Chemical Industry: Chemical industry faces volatile backdrop on road to recovery

By Joseph Chang, Global Editor, ICIS Chemical Business

The coronavirus crisis may simply accelerate key macro trends already underway, creating a volatile backdrop for chemical companies to navigate on the road to recovery.

Four key macro trends are shaping global discontentment: growing income inequality; the displacement of labour from automation, technology, immigration and free trade; wars displacing investment in infrastructure, healthcare and education; and increasing polarisation via social media, said Ian Bremmer, president of global political risk research and consulting firm Eurasia Group.

For example, technology can take away the ability of brick and mortar stores to turn a profit, even more so during the coronavirus crisis. And the clash between the US and China is progressing more rapidly because of the coronavirus.

In the US, the violent protests being sparked by the killing of George Floyd by police come amid a backdrop of a hyperaccelerated polarisation of political views, inequality, over 40 million unemployed Americans, and a major contraction in GDP, with the economic impact being experienced more by African Americans and other minorities, he pointed out.

However, the impact of the widespread protests on the chemical industry is likely to be limited. “I don’t see a great deal of economic impact [from the protests] on the chemical industry,” said Peter Huntsman, CEO of Huntsman Corp, in an interview with ICIS amid the American Chemical Council (ACC) virtual annual meeting.

The chemical industry has a unique opportunity to attract people from the high school level to the STEM (science, technology, engineering and mathematics) disciplines, where they can have better job opportunities. In the US, many of its facilities are on the Gulf Coast and coastal southeast, which have more diverse populations, he said.

Some of the root causes of the civil unrest include people under quasi-house arrest from the coronavirus lockdowns, and many people in service sectors losing their jobs, often after finding employment for the first time, he noted. Add to that the degree of frustration around racial discrimination, and isolated cases of police brutality, and we’re in today’s situation, said the CEO.

US-China relationship

Should US President Trump’s approval ratings slip into the 30% range, there is a greater probability of Trump ramping up the rhetoric against China and using it as a cudgel in promoting the view that contender for presidential elections Joe Biden is soft on China. “I do think we will head towards a more confrontational relationship with China,” said Bremmer.

A cold war between the US and China would be another shift away from globalisation, ultimately leading to less efficiency, less growth and more volatility, he said.

While there will continue to be competition between the US and China, “long term, both are much stronger when working together than when squandering opportunities and working apart,” said Huntsman. However, he sees a “good probability” that the phase one US-China trade deal will be scrapped, or further progress delayed, as the impact of the coronavirus makes it difficult for China to meet its commitments in terms of substantially more imports from the US.

Huntsman Corp’s supply chains are already largely localised, with about 95% of sales in China from products produced in China or southeast Asia, with the percentage in the low-90% range for sales in Europe. It serves the US market from US production with some exports, he pointed out. “We don’t have large plants that export a lot. By and large we are close to the customer,” said Huntsman.

Societal shift/ACC overhaul

The chemical industry will also have to deal with changes in societal expectations, where the public and consumers have set a higher bar for corporate responsibility.

In this vein, the ACC plans to renew and refresh its flagship Responsible Care programme, focusing on health, safety and environment (HSE) in a rapidly changing political and social landscape.

“Responsible Care is about continuous improvement - not just for ACC member companies, but to the program itself,” said Chris Jahn, CEO of the ACC, in the trade group’s virtual annual meeting, noting that the last review of the programme was done in 2010.

In the past two years, there has been an increase in high profile accidents amid a changing regulatory and social landscape. Public expectations have set a higher bar, he noted.

Mark Vergnano, CEO of Chemours and Chairman of the ACC Board of Directors, said the industry must have a forward-looking vision and do more than just commit to a renewed Responsible Care. There must be proven progress in HSE as a top priority.

Details of the ACC’s renewed Responsible Care initiative have yet to be released, but it’s clear there will be a greater focus on sustainability and industry is acting in its best interests.


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