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The chemical industry went through a wild ride in the past few years with natural disasters and a cavernous economic recession causing record high, then low, chemicals demand and pricing, with the addition of uncertain supply and a host of major suppliers in turmoil. While the waters have calmed somewhat recently, chemical buyers are expressing concern about post-recession uncertainty in the chemical supply market, especially around extended lead times, capacity ramp-ups and future pricing trends for commodity and specialty chemicals.
One thing is for certain, however: the global chemical supply base has matured and there seems to be little, if any, separation between domestic and international suppliers relative to quality and customer support. Chemical buyers want the right material at the right cost, whether it comes from Texas or Tunisia. "Buyers are frequently using the competitive bid process globally for commodity chemicals and focusing on pricing rather than supplier relationships," says Erik Halbert, a manager who follows the petrochemical industry for the Wellesley, Mass.-based supply chain economics firm Boston Strategies International. "We see that the spot market prices for chemicals are down and inventory is adequate."
Specifically, Halbert sees the specialty chemical market becoming one of rigorous bidding but the contract terms are longer than those of commodity chemicals and feed stocks. "When dealing with specialty chemicals buyers are looking at contracts that may run two to three years long and in that case sourcing becomes more of an important issue," says Halbert. "With application-specific chemicals it is important to keep close relationships with suppliers in case the underlying chemistry changes. The suppliers need to be responsive and they also may act in a co-development relationship with their customers."
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