A new report from the Deloitte Touche Tohmatsu Limited (DTTL) Global Manufacturing Industry group, Compass 2011: Global chemicals sector midyear outlook, indicates that the chemical industry is continuing to recover, with revenue growing at a compoun
A new report from the Deloitte Touche Tohmatsu
Limited (DTTL) Global Manufacturing Industry group, Compass 2011: Global
chemicals sector midyear outlook, indicates that the chemical industry is
continuing to recover, with revenue growing at a compound annual growth rate of
7.9 percent over the near term. Higher prices and improving global economic
conditions, leading to increased demand in the end markets for chemical
products, have contributed to the revenue growth. This trend is expected to
continue into the second half of 2011.
Contributing to the upswing was the increased global sales in the automotive
industry, which is a significant market for chemicals because of the high volume
of products used in the development process. Other end markets that have helped
drive revenue so far in 2011 were consumer electronics and pharmaceuticals.
Looking ahead, China is anticipated to dominate the global chemical scene with
the highest percentage revenue growth for the remainder of 2011. Markets such as
India, Brazil, and Korea will follow China closely. While demand in the United
States and Europe is expected to be moderate, higher prices will likely
translate into stronger revenues for chemical companies in these markets this
year.
The DTTL Global Manufacturing group?s outlook also anticipates oil prices to
continue to trend higher. ?The current 30 percent spread between oil and natural
gas prices per barrel in the United States is creating market advantages for
chemical companies with production facilities that are capable of feedstock
flexibility,? says Tim Hanley, Global Chemicals sector leader, DTTL Global
Manufacturing Industry group. ?In the long term, the sustainability of this
advantage will likely be dependent on shale gas permitting, supply chain
infrastructure development, and demand for natural gas in other markets.?
Merger and acquisition (M&A) activity is a bright spot for the global chemicals
sector, with 2011 deal volumes and values likely to exceed pre-recession
figures. India, China and other developing countries will likely be targets for
M&A activity in both the chemical and plastics sectors, which will likely
accelerate the rate of deals in 2011.
According to the report, sustainable housing and agriculture are two global
megatrends in play this year for chemical companies looking to gain a
competitive advantage. Chemical players that are proactively looking to
capitalize on megatrends are now focusing their long-term business strategies on
solutions that are critical to society. Therefore, research and development
(R&D) is a significant way to bring megatrend solutions to market. More chemical
producers are recognizing the need for collaborative innovation with other value
chain constituents that are just as critically important to the development of
solutions for a growing global economy, energy, mobility, urbanization, and
climate change.
Higher prices and improving global economic conditions, leading to increased
demand in the end markets for chemical products, have contributed to the revenue
growth. This trend is expected to continue into the second half of 2011.
"Chemical companies in India have woken up to
concepts in sustainable technologies and not merely from an angle of corporate
social responsibility. The impetus on being sustainable for Indian chemical
companies can be noticed across most business processes; in areas of
procurement, product design innovation, manufacturing, marketing and even
reporting" says Vijay Iyer, Chemicals sector leader, Deloitte in India.
"Indian chemical companies, investing today in sustainable technologies would
therefore benefit not only from process innovation and subsequent efficiencies
but also gradually garner end customer recognition of being early adopters of
green technologies. Such recognition will be a definitive differentiation, in an
era where consumers are becoming progressively aware of the need for
environmental sustainability", adds Vijay.
The global chemicals sector is well positioned for the remainder of 2011 to not
only hit revenue forecasts, but also to create opportunities to enhance growth
in the future
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