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Home » The Chemicals and Energy Industry Is Primed for Robust Growth

The Chemicals and Energy Industry Is Primed for Robust Growth

March 7, 2017
SupplyChainBrain

Before 2008, the chemical market underwent an era where the market was full of imports from the Far East and extra volume from the Middle East. Shareholders weren't happy with the current growth, wanting their industry to experience 10 to 15 percent growth like in the electronics industry. Companies were forced to sell off their cash cows to focus more on specialty and fine chemicals. Bulk chemical consolidated companies were created by acquiring the sell-off. Offshore businesses shot up to provide lower costs to global markets.

In today's market, with lower energy prices, the chemical industry has begun to reshuffle. Reshoring is returning business from the Far East to North America and Europe in an effort to balance costs with improved customer services.

In 2016, chemical and energy businesses are focusing on portfolio management by realigning their business strategies for success and growth over the next 10 years. Mergers and acquisitions are rampant. Now the money pot is in the emerging markets of the Middle East, Brazil and China, who want to buy a footprint into the main market. China and the Middle East are buying up businesses to new markets, such as China Chem, which bought Syngenta.  Bayer split off their materials division to give them cash to further expand their reach in agrichemical products. Oxea grew out of a split from the bulk chemicals of Celanese.

By 2020, there will be a big reshuffle of the industry apart from mergers and acquisitions. Companies are focusing on revitalizing their products, selling them to non-traditional markets like CPG, automotive and electronics, in order to raise revenues and increase their value. The requirement for chemicals is growing all the time, and the industry will see a reclassification of products from chemicals to life sciences or special materials. By using these terms, the industry can attract research knowledge and investors who want to advance the markets of new energy, bio-products, regenerated plastics and more.

Beyond 2020, the pendulum swing will continue with on-shoring and nearshoring. Companies will look to move back to North America from Brazil, Russia and China or to other countries like Nigeria and Indonesia where growth is perceived to improve. With the fluctuation of energy markets, companies will look more towards profitability within their portfolios, than just growth in volumes or revenues. The industry will see a rise of the chief supply chain officer, incorporating responsibilities found today within CPG and retail, focusing not just on customer service and supply-chain visibility but to optimize customer engagement and delight.

Over the past 15 years, businesses have invested in big ERP solutions. Beyond 2020, companies will look to have a digitization strategy moving towards the Industrial Internet of Things (IIoT) and Industry 4.0. Companies will strive to be more like Amazon where customers can get their products when they want them from where they want them and how they want them. Millennials will join the workforce providing smarter business solutions and innovative applications that create new value for the business. Current B2B network solutions will move from connecting smart applications to ERP systems to improving data quality, data manipulation and data analysis.

The Outlook

Beyond 2020, chemical companies will also use technology to help them brand their products to prevent copycatting. Data generated from the IIoT and other sources will be analyzed to prove whether a product is really theirs or not. Chemical companies will continue to showcase their brands and how they drive the day-to-day market. The message to the world will be that businesses can’t exist without chemicals.

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KEYWORDS Chemicals & Energy Global Supply Chain Management Retail Supply Chain Analysis & Consulting
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