Chemicals

Chemicals CEOs say foreign markets have the edge over domestic ones this year

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51%

of chemicals CEOs expect China to be one of their strongest markets this year.

Like their peers in other sectors, chemicals CEOs are a bit less optimistic this year. They’re worried about threats like exchange rate volatility and rising energy and raw materials costs. But they’re working hard to build organisations that can thrive despite disruptions. How are they doing it?

Growing abroad
In most industry sectors, growing domestically is seen as the best route to success this year. Not so for chemicals CEOs. They’re actually slightly more optimistic about their company’s chances in foreign markets, rather than on their own home turf. That’s probably why more of them say their company is using international experience and global mobility to prepare future leaders.

New deal opportunities also rank higher than domestic growth on chemicals CEOs’ growth list. More chemicals CEOs say their companies completed a cross-border M&A over the past 12 months (30% vs. 19%). And the number jumps even higher when it comes to plans for the coming 12 months, with nearly two-fifths planning a transaction. JVs and strategic alliances are even more popular with chemicals CEOs. Relatively few, just 17%, expect cross-border deals to include North America though.

With 40% of chemicals CEOs saying manufacturing capacity is a top three investment priority over the next 12 months, far more than across the sample as a whole, some of those deals may revolve around getting more capacity where it’s needed.

Focusing on China
One place where capacity expansions are certainly planned is China. 61% of chemicals CEOs with key operations there say building manufacturing capacity is one of their primary objectives this year – more than double the number across the sample as a whole. Indeed, the chemicals sector stands out as the industry with arguably the strongest focus on China. More than half of chemicals CEOs say it will be a top market this year; that’s twenty points higher than the overall average and higher than any other sector.

Making innovation the #1 priority
Chemicals CEOs have the strongest focus on innovation of any industry we surveyed. Three-fifths of them said R&D and innovation is one of their top three investment priorities over the next 12 months – almost double the overall average, and significantly more than other innovation-driven sectors like pharmaceuticals & life sciences and technology. More than three-quarters of them also say they’ll make changes to increase R&D and innovation capacity. A lot of what’s driving innovation at chemicals companies is linked to customer needs.

Innovation is one way that chemicals companies stay ahead of the competition. Many chemicals CEOs are keeping a close watch on what industry peers are doing. 61% say that industry competitors and peers have a significant influence on business strategy – again, far more than the overall average of 45%.

Developing more environmentally-friendly solutions
Some of the sector’s most powerful innovations are helping other sectors lower their carbon footprint. But chemicals production itself is also energy intensive, uses primarily fossil fuels as a raw material, and requires other natural resources like water too. Many chemicals executives are keenly aware of the need to reduce the sector’s overall environmental footprint. Two-thirds plan to increase their focus in the coming 12 months. And looking forward over the next three years, 38% also say they’ll make bigger investments in addressing the risks of climate change and protecting biodiversity. In both areas they’re ahead of the overall average.

Building robust global supply chains
Supply chain disruptions are a potential headache for many chemicals CEOs. 42% worry that they could hamper growth. One way nearly two-thirds of chemicals CEOs are coping is by diversifying their supply chains and working with more partners across varied geographies.

 
These interviews contain the opinions and views of the CEOs interviewed, and do not necessarily represent the opinions and views of PwC.

 
 

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