Impact of Coronavirus (Covid-19) Pandemic on the Bulk Chemicals Industry

The coronavirus pandemic has affected one of the most important sectors of the global economy –Chemicals Industry which contributes around 7.0 % to the global GDP and provides employment to around 120 million people (including directly and indirectly). The production of bulk chemicals has declined across the globe, due to lower demand from the end-use industries such as coatings, agriculture, consumer durables, electronics, healthcare, food processing, construction, and automobile. Over the past decade, China has drastically increased production capacity of commodity chemicals in the country and has become one of the largest exporters of commodity chemicals to the world. Decline in production of chemicals in China has created major disruptions in the supply chain & trade imbalance of commodity chemicals. In March, the National Bureau of Statistics of China stated that the manufacturing of chemicals in China’s dropped by 21% in the first two months of 2020, compared to the year-ago period, and profits slumped by 66%. This is further coupled with declining feedstock prices, which has resulted in the change of the price trend of various bulk chemicals such as ethylene, propylene, propylene oxide, benzene, to name a few. In the U.S., Polyvinyl Chloride (PVC) was traded at US$ 620-630 per ton in the first half of April 2020 down by 27% from US$ 840-860 per ton in March 2020.

According to Coherent Market Insights, the current crisis also defined as uncharted territory has created operational & supply chain disruptions, lowered productivity among workforce, and the unrelenting trend is expected to tighten credit markets in the short run till December 2020. Post pandemic, Coherent Market Insights anticipates change in the dependence of imports from China, which will lead to restructuring in the supply-chain of commodity chemicals. South-East Asian countries and India are expected to be the most preferred nations wherein major manufacturers can shift their production facilities.