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Companies in the chemical industry must establish better supply networks
Companies in the chemical industry must establish better supply networks
The chemical industry is changing rapidly. Over the past 20 years, multinationals have been integrating their supply chains so that some products can only be purchased from one or two countries. Lower costs, higher production, and stricter environmental regulations in developed countries have all contributed to this shift.

Companies in the chemical industry must establish better supply networks

The chemical industry is changing rapidly. Over the past 20 years, multinationals have been integrating their supply chains so that some products can only be purchased from one or two countries. Lower costs, higher production, and stricter environmental regulations in developed countries have all contributed to this shift.



For example, at present, China's output accounts for about 39% of the global chemical industry. It is estimated that by 2025, China's chemical industry will grow at a compound annual growth rate (CAGR) of about 5%, and the total sales will reach US $4.85 trillion. In contrast, over the same period, the compound annual growth rate of the United States was about 2.7%, that of Germany was 1.3%, and that of Japan was less than 1%.



Business leaders are well aware of the risks of over reliance on a single or limited market for raw materials and intermediates. This situation has led some multinational companies to rethink the supply chain and diversify it, which represents a series of new challenges. Chemical industry enterprises must establish a broader and more sound supply network, and look beyond any country. As many governments become more environmentally conscious, businesses must focus on removing the most polluting substances and processes from their product mix. Still, they have ways to expand their market share and profitability.



To prepare this report, PwC's strategic consulting business strategy & interviewed executives of five leading global chemical companies with rich experience in Global trade, three of which are in Germany, one in China and one in the United States. Through these interviews and industry observations, we propose measures that global companies can take to manage changes in the supply of chemicals.



In the short term, these measures include ensuring supply, using alternatives and resorting to financial buffers. In the medium and long term, the time window for a company to create a favorable competitive position is limited. Suggested measures include establishing resilient supply chains, reviewing product portfolios and business units, and being vigilant.