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Future of chemical industry surrounded by dark black clouds
06 Jan '09
2 min read
The chemical industry is facing a tough period since the last few months and more so since the unfolding of the economic crisis and the resultant slowdown in all major consuming sectors of chemicals across the globe. A sharp fall in demand across the board and a squeeze of credit is taking its toll on this once vibrant sector.
One of the biggest chemical majors in the world; BASF had recently announced closure of a number of its worldwide plants and now come reports of the world's third largest chemical company; LyondellBassel contemplating filing for Chapter 11 bankruptcy and thereby joining the long list of companies who have either cut production or totally shut down plants.
Dow Chemicals, the largest chemical company in the US had earlier announced laying-off 5,000 jobs in the process of closing 20 plants in an effort to face the crisis head on. DuPont also announced job cuts and put on hold a proposed expansion plan in China. Major takeover or joint venture deals also have been put on the backburner just like the Hexion and Huntsman deal.
Dow is feeling the blues the most since its deal with the Kuwait based company was scuttled, as it was looking forward to using the proceeds of the deal to repay its debt from the takeover of the , Rohm & Hass. Now it looks likely that the deal could be under pressure. The most recent merger of Lyondell and Bassel in end 2007 may also face the music.
The only companies, who look like cruising through the crisis, seem to be the specialty chemical players rather than those who deal in mass consumption chemicals as they cater to a niche market due to which they are able to withstand pricing pressure compared to companies in to manufacturing of commodity chemicals.
No one is willing to lay a bet on the time frame on the reversal of this slowdown trend, but experts say that if the recessionary trends continue for long, a lot of small and medium size companies could get wiped out for good, with the big players able to withstand the pressure only and only on the strength of their balance sheets. But for how long is the million dollar question everyone's lips.
One of the biggest chemical majors in the world; BASF had recently announced closure of a number of its worldwide plants and now come reports of the world's third largest chemical company; LyondellBassel contemplating filing for Chapter 11 bankruptcy and thereby joining the long list of companies who have either cut production or totally shut down plants.
Dow Chemicals, the largest chemical company in the US had earlier announced laying-off 5,000 jobs in the process of closing 20 plants in an effort to face the crisis head on. DuPont also announced job cuts and put on hold a proposed expansion plan in China. Major takeover or joint venture deals also have been put on the backburner just like the Hexion and Huntsman deal.
Dow is feeling the blues the most since its deal with the Kuwait based company was scuttled, as it was looking forward to using the proceeds of the deal to repay its debt from the takeover of the , Rohm & Hass. Now it looks likely that the deal could be under pressure. The most recent merger of Lyondell and Bassel in end 2007 may also face the music.
The only companies, who look like cruising through the crisis, seem to be the specialty chemical players rather than those who deal in mass consumption chemicals as they cater to a niche market due to which they are able to withstand pricing pressure compared to companies in to manufacturing of commodity chemicals.
No one is willing to lay a bet on the time frame on the reversal of this slowdown trend, but experts say that if the recessionary trends continue for long, a lot of small and medium size companies could get wiped out for good, with the big players able to withstand the pressure only and only on the strength of their balance sheets. But for how long is the million dollar question everyone's lips.
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