The chemical industry can no longer count on past performance.
It wasn’t long ago that double-digit returns came easily in the chemical business. But those days are gone.
The challenges the industry is facing are broad and deep. Commodities prices continue their history of volatility, making long-term planning difficult. Evolving feedstock economics and the shift to unconventional sources such as shale gas have contributed to a resurgence of production in the United States, even as the center of the industry moves toward Asia and the Middle East is emerging as a significant player in the chemical industry. Operational excellence is as important as ever, but the current dynamics demand more. New commercial strategies, service excellence, and top-tier data capabilities are needed to win.
The dramatic rise of shale gas as a resource in North America, combined with the growing maturity of the chemical industry in many emerging regions, is shifting the balance of power in the chemical sector.
This means chemical companies have to work harder than ever to thrive. It wasn’t unusual to see strong average total shareholder return in the industry during boom years, but the average TSR in the most recent five-year period was barely 5%. Winning chemical companies are transforming their business models and adopting lean principles to ensure that even in a challenging market, revenue growth leads to higher returns.