化工行业现状：是时候采取大胆行动、推进创新

December2024

ChemicalsPractice

Thestateofthe

chemicalsindustry:

Timeforboldactionandinnovation

Afteryearsofoutperformingtherestofthemarket,thechemicals

industry’sreturnsarelagging.Toreversethistrend,theindustrywillneedtorethinkhowitcreatesvalue.

byChantalLorbeerandObiEzekoyewithFelixRompen

Formostofthepast20years,thechemicalsindustryhasgeneratedreturnsabovethoseofthebroadercapitalmarkets.1However,afterreachingrecordheightsduringtheCOVID-19

pandemic,thechemicalsindustrymaybefacinganewera:globalindexeshaveincreased24

percentperyearsincelate2022,whilechemicalsstocksgrewlessthan2percentperyearoverthesameperiod.2

Itremainsuncertainwhetherthecurrentdynamicswillleadtoareturntothecyclesthatthe

industryexperiencedoverthepastseveraldecadesorwhetherthefactorsbehindtoday’s

conditions—overbuiltcapacity,highenergyprices,regionalization,inflation,workforceand

demographicshifts,andnewregulations—representlastingstructuralchangesthatwillreshapethechemicalsindustry.

Inthisarticle,wetakeourannuallookatthechemicalsindustry’sperformanceandthefactorsthatmaybeinfluencingitscurrenttrajectory.Wealsoproposequestionsthatindustry

stakeholderscouldconsiderastheynavigatetoday’scompetitivelandscape—onethatcallsoncompaniestofocusmoreoninnovationandmakeboldermoves.

Anewperiodforthechemicalsindustry

Inpreviousarticles,3weoutlinedthereasonswhythechemicalssectoroutperformedthe

broadermarketoverthepast20years:demandgrowthinAsia,improvementsinproductivity,accesstonewfeedstockssuchasshalegas,andfavorablepositioninginthevaluechain.A

closerlookshowsthatthestrongestperformanceoccurredinthe2008–11and2015–17timeperiodsandalsoduringtheCOVID-19pandemic.Theperiodfrom2003to2021deliveredtotalshareholderreturnsof11percentperannum;ROICincreaseto14percent,from8percent;5

percenttop-linerevenuegrowthperyear;andaseven-totenfoldmultipleexpansion(EV/EBITDAFY+2).

Butformanychemicalsexecutives,theyearssince2022havebeenthemostchallengingoftheircareers.Reversingthelong-termtrend,thechemicalssectorhasunderperformedthebroaderstockmarket(exhibit).

Partofthisoutcomeisattributabletosteepsharepricedeclines(–12percentperyear)amongChinese-listedchemicalscompaniesandtoglobalindexesbeingbuoyedbyoutperformingtechcompanies.Evenwhenadjustingforthesefactors,thegapremains.

Theforcescontributingtotheindustryslowdown

Thereareseveralpotentialreasons—withbothshort-andlong-termreach—forthechemicalsindustry’slaggingperformance.

1MSCIWorldIndexFactsheet,November29,2024.

2CorporatePerformanceAnalyticsbyMcKinsey;S&PGlobalMarketIntelligence.

3ObiEzekoye,ChantalLorbeer,SiddharthPeriwal,andFelixRompen,

“Chemicalsandcapitalmarkets:Regionaldifferentiation

,”McKinsey,September18,2023;“

Chemicalsandcapitalmarkets:Growingsustainably

,”McKinsey,April22,2022;ObiEzekoyeandChantalLorbeer,

“Chemicalsincapitalmarkets:Temporarysetbacksornewdisruptivetrends?

,”McKinsey,November14,2019.

Thestateofthechemicalsindustry:Timeforboldactionandinnovation2

Thestateofthechemicalsindustry:Timeforboldactionandinnovation3

Exhibit

Thechemicalssectorisnolongeroutperformingthemarket.

chemicalssectorTSRComparedwithMSCWorldIndex,2003-24,'index(100=Dec2003)

ERA1

performanceinlinewithoverallmarket

ERA2

chinaexpansionandtheriseofunconventional

feEdstocksinNorthAmerica

ERA3

COVID-19

ERA4

DEstocking

700

600

500

400

300

200

100

700

600

500

400

300

200

100

20042006200820102012201420162018202020222024

TSRCAGR2.213.25.91.8

byera,2%0.011.85.424.5

1weightedmeanofTSR,yearoveryear.chemicalssectorsamplesize(n=673companies).

source:corporateperformanceAnalyticsbyMckinsey;S&PGlobalMarketIntelligence

Mckinsey&company

Thefollowingareamongtheshort-termdrivers:

—EnergypricesinEurope(chemicalcompaniesbasedinEuropeaccountforalmost30

percentofoursampleset)remainhigherthaninprepandemicyears.

—Thepandemicdepletedchemicalstockpiles,whichthenneededtobereplenished.Thisdestockingandrestockingcycle,compoundedbypandemic-drivensupplychainissues,magnifiedshort-termmarketfluctuations.

