The global chemicals & advanced materials industry is likely to realize the adverse impact of the coronavirus (COVID-19) pandemic from every direction. Not only would supply chains be disrupted by the outbreak of this virus in key regions, but also demand might fall due to the uncertainty in the global economy and capital markets. To stop the further spread of the pandemic, many national governments have opted for restrictions of movements, since workforces are facing the risk of infection. This has added to an unpredictable dimension to the crisis. The COVID-19 pandemic has caused widespread concern and economic hardship for several consumers, businesses and communities across the globe. According to a recent report, the Dow-Jones Industrial Average has lost almost 30 per cent of its value since mid-February 2020 owing to the coronavirus worries. Terribly low demand and a price war between Russia and Saudi Arabia have pushed the global oil prices down by 60 per cent since the start of 2020, to well below USD 30 per barrel.
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As a resultant ripple effect of the economic slowdown on the chemicals industry, Methanex has claimed that it would idle methanol plants in Chile and Trinidad from the beginning of April 2020. The anticipation is that methanol demand could be impacted in the second quarter of 2020 due to the substantial reduction in manufacturing activity in countries that have had significant outbreaks of COVID-19. China, the country where the pandemic originated, is a massive importer of methanol for chemical and fuel production. Chile has so far lost about 2,000 metric tons of lithium chemical sales due to lack of demand from China.
Moody’s Investors Service doesn’t expect chemicals and pharmaceuticals to be as impacted by COVID-19 as quarantine-vulnerable industries like airlines and tourism industries. According to another market study, due to falling demand, there is likely to a global oil surplus of between 800 million and 1.3 billion barrels in 2020. US oil production could decline by 2 to 4 million barrels per day over the next 18 months.
According to the Germany-based chemicals company, BASF Group, the year 2020 would be worrisome due to the coronavirus. In a statement issued 28 February 2020, the German chemical company said that the viral infection could result in a second year of falling profit for the company and reduce global chemical production to about 1.2%. That would be the worst growth for the sector since the Great Recession in 2008 and a significant dip compared to 2019, when it grew 1.8%.
Local dyestuff units in India are largely dependent on imports of several raw materials from China, including chemicals and intermediates. Delayed shipments from China due to the pandemic and a spike in raw material prices are likely to be affecting the dyes and dyestuff industry, particularly in Gujarat. Nearly 20 per cent of the production is projected to be affected due to the disruption in raw material supply. China is also a major supplier of specialty chemicals for textiles, especially Indigo required for denim. The business in India is likely to get affected and people are securing their supplies. However, it is also an opportunity for the US and the European Union to try and diversify their markets and mitigate the Chinese risk. Some of this business can be diverted to India if taken advantage of.
Typical contingency plans help enable operational effectiveness at the aftermath of global events like natural disasters, cyber incidents and power outages, among others. However, they do not generally take into account the widespread quarantines or lockdowns, extended school closures and added travel restrictions that are now being enforced in countries across the world. Each organization’s response to these forces should be carefully tailored to the dynamics of its industry, with proper governmental support.
Browse through the report @: Global Coronavirus (Covid-19) Market - Guidance for Executives, Management Consultants and Investment Advisors