In addition to causing deaths, the coronavirus pandemic is also affecting the global economy as governments adopt blockade measures and curb population movements. Industrial activities have stopped, international travel has stopped, and only basic businesses such as food and medicine have been allowed to operate. As factories face supply chain disruptions and labor shortages, these measures have had a significant impact on almost all industrial sectors.
The chemical industry is no exception. Global chemical production fell nearly 3% in March. The reason behind the reduction is the shortage of raw materials and labor, as well as the closure of factories ordered by the government. In different categories of the chemical industry, the specialty chemical products sector has experienced disruption and production decline since February 2020. The worst impact was in March, when global production of specialty chemicals fell by more than 6%.
The demand of each department is unbalanced
Special chemical products have numerous uses in a wide range of industries, such as polymers and plastics, adhesives, paints and coatings, lubricants, cleaning materials, etc. Any disruption in the industry will have a ripple effect on other sectors that depend on special chemicals. Since the outbreak of the epidemic, the demand for special chemicals in various departments has been uneven. The demand for specialty chemicals in the paint and coatings industry has declined sharply, and its demand for pharmaceuticals, detergents, detergents, flavors and fragrances and plastics has either risen or remained stable. The paint and coatings industry has been hit hard as its two major end use sectors, construction and automotive, have witnessed a significant decline in demand. Soon, specialty chemicals manufacturers will need to make smart strategic adjustments and restructure their businesses to cope with this unbalanced demand situation until the pandemic threat is over and industry dynamics return to pre outbreak levels.
Impact on manufacturers of special chemicals
The impact of the pandemic on manufacturers of specialty chemical products is mixed. Low oil prices have reduced the cost of raw materials for some production lines, and the closure of Chinese factories has even helped manufacturers in Europe, the United States and India fill the gap and increase orders. However, supply chain disruption has led to procurement problems for some manufacturers. Enterprises relying on Chinese raw materials are also facing major logistics challenges.
Most of the impact will be felt by specialty chemical products manufacturers in the first quarter of 2021 rather than in the fourth quarter of 2020. Specialty chemicals manufacturers such as Clariant and Evonik have reported declining profits in the first quarter of 2020. Most of these enterprises will experience a U-shaped recovery, because demand is not expected to increase significantly even after the blockade is lifted in developed economies. Once the plant reopens and the supply chain becomes more flexible, specialty chemicals manufacturers are most likely to meet their existing order commitments by the end of 2020. The time and extent of recovery will depend on how early the blockade is lifted around the world and how quickly the world can recover from the pandemic.
