The global chemical industry enters 2024 with positive prospects. After experiencing the challenges of 2022 and 2023, the industry is entering a recovery phase with moderate growth. Despite the remaining challenges, the combined impact of increasing demand, favorable regulatory frameworks, and a focus on sustainability and innovation will provide a strong foundation for growth and success in the coming years.
In the year-end 2023 report, the American Chemistry Council forecasted global industrial production in 2024 to grow by 1.8%, while global chemical production is expected to grow by around 2.9%.
Looking Back at 2023
The effects of economic recession in Europe, inflation in the U.S., and slower economic growth in the Asia-Pacific region were key factors leading to weakened global chemical demand in 2023. Many chemical companies worldwide reported negative growth in chemical sales in the first three months of 2023. However, companies expressed positive outlooks for Q4/2023, anticipating that the overall decline would ease.
In 2023, the number of jobs in the global chemical industry decreased, although chemical production grew by 1.2% compared to 2022. During this time, several companies had to shut down production lines. For example, U.S.-based Trinseo began closing its styrene plant in the Netherlands due to declining revenue and profits. Multinational chemical company Huntsman reported declining sales and average selling prices for polyurethane, advanced materials, and high-performance products in 2023. Another leading chemical company, Chemours, faced stress, resulting in the closure of plants due to a 14% drop in revenue and a 45% decrease in profits.
In the U.S., chemical demand weakened in the first nine months of 2023 due to the impacts of domestic economic recession and inflation. However, the situation began to improve in Q4, with a slight recovery in demand. The American Chemistry Council forecasts the domestic chemical industry will grow at a single-digit rate from now until 2026.
In Europe, chemical demand significantly declined in 2023 due to weakened demand from all end-use sectors. Meanwhile, high energy and raw material costs, the Russia-Ukraine war, and the worsening impact of inflation and rising interest rates continued to negatively affect the continent’s chemical industry. The European chemical industry is reevaluating supply chain strategies to balance costs, maintain resilience in crises, and follow the path of innovation while meeting carbon emission reduction requirements.
The Asia-Pacific region once again proved to be the world’s growth engine, becoming a beacon of hope for large chemical companies. Although growth in 2023 was moderate and did not meet early-year expectations, the Asia-Pacific region will continue to account for two-thirds of the global chemical market share in 2024.
Prospects for 2024
Chemical companies worldwide enter 2024 with caution, focusing on cost-cutting and improving the efficiency of production processes to offset losses from the previous year.
In 2024, chemical companies will continue on the path of transformation set in 2023, focusing on sustainable development practices, energy transitions, digital initiatives, and innovative technologies to adapt to changing geopolitical environments, demand-driven production, and deglobalization trends.
Concerns about geopolitical issues will lead to requirements for risk management, continuous production, just-in-time supply, and efficient supply chain management. The chemical industry will face different standards across supply chains and economic or business chains. Most chemicals have a multi-regional nature, making intercontinental trade a crucial factor for many companies in the industry.
According to market analysis firm MarketsandMarkets, key sectors of the global chemical industry will grow from $2.265 trillion in 2023 to $2.411 trillion in 2024, with an annual growth rate of 8%. These sectors will open up new opportunities in 2024, with an estimated total value of around $165 billion in the form of new technologies, sustainable solutions, new materials, and energy transitions.
Carbon emission reduction, digitalization, sustainable development, circular production, and energy transitions will be key trends driving the global chemical industry in 2024 and the years ahead.
Source: Chemical Industry Newsletter No. 7 (02/2024)
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