PwC Releases Chemical Sector Findings from the 17th Annual Global CEO Survey
27 February 2014 Chemicals CEOs are optimistic about future prospects despite worries about energy costs, raw materials prices and skills shortages. They’re looking to technological advances, climate change and resource scarcity to transform their business over the next five years. To adapt, they’re already changing supply chains, production capacity, research and development and innovation capacity.
Chemicals CEOs are More Optimistic This Year
This year, 56% of chemicals CEOs believe the global economy will improve over the next twelve months (compared to 44% of the sample overall), and 42% think it will stay the same. Just 2% expect it to decline. That’s a dramatic turn-around from last year. Sector CEOs are more confident this year too. An impressive 98% expect revenues to grow over the next three years.
Energy Costs, Skills and Raw Materials Prices Stand Out as Looming Risks
However, the picture isn’t all rosy. The threat of high and volatile energy costs is looming large with 75% of chemicals CEOs somewhat or extremely concerned, far more than across the sample. They are also more concerned than their peers are across the sample about the availability of key skills, supply chain disruption and high and volatile raw material prices. Additionally, 79% percent of chemicals CEOs worry about government responses to fiscal deficit and debt.
Chemicals Companies are Looking to the U.S. for Growth
More chemicals CEOs (44% vs. 30% overall) rank the U.S. as one of the most important countries for their overall growth prospects over the next 12 months. And more of those planning an M&A, JV or strategic alliance are looking to North America too (41% vs. 30% overall). This is a reflection of the boom in shale gas production that is lowering energy costs in the U.S. In Asia, Indonesia stands out as an important growth market for the sector.
Climate Change and Resource Scarcity will Transform the Chemical Industry
More than two-thirds of chemicals CEOs expect technological advances to dramatically change their business environment. But nearly as many chemicals CEOs (61%) believe that resource scarcity and climate change will transform their business over the next five years. Ninety-one percent of chemicals CEOs agree or strongly agree that it is important for their company to measure and try to reduce their environmental footprint. In other research, we’ve found that many chemicals companies are innovating to help their customers improve too.
Supply chains, Production Capacity and R&D are Changing in Response to Global Trends
More chemicals CEOs see a need to change their supply chain in response to transformative trends than do CEOs in other sectors. That may partly reflect increasing interest in shifting some production from oil to biofuels or natural gas in response to resource scarcity and climate change. Nearly half of chemicals CEOs have already started investing in production capacity, far more than across the overall sample. More have already started or completed a change of programming around research and development and innovation capacity, reflecting the strong focus on innovation we’ve seen over the past several years.
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