Post-2020 Perspectives

Counting profits and losses

As new waves and new strains of the virus meet uneven vaccination programs globally, hopes for a return to a pre-Covid sense of normality fade. But, while the previous year was marked by (often erratic) reactions to unfolding events, 2021 affords clearer before-and-after-2020 perspectives.

Upstream in the value chains of most industries, the global chemical sector offers a concise comprehension of 2020: by end-market application, the healthcare, pharmaceuticals, nutrition, and electronics were the most Covid-resilient industries. Meanwhile, the automotive and aviation sectors were - and continue to be - the most immediately and severely hit by the fall in demand.

Performance was also mixed across industrial and consumer lines - the furthest from the customer and more commoditized, the greater the impact for the price-sensitive base chemicals. In the commodities sector, including plastics, coatings, rubbers, and fertilizers, the pandemic accentuated a pre-existing tight margin environment caused by oversupply imbalances for products like polyethylene, as well as trade tariffs imposed between the United States (US) and China.


Reversely, highly specialized players with premium products in the pharma or healthcare space experienced strong growth. For example, SEQENS, a producer of solutions for gel sanitizers, aspirin, and paracetamol formulations, as well as new molecules for the Covid vaccine, overperformed across all business units.

Overall, total global chemical revenues are estimated to have dropped by 9% in 2020, and expect a rebound of 10% this year, according to the American Chemistry Council. The bounce-back is aligned with global economic recovery; the IMF is projecting global growth at 6% for 2021, and India and China head the estimates with 12.5% and 8.4% respectively.

Asia Pacific (APAC) is the biggest market for the chemical industry, accounting for over 35% of the specialty chemicals market by revenue, and over half of the global market of petrochemicals. This region stood out as the most resilient during the pandemic, and is the quickest to recover. Nouryon, the new standalone specialty chemicals entity formerly part of AkzoNobel, shared that APAC registered profits. Evonik similarly reported only a 1% drop in sales in the region - its best performance globally.

““In the near term, there is no running away from the specter of Covid-19, though there continue to be new pockets of opportunity, particularly in the specialty chemicals field, where there has been a wave of interest from MNCs looking at Covid-resilient areas like nutrition, food and beverage, hygiene products, and also electronics and semiconductor sectors.”

Ow Kai Onn, VP & Head, Chemicals and Materials, Economic Development Board (EDB)

What stays, what goes

Regardless of the star sectorial or even geographical performers, these results are not deterministic of the outlook going forward. Siew Tin Lim, CEO of Jebsen & Jessen Ingredients, a Singapore-based chemical distributor with a portfolio in both commodity and specialty markets, assesses the next step with care, understanding that the pandemic interrupted regular cycles in the chemicals business: “In the coming months, we will be closely analyzing the markets and looking at current indicators to decide the long-lasting megatrends we should capitalize on.”

The main task for the industry at large will be to correctly identify what are temporary, lasting or permanent, accelerating or decelerating changes. This appraisal cannot be easy, since it depends on the success of vaccination campaigns, shifting consumer behaviors, unpredictable government reactions, and the mobilization of different verticals - be it pharma or automotive. With the imbalanced global recovery, geopolitical headwinds still on the horizon, and supply chains vulnerable to disruptions, the crisis is not over.

In Singapore, strict stay-at-home and movement restriction measures known as circuit breakers, together with extensive testing and contact tracing for disease surveillance and the freezing of international travel, worked commendably well in containing the spread of the virus and restarting the economy, but they may not be enough, given the country’s exposure to external threats.

From the onset, Singapore was the second-most connected place to Wuhan, after China itself, with 3.4 million people traveling between the two cities annually according to WHO. Singapore is also one of the most trade-dependent countries, with 319% of trade as a proportion of GDP, which means that the chemical industry will fluctuate in tune with the country’s biggest trade partners. Finally, Singapore heavily relies on foreign workers - about 350,000 people used to cross the border daily from Malaysia to Singapore. Though the chemical industry jumped to a 12.3% growth rate by Q4 2020, it is easily weakened by global instability.


“Outside of the obvious global demand reduction in 2020, the stalling of container movement and changes in the refinery output impacting certain key industry raw materials were the biggest disruptions the industry had to manage.”

Sean Spencer, VP and MD, Afton Chemical Asia Pacific

What’s more, the full extent of the global recession and the corporate distress is not yet fully visible, salient effects creating further unpredictability. When the forbearance on loan repayments expires, subdued bankruptcies and the share of non-performing loans will indicate how far, and how deep, the marks of 2020 stretch. Mismatches in the labor market, as some workers may not be able to return to former jobs, but also questions about the relevance of some business models or the structure of global value chains, will also be brought to the surface.

Putting aside the economics, the pandemic also created a deep societal change, affecting how people work, interact, relax, spend, and what they care for. According to Accenture, 79% of consumers will seek products that are healthier and better for the environment.

Another legacy is the growing reliance on digital tools. From a “nice-to-have”, digital platforms have turned into a necessity. The pandemic created the perfect set of conditions to propel the use of digitalization and drive investments in automation. But digitalization may do more than allowing companies to close the physical gap created by lockdowns. Digitalization can propel international expansion unhindered by geographical limitations: “We see more enterprises pivoting into new businesses made available through e-commerce platforms. I believe the digitalization process will continue in the new business environment, driving overseas growth,” said Lee Pak Sing, assistant CEO, Trade, Connectivity & Business Services at Enterprise Singapore (ESG).

In 2020, business continuity mostly consisted of reactive measures, not least with a certain degree of defensiveness; but enough time has now passed for chemical players to move into a stage of acceptance and look at long-term business continuity planning. Besides reading how Covid-19 affected balance sheets, portfolios, or global supply chains, this long-term-thinking exercise also entails situating these players within a wider timeframe that positions them wisely within megatrends. With the global population set to increase to 10 billion people by 2050, the global chemical industry is supported by a strong demographic factor that secures its long-term growth. On the back of this projection, global chemical production is expected to double by 2030, as suggested by UNEP.

Image courtesy of tawatchai07 on Freepik