- Turnaround in output on the back of an upturn in emerging markets demand
- Impact of rising fossil fuel prices on feedstock costs, especially petrochemical
- Level of R&D spend required in order to support/expand margins
- Sustained M&A activity in intensifying battle for market share
Stable growth driven by Asia-Pacific
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.
Chemicals-global-sector-report-feb18.pdf