MEDIUM RISK for entreprises
Chemicals is a cyclical business closely to GDP as many chemical products are used up in early stages of the manufacturing supply chain. Upstream chemicals like petrochemicals usually depend upon the dynamics of their respective main end market (e.g. manufacturing) while downstream chemicals like cosmetics are driven by on big trends in consumer spending.
Driven by global economic growth and pass-through of rising naphtha prices onto downstream chemical product prices, global chemical sales went up by 9% y/y in 2017, to reach USD3.8tn. We expect continued sales growth around 6%-8% (CAGR 2018-19).
European chemical players closed the margin gap to US peers due to a focus on specialties enjoying higher margins; yet the sustained economic growth across Asia (particularly China) and in the U.S. is the prime volume and price driver. Only agrochemicals may continue to face headwinds, from weak crop prices which have led to revenue decline in farming as the most important end market.
Basic chemicals: It has a close relationship with the cycle of industrial production as its products are used further down the supply chain
Soaps, detergents, cosmetics: All attached to chemical products, they are affected by trends in consumer spending
Agrochemicals: It is closely tied to global food prices and to farming revenues
Contact Euler Hermes
Economic Research Team
Sector Risk Analyst