The global chemical industry is navigating a complex landscape, shaped by the aftermath of the COVID-19 pandemic, fluctuating economic conditions, and geopolitical conflicts.
United States: The Land of Incentives
The U.S.’ chemicals industry has been bolstered by a domestic economic boom and strategic incentives as President Joe Biden looks to bring green and semiconductor industries back from China. The Inflation Reduction Act (IRA), which is directing $400 billion toward clean energy, with a key goal of reducing the nation’s carbon emissions by 2030, is now in its second year and is playing a crucial role in supporting industry growth. “CO2 capture and sequestra- tion technology is seen as both scalable and profitable, especially with recent enhancements in incentive programs like the IRA in the United States,” emphasizes Mark Behrman, president & CEO of LSB Industries, when talking about the value add from the IRA.
However, not all industry leaders are entirely satisfied with the IRA's scope. Mark Nikolich, CEO of Braskem America, acknowledged the act’s positive aspects but also highlighted its limitations. "While initiatives like the IRA in the U.S. represent a positive step, especially in funding sustainable projects, they are viewed as too narrow as they do not address circularity projects," he notes.
While the bipartisan nature of the IRA ensures its continued influence beyond the upcoming election, there will be continued calls for more inclusive incentives that address a wider range of sustainability issues.
Europe: Slow Push Back From the Edge
Europe has seen itself on a different trajectory. “2023 presented a 'perfect storm' for Covestro, accentuated by the geopolitical crisis and its domino effects on global demand and energy costs,” un- derlines Covestro’s Chief Commercial Officer Sucheta Govil. “The Ukraine-Russia conflict exacerbated these challenges, leading to a notable impact on our sales volumes, prices, and ultimately, a 20 percent decrease in sales to 14.4 billion from the previous year's 18 billion. Despite these adversities, we take pride in our cash manage- ment and the steps we took to mitigate the downturn,” she notes.
While companies have weathered the almighty storm in Europe, and inflation and interest rates appear to be coming down, the European chemical industry does face upcoming challenges. Giuseppe Librandi, president and CEO of COIM, believes “stringent regulations and the ambitious but, in our view, poorly implemented Green Deal,” will affect the European chemical industry’s competitiveness moving forward. In the context of regulation, Sanjeev Rastogi, CEO of Arxada, underlines how certain markets like Switzerland, are becoming “highly attractive to customers seeking sustainable solutions,” due to their low scope three emissions.
New ships need to be built and alternative fuel sources used, but there is still a lot of debate and little consensus on what fuels are most appropriate. LNG, LPG, methanol, and ammonia are contenders but there’s a limit to the amount of ammonia available commercially currently that is not being used for fertilizer production. Gina Fyffe, CEO, Integra
APAC: Growing Economies Still Creating Demand
The ripple effects of China's economic deceleration have been felt across the APAC region, influencing market dynamics and trade flows. Neighboring countries that rely heavily on China for raw materials and chemical products are experiencing some cost fluctuations. However, APAC’s chemicals industry continues to be buoyed by growing middle classes and urbanization with Southeast Asia and India leading this. Growth in APAC’s chemicals industry will be 5.2 percent in 2024 compared to 3 percent worldwide, according to Atradius.
When it comes to sustainability, it is Singapore that is taking the boldest steps in the region. As a city-state with no natural feedstock and little land, it is leveraging its strategic geographical location and ease of doing business to be a first mover in the energy transition.
One of Singapore's most significant initiatives is the continued imple- mentation of a carbon tax. Wey-Len Lim, executive vice president of the Singapore Economic Development Board, explains, “The carbon tax in Singapore was introduced not as a revenue-generating tool but as a price signal to encourage companies towards sustainable practices and energy transition.”
The revenue generated from the carbon tax is reinvested, for ex- ample, through the Resource Efficiency Grant for Emissions, into the industry to support energy efficiency and emission reduction projects, directly contributing to the industry's sustainable transition.
This strategic focus on sustainability, cou- pled with our agility in meeting customer needs, exemplifies our proactive stance on environmental stewardship and our capacity to deliver tailor-made, sustainable solutions rapidly. Lori J. Ryerkerk, CEO, Chair & President, Celanese