The chemical industry continues to perform strongly in all regions and we expect this trend to continue for the foreseeable future. Research by consulting firm Roland Berger, “chemistry winners in 2018 – focus on profits”（ https://bit.ly/36ndHjp ）This paper examines the financial performance of 170 chemical companies in the United States and Europe, and provides an overview of the industry. The report found that 2018 was another strong year for the industry.
According to this study, the total sales of 170 chemical manufacturer surveyed in 2018 increased by 9% compared with 2017, and the profitability of the whole chemical industry was also very strong last year. Although the 12% EBIT was lower than 13% in 2017, the overall EBIT improved due to the 4% growth in industry wide sales of the chemical industry.
According to our experience in asfintec, the performance of specialty chemicals has been particularly good in recent years. The bulk chemicals market also performed well, especially in Asia, where demand is strong and there is a clear trend towards self-sufficiency, and in the United States, where raw materials are dominant. In fact, access to cheap raw materials continues to provide significant cost advantages for North American chemical manufacturers. We have seen a huge wave of new capacity, and we expect the second wave to occur in 2021-2024.
Even Europe, struggling with cost competition in recent years, has announced some major new activities, indicating that the economy here is also recovering. There are two trends affecting European operators: first, European operators import cheap raw materials from American operators; second, European operators are pushing to move downstream to participate more in the special chemicals industry. The advantage here is that it is a business with complex technical requirements, suitable for European performance capabilities. Operators know that if they do well in this area, they will have more profits and profitability, which will continue to encourage broad participation.
Of course, although the overall situation is optimistic, the chemical industry is still facing major challenges. There are trade tensions between the United States and China, as well as between the United States and the European Union (to a lesser extent). Chemical manufacturers will need to pay close attention to these tensions, as any uncertainty in trade flows can hinder decision-making.
Another major challenge relates to the speed of digital transformation in these market sectors. Although the processing industry has finally caught up with the service industry in terms of digitization, compared with similar industries, the chemical industry is still in a backward position. Compared with many other heavy industries, chemical manufacturers lag behind in implementing digital solutions. Of course, the refining industry is developing faster than the chemical industry. Most operators are using advanced process control (APC) solutions, and many operators are turning to artificial intelligence (AI) tools.
In contrast, while more and more chemical companies are exploring and experimenting with the benefits of this technology, few are launching real-time commercial applications. As a result, they may miss the benefits of deploying an APC solution that enables units to run faster and deliver consistent specifications. Many companies are still experimenting with analytical tools that can help them apply the lessons learned from past operations and improve future results.
Operators need to take action to solve this problem as soon as possible and start their digital efforts. Otherwise, they will miss the opportunities that the transition to digitalization may bring – from the opportunity to improve productivity and profit by increasing throughput and production, to better coordinate the supply chain, to better plan maintenance and reduce unplanned downtime.
It’s all about the pursuit of operational excellence. APC still plays a key role in helping the company to maintain the best operating conditions. At the same time, using normative analysis to determine when the equipment will fail can enable operators to plan ahead, make emergency plans and avoid unnecessary costs. Given these potential benefits, why don’t more Chemical operators take advantage of the benefits of digitalization? What hinders most operators is the thorny issue of operational complexity. Operators often don’t know where to start. Many businesses, especially in professional areas, have become increasingly complex as customers demand higher levels of performance and quality, and a wider range of choices from manufacturers. Operators realize that they need to diversify their product lines to meet these increasingly complex needs.