By Tim Hanley - February 27, 2015
Deloitte Global was proud to host its 10th Global Chemical Think Tank recently in Dusseldorf, Germany. The event brings together Deloitte member firm clients and Deloitte professionals from around the world to engage in forward thinking discussions on key trends and issues impacting the global chemicals industry. While several topics were featured on the agenda, let me highlight three topics which resonated with me.
First, the chemicals industry landscape is continuing to evolve with companies that are better focused on providing solutions to emerging customer needs to become more globally competitive. In an industry which over the last decade has grown on average on par with gross domestic product (GDP), breakthrough performance will demand the ability to harness new exponential technologies and adapt business models to drive innovation and exceptional growth. This is an inflection point for the industry, which is poised for new developments in areas such as advanced materials, material-based systems manufacturing, and digital design. To cope with these opportunities and challenges, companies will likely need to deploy innovative talent strategies to have the right skills needed to drive the business forward as the industry competes in the digital age.
Secondly, the feedstock environment is changing, both with the volatility of oil prices, as well as with the potential for next generation bio-based feedstock becoming more important in the future. While lower oil prices continue to steal the headlines, there appears to be growing investments and collaborative innovation in bio-based feedstock as a sustainable energy alternative. Given the multifaceted dimensions of the feedstock prism, companies will likely turn to advanced analytics as a competitive tool to find the right feedstock strategy for their business. The recent steep decline in oil prices, which impacts the pricing of naphtha, will likely create short term opportunities and challenges, depending on the feedstock source for companies. While this decline may not be lasting, it is a development being closely monitored.
Finally, mergers and acquisitions (M&A) will likely continue to be robust in the global chemicals sector. In 2015, the U.S. is expected to continue to be of interest, driven by anticipated moves by chemical companies to realign their portfolio as well as by strategic investments to position as the shale gas opportunity gradually unlocks. Further, commodity deals are likely to lead the pack, but specialty deals is expected to rebound to 2012 levels. Among the challenges that could hamper M&A activity in the sector include debt availability in certain geographies, competition and regulations changes, use of spin-offs rather than divestitures to executive portfolio realignment, and a significant global conflict. Read more in Deloitte's recently released 2015 Global chemical industry mergers and acquisitions outlook.
Some of the topics I share in this article highlight the dynamic opportunities that lie ahead for all manufacturers – not only in the chemical industry. Over the next few months I hope to continue to offer perspectives on different sectors and issues.
Tim Hanley is the Global Leader of the Manufacturing Industry group of Deloitte Touche Tohmatsu Limited (DTTL). In his global industry leadership role, he directs strategic initiatives and investments to grow Deloitte member firm market share within the manufacturing industry. During his distinguished 35-year career, Hanley has led teams serving all business aspects, including consulting with top management regarding organizational financial strategy development and execution, acquisitions, and market development.