • Higher R&D s​pending required for chemical players to reach an upmarket positioning 
  • M&A activity to continue in 2016 putting at risk small players 

Chemicals Sector Value:
2,900 bn USD

Chemicals Sector Risk Rating

Sector-Risk-low
Last reviewed: 02/02/16

Chemicals id card

Fragmentation
Fragmentation-1 
Internationalization
Internationalisation-4 
Capital Intensity
Capital-intensity-3 
Profitability
Profitability-3 

Sector risk map: Chemicals

european chemicals companies catching up with the us thanks to low oil prices

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. 

key players

Country

Role

Sector Risk

UNITED-STATES #1 Importer
#2 Producer
#2 Exporter
Dot-Risk-Low
GERMANY #1 Exporter
#3 Importer
Dot-Risk-Low
CHINA #1 Producer
#2 Importer
Dot-Risk-Medium

Strengths

  • Innovative sector linked to a strategy  of upmarket positioning
  • Diversified outlets softening the impact of external shocks on firms’ revenues 
  • Sound level of operating cash flows enabling corporates to cope with high capital requirements

Weaknesses

  • Activity highly sensitive to the global economic situation
  • High capital intensity meaning high level of debt
  • Poor public image due to environmental concerns
  • Struggling agrochemicals showed by the recent failure of Monsanto’s takeover of Syngenta

Chemicals subsectors insights

Petrochemicals: Along with refining, gains from cheap oil prices on both sides of the Atlantic. 
Polymers/plastics: European chemical players have been catching up with US and Middle East competitors thanks to low oil prices which bring down the cost of feedstock supply. 
Agrochemicals: The subsector has been hit by decreasing revenues following less abundant harvests than expected.  

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