Perspectives: From the Editor

Chemicals CEOs' Optimism Grows

New survey shows executives' outlook has become even rosier.

By Mark Rosenzweig, Editor In Chief

The 17th Annual Global CEO Survey, released in late February by PricewaterhouseCoopers (PwC), New York City, indicates that chief executive officers of chemical manufacturers worldwide are even more upbeat about the prospects for their companies than they were last year ("Chemicals CEOs Convey Optimism.")

This year, 56% of chemicals CEOs (compared to 44% of all executives responding) believe the global economy will improve over the next twelve months, while 42% of the chemicals executives expect the economy to remain the same. PwC calls this a dramatic change from last year when only 14% of chemicals executives foresaw an upturn. In addition, 98% of the chemicals CEOs anticipate their company's revenues growing over the next three years (versus 94% last year).

Much of the growth should come from the U.S., according to many of these executives. More chemicals CEOs (44% versus 30% of the overall respondents) rank the U.S. as one of the most important nations, excluding their home country, for their growth prospects over the next twelve months — displacing China, which was most cited in last year's survey. In addition, 41% (versus 30% of overall respondents) say their companies are planning a merger, acquisition, joint venture or strategic alliance in North America. PwC reckons the availability of low-cost gas from growing shale gas production in the U.S. likely contributes to the appeal. (The survey is just the latest positive report on U.S. prospects. For instance, our January cover story "U.S. Chemicals Industry Gets into Better Tune,"  stressed the outlook for U.S. chemical makers is getting brighter and noted that America has emerged as the place to invest in chemical projects.)

"…The U.S. is where we're doing most of our investing over the next few years," Jim L. Gallogly of LyondellBasell Industries, Rotterdam, The Netherlands, told PwC. "The reason for that is the boom in shale gas. Because of shale gas, we have cheap natural gas feedstocks and, as a result, our products are generally cheaper than our competitors' products in all regions except the Middle East."

China ranks number 2 on the list of growth markets (cited by 40% of chemicals CEOs), followed by Germany (21%) and Brazil (19%). More than 10% of the executives also point to India, Russia and Indonesia as growth markets.

Nearly half (49%) of the chemicals CEOs plan to increase head count this year, up from 43% last year. On the other hand, 23% expect to decrease head count.

Most chemicals CEOs (91%) agree that it's important to measure and try to reduce their company's environmental footprint. In addition, 61% believe resource scarcity and climate change will transform their company's business. And 51% (compared to 41% of all respondents) think supply chain disruption could threaten growth. In response, 86% now are taking steps from developing supply-chain strategies to implementing changes (versus 64% of overall respondents), with 33% saying such moves are underway or finished. And 47% of the chemicals executives (versus 30% of overall respondents) note their firms already have started or completed investments to change production capacity to cope with global trends. "This may partly reflect increasing interest in shifting some production from oils to biofuels or natural gas in response to resource scarcity and climate change. But shifts in demand are probably a factor, too," states PwC.

A much higher percentage (72% versus 57% last year) of chemicals CEOs worry about over-regulation. The percentage citing concern about energy and raw material costs rose to 82% from 75% last year; PwC notes this uneasiness is attracting many chemicals producers to regions with lower potential feedstock costs, particularly the U.S. In addition, 72% (versus 52% last year) express apprehension about the availability of people with key skills.

The overall survey, accessible at www.pwc.com/gx/en/ceo-survey/index.jhtml?WT.ac=vt-ceosurvey, includes inputs from 1,344 executives in 68 countries; responses came from 57 chemicals CEOs from 21 countries.


rosenzweigweb.jpgMARK ROSENZWEIG is Chemical Processing's Editor in Chief. You can e-mail him at mrosenzweig@putman.net

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