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COVID-19 Impact on Chemical Additives Industry

The relentless onslaught of COVID-19 pandemic is wreaking havoc on chemical additives companies. Escalating infections, nationwide lockdowns, and halts in the transportation are creating headwinds in the chemical additives landscape from weak demand due to the outbreak. Expert analysts at FMI are continuously monitoring and responding to changes of events in the chemical additives market space. Some areas that will see growth are chemical additives used in PPE, cleaning solutions, antiseptics, and industrial chemicals. Fertilizer additives are poised for a significant offtake as governments rush to inject security in regional food hubs. Our analysts predict moderate to high impact on chemical additives with recovery expected in near term.

Market Stats

11.2%

Pre COVID-19 2020 Growth Forecast

8.7%

Post COVID-19 2020 Correction

250

Expected BPS Drop

Q3 2021

Expected Recovery

Evaluating Situations – Learning from the Past

COVID-19 Market Effect

Analysing the Historical Patterns

The expected slowdown and possible recession in chemical additives owing to the COVID-19 pandemic is fundamentally different from the great recession of 2008. Whilst the latter originated from financial imbalances that prevailed in the housing sector, the former’s downturn is poised to be a lot shorter and shallower.

Anticipated recovery in demand for chemical additives is likely to exhibit a V-shaped recovery and strong growth in subsequent years. The recession of 2008 in comparison left us doggedly working off the imbalances for a long period of time.

The chemical additives landscape will face ramifications with a bleak outlook for the next two quarters. The market is anticipated to fall 120 BPS, which will exhibit a CAGR 2.6%, down from the expected 3.8% for this year. Value erosion will be high in the first two quarters of the year as infections from the pandemic soar.

However, our experts opine that this will get balanced out from the second quarter as markets gain control over the pandemic. The demand for chemical additives will enter a recalibration period and make a slight recovery in the next two years with the addition of 10BPS. The market will chart a steady course through 2030 and is expected to make a moderate recovery of 50 BPS.

Succeeding Amidst & After the Crisis

The COVID-19 pandemic has severely disrupted supply chains in the chemical additives landscape. Manufacturers can overcome this by proactively monitoring supply chains, sites and warehouses. A stringent appraisal of customer orders, inventory levels will plug loopholes. Near term strategies would include overcoming cash crunch challenges, gaining resilience from lockdowns, and quickly returning manufacturing to scale.

Request the coronavirus impact analysis across industries and markets

Expert Opinion

Sudip Saha, Research Director

Sudip Saha, Research Director

We need to identify and address the immediate challenges that the pandemic is presenting to specialty chemical manufacturing units and take necessary steps to obviate supply chain disruptions. We also need to re-think and re-imagine how the economy will pan out in the coming quarters and how we can re-invent to build scale. Businesses should also be aware of shifts that take place in competitive environment.

Nikhil Kaitwade, Category Head and Research Manager

Nikhil Kaitwade, Category Head and Research Manager

The key to re-building would be to strategize an action plan and tweak decisions as the situation evolves over the next two or three months. Economic activity is anticipated to normalize in the latter half of the year in chemical industry landscape. This arena will not be as heavily impacted as tourism and airlines, which have taken a severe hit. High raw material prices may squeeze margins of chemical additive manufacturers but this will even out over the next one to two years.