—Interestratesandinflation,whichaffectmanydemandcentersforchemicals,suchastheconstruction,automotive,andconsumer-packaged-goodsindustries,slowedchemical

growth.

Thestateofthechemicalsindustry:Timeforboldactionandinnovation4

Weseeearlysignsthatthesefactors,andthenear-termpessimismtheylikelytriggered,couldbeeasing.Buttheindustry’sperformanceremainssignificantlybelowitsprevioustrajectory.

Overthelongterm,severalstructuralfactorspointtolower-than-historicalreturnsforthechemicalsindustry:

—Theindustryisreachingthelimitsoflineardemandgrowth.AsGDPgrows,chemical

consumptiontypicallymatchesorexceedstherateofgrowth.4Butaseconomiesmature,

thiscorrelationweakens,andthecurveflattens.Anincreasingshareofhigh-growthregionsisarrivingattheflatterpartofthiscurve.Inaddition,somedevelopedregionsfaceGDPandchemicalsindustrydeclinesduetodemographicchanges,energyprices,andregulatory

changes.

—Capacityadditionsoftenledbystate-ownedenterprisesfarexceeddemandgrowth,

especiallyinAsia.Asanexample,inthefiveyearsbetween2023and2028,Chinais

expectedtoaddmorethan20milliontonsofannualcapacityinpolyethylene,whileits

annualdemandisexpectedtoincreasebylessthan10milliontons.Thecountry’s

accelerateddriveforself-sufficiency,fueledbyeconomicandgeopoliticalforces,may

significantlychangetradeflowsinmanyvaluechains.Theeffectofthisshiftisnuancedanddependsontheinterchangeabilityofproductgrades,shippingeconomics,andtariffs.It

neverthelesshas,ingeneral,depressedglobalcapacityutilizationratesandindustrymarginsoutsideChina.Meanwhile,regionswithcost-competitivepetrochemicalfeedstocks,suchastheUnitedStatesandtheMiddleEast,havealsocontinuedtoincreasecapacityand

production,puttingpressureonindustrymargins,especiallyinEurope.

—Fundamentalinnovationappearstohavestalled,andmanyproductsarecommoditizing

fasterthanbefore:thetraditionalstrategyofend-marketapplicationtailoringhasbecomeincreasinglycompetitive.Onereasonforthisisthatchemicalcompanieshavegottenclosertotheircustomersbutnotnecessarilytotheirendmarkets.Theyhavefocusedmoreon

incrementalinnovation,ratherthanondesigningtransformativesolutionsthataddressunmetneedsforendusersandcommandhighermargins.

—Achangingregulatoryenvironment,especiallyinEuropeandtheUnitedStates,adds

anotherlayerofcomplexity.Newregulationshaveaffectedcompliancecostsand

companies’operationalstrategies.Carbontaxesandlanduseregulationshaveputpressureonindustries,furtherimpactingdomesticdemand.

Allofthesefactorshaveledinvestorstolowertheirlong-termexpectations.EBITDAmultiplesdroppedto7.6-foldin2023,from10.5-foldin2021.5

4CorporatePerformanceAnalyticsbyMcKinsey;S&PGlobalMarketIntelligence.

5CorporatePerformanceAnalyticsbyMcKinsey;S&PGlobalMarketIntelligence.

Thestateofthechemicalsindustry:Timeforboldactionandinnovation5

Howchemicalcompaniescancreatevalueinanuncertainworld

Despiteincreasedcompetitivepressure,moderatingindustrydemand,andgeopoliticaland

regionalchange,chemicalcompaniescancontinuetocapturesignificantvalueiftheytaketherightsteps.Thefollowingfiveactionswillbecritical.

Prepareforgrowthwithoutoverextendingoncostsorlosingdisciplineoninventory

Inventorylevelshavefluctuatedwildlyoverthepastfiveyears.Demandcouldincreaseinthe

comingquarters:someexpertsexpectthedestockingandrestockingcyclethathasworked

againsttheindustrytotemper.Butcompaniesmaybewisetomaintaintightcontrolsoncosts

andinventorybecauseevenwithexpectedshort-termgrowth,long-termdemandwilllikely

moderate.Thissituationpresentsauniquechallengetochemicalsexecutives,whoshouldseektoproperlytimegrowthandproductiontothesetrends.Inanycase,effortstomaximizevariablecostsrelativetofixedcostsshouldbeseenasno-regretsmoves.

Continuetoinvestininnovation

Leadingchemicalcompanieshaveconsistentlydevelopeddistinctivesolutionsthataccelerate

andenablebroadermegatrends.Thesesolutionshaveincludedpioneeringlightweightmaterialsinautomotiveapplications,enablingminiaturizationinelectronics,andextendingshelflifein

foodpackaging.Theabilitytoidentifyandinvestininnovationshasproventobeakeydifferentiatorforoutperformersinthissector.

