Combating Present Threats in Chemical Industry

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On Friday, crude oil observed an astonishing drift after witnessing a much-awaited gains post the U.S. President Donald Trump’s triumphant tweet on Thursday. This fall in oil prices is an indication of market skepticism over the deal to settle Saudi and Russia price war without emphasizing on the oil production scale of U.S. The situation may force the U.S. shale producers to believe that majors want to dominate the issue so they can remove smaller rivals in the country’s biggest shale basins, including the Bakken and the Permian, in Texas and New Mexico. The efforts made to resolve the price war is of no use until U.S oil production is also examined to stabilize the market in times of concerns over global economic recession. Consequently, Brent crude futures recorded a fall by 3.27 per cent and was assessed at $28.96 per barrel while WTI crude slumped by 4.46 per cent to $24.19 per barrel.

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Monthly Analyst View

ChemAnalyst expects softness in the demand of majority of bulk chemicals and petrochemicals globally in the coming weeks as the coronavirus impact is set worsen the economic situation. However, global consumption of feedstocks, intermediates, polymers, and elastomers is expected to recover by the second half of 2020 assuming that India and China show signs of economic recovery by then. Combined with worst crash in crude oil, and unjust volatility in the markets, there is a significant pressure on creditworthiness around the world. Consumer spending is anticipated to be the major concern as unemployment figures would rise as youngsters fear job losses due to economic downturn.

How chemical Industry will respond to the pandemic?

APAC polyethylene and polypropylene demand is expected to recover from June 2020 onwards. Major producers announced price decreases for feedstocks such as methanol, styrene, benzene, and naphtha in March. Methanol contract prices decreased by about USD 3000 per tonne in Q1 of 2020. Due to plummeting demand, ChemAnalyst anticipates that consumption of ethylene, propylene and butadiene could be impacted in the second quarter of 2020 as there has been a substantial reduction in manufacturing activity across several countries which adopted lockdown measures as to restrict the spread of the coronavirus.

Market Impact Analysis: April

Growing demand of raw materials used for manufacturing of cleaning chemicals, disinfectants and hand wash are saving grace for companies like Dow Chemicals, BASF, Evonik, Arkema and Huntsman. More and more companies have entered into manufacturing IPA, Ethanol, Acetone, Hydrogen Peroxide and Peracetic acid. All major producers are planning to expand their capacities by debottlenecking or changing their product line so that incremental demand of these chemicals can be fulfilled. Diageo and Pernod Ricard have started producing disinfectant from denatured ethanol, glycerol and hydrogen peroxide in their manufacturing facility in Europe and Asia Pacific region.

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“The outbreak of the novel coronavirus in USA, Italy, France, Germany, United Kingdom could be seen as an opportunity than a threat for countries like China and India to consolidate their position in the global chemical & petrochemical market. Companies from these countries should analyze their peers from Europe and North America and explore new markets for better supply-chains.” 

Jaideep Kumar

Senior Analyst – ChemAnalyst

jaideep@chemanalyst.com

Source: ChemAnalyst

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