After having taken rigorous restructuring measures in 2009 and with improving economic conditions and inventory re-stocking during 2010 , a number of chemical companies reported significant improvements in their 2010 results. However, uncertainties remain in the economic environment. Hence, cost reduction and process optimization remain high on the agenda of chemical companies.
Whilst the global economic downturn has decimated demand for chemical products, it offers an ideal opportunity for chemical companies to realign their business models to the new economic reality.
Chemical companies in Europe need to make hard honest choices now to rationalize those unprofitable facilities that cannot compete with newer, more efficient plants being built outside Europe and instead, ruthlessly focus resources and investment on those chemical clusters which do remain competitive. Additionally, they should also try to capitalize on their historic advantage in innovation to stay ahead of the competition from the East, especially in terms of developing sustainable solutions that will undoubtedly become increasingly in demand over the next few years.
China is after the US the world's second biggest consumer of chemicals, and chemical makers have long derived benefits from the low cost of labor, cheap infrastructure, favorable government policies and an immense market. Chinese companies are collaborating with Middle Eastern companies as part of aims to become self sufficient in sourcing petrochemicals and raw materials. China continues to also partner with foreign multinationals in order to develop domestic technologies and move up the value chain.
With an abundant supply of cheap oil and gas, reserves and proximity to the emerging markets in Asia, the Middle East is leveraging its strength to become a global petrochemicals producer. Middle Eastern companies are seeing advantages in buying rather than building to gain access to Western technologies and markets. European firms should actively seek beneficial joint ventures and strategic alliances that provide access to both cheap Middle Eastern feedstocks and the burgeoning Asian markets.
KPMG’s chemical practice combines broad technical expertise with deep industry knowledge to support chemical companies in areas such as:
- Tax compliance outsourcing, tax efficient supply chain management and transfer pricing
- Sustainability reporting, REACH support and Carbon Emission Advice
- Transforming the finance function
- Cost optimization
- Legal entity rationalization
- Shared services and outsourcing
- Standardization of IT systems / processes
- Business intelligence and improved forecasting
- Treasury and working capital management
- M & A. acquisitions and divestments, chemical feasibility studies
- Contract compliance e.g. outsourcing arrangements, licensing / royalties, R&D alliances and Joint Venture audits.