Today,leadingcompaniesareworkingwiththeircustomersandotherstakeholderstooffer

solutionsinpromisingareassuchasrecycledmaterials,themicrobiomeandpersonalized

nutrition,carbonremoval,andadvancedwaterpurification.Additionally,theenergytransition

andtheburgeoningclimatetechnologysectorarespurringinnovationsinthehydrogen

economy(forexample,advancedmembranesandstoragematerials),watertreatmentsolutions(forexample,advancedfiltrationandbioprocessing),andnext-generationbatteries(forexample,sodiumsolidstateandsulfurcathodes).

Whilethesepoolsarestructurallyattractivebecauseoftheirhighgrowthpotentialandhigh

margins,companiesshouldmakearealisticassessmentoftheirstartingpointandabilities

beforejumpingin:historyaboundswithexamplesofcompaniesthatdelvedintoexcitingareaswithoutaclearadvantage,destroyingshareholdervalue.

Chemicalcompaniescoulddowelltoboldlyreallocatecapitaltowardareasinwhichtheyareuniquelypositionedtocreatevalue.Thetypicalprocessofsurgicalbudgetrealignmentsis

unlikelytosuffice.Forsomecompanies,thismaymeanmakinghardchoices—butsuchmovescanstrengthentheirpositioninareaswheretheyhaveuniquecompetencies.

Prepareforstructuralshiftsinselectchains

Marketenvironmentssuchastheseoftenspurwavesofconsolidation,andwebelievethatthereareampleinstancesofchemicalcompanieswithcomplementaryskillsandjointvaluecreation

potential.Inchemicals,wehaveseenlarge-scaleM&Apropeloutsizereturnsinthepast.It

Thestateofthechemicalsindustry:Timeforboldactionandinnovation6

seemsreasonabletoassumethatinacontextwherekeyvaluepoolsareeroding,competitionisintensifying,andcustomerdemandsareeverchanging,industryconsolidation—atleastinsomechains—mightbetheresult.

Leveragetechnologytochangebusiness

Inchemicals,asinallindustries,digitalinnovationsandtechnologyarefundamentallychangingbusinessmodelsandvaluepools.

GenerativeAI(genAI)

isbeginningtomakeanimpacton

back-office,supplychain,andcommercialfunctionsinmanychemicalcompanies.However,

therearesomechemicals-specificusecasesfortechnologythatcouldtransformtheindustryinthecomingyears:

—GenAI-enabledR&D,especiallyinmaterialsdiscovery,processoptimization,materials

optimization,andformulationoptimization,Inthepast,computationalmaterialssciencefeltlikesciencefiction,confinedtouniversitylaboratoriesandwithlimitedpotentialforreal-

worldimpact.Now,recentadvancementsingenAI,machinelearning,6andlow-cost

computingareallowingarapidaccelerationofbreakthroughsinR&D.Inthepastfiveyears,computationaltoolshaveledtothediscovery,withoutbenchtopexperimentation,ofmillionsofalloys,crystals,andmolecules,manyofwhichareexpectedtohavecommerciallyuseful

properties.

—Technology-enabledcommercialgrowth,GenAIopenscompletelynewavenuesto

commercialgrowththroughgen-AI-assistedleadgeneration,newmarketidentification,andnewcross-sellopportunities.Forexample,throughtheuseofnewlydevelopedAItoolsthatsuggestednewapplicationsforitsproductsandnewcustomerleads,aleadingchemicals

companyidentifiedapipelinetwotothreetimesitscurrentbusinessandisexpectinga10to20percentrealrevenueincreaseasaresult.

—Technology-enabledoperationsexcellence,Technology-enabledimprovementsin

operationshavenotyetbeenexhausted.Weoftenseeatleast5to10percentefficiencyincreasesinproductivityinchemicalproductionfacilitiesaftercompaniesadoptadvancedanalytics,sensortechnologies,andpredictivemaintenanceimprovements.

Rethinkengagementacrossgeographies

Previously,chemicalcompanieschosetoexpandgloballyprimarilybyinvestinginChina,

Thailand,andotherAsianmarketsandbylocatingback-officeworkinlow-costcountries.Thisapproachisnowoutdated:investorsarelookingforthenextwaveofvaluecreationwhile

navigatinggeopolitics

.Chemicalsexecutivesshouldthereforeaskthemselvesthefollowingquestionsabouttheirgeographicstrategy:

—Howcanweidentifyandcapturethenextbiggrowthmarkets?

6“

Beyondthehype:NewopportunitiesforgenAIinenergyandmaterials

,”McKinsey,February5,2024;GabrielRSchlederetal.,“FromDFTtomachinelearning:Recentapproachestomaterialsscience–areview,”JPhysMaterials,2019;GaryTometal.,“Self-drivinglaboratoriesforchemistryandmaterialsscience,”ChemicalReviews,August28,2024,Volume124,Issue16.

Thestateofthechemicalsindustry:Timeforboldactionandinnovation7

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