Deloitte outlook for global chemicals industry positive, with revenue growth expected in 2011

Beijing, 21 June 2011— A new report from the Deloitte Touche Tohmatsu Limited (DTTL) Global Manufacturing Industry group, Compass 2011: Global chemicals sector midyear outlook, indicates that the chemical industry is continuing to recover, with revenue growing at a compound annual growth rate of 7.9 percent over the near term. Higher prices and improving global economic conditions, leading to increased demand in the end markets for chemical products, have contributed to the revenue growth. This trend is expected to continue into the second half of 2011.

Contributing to the upswing was the increased global sales in the automotive industry, which is a significant market for chemicals because of the high volume of products used in the development process. Other end markets that have helped drive revenue so far in 2011 were consumer electronics and pharmaceuticals.

Looking ahead, China is anticipated to dominate the global chemical scene with the highest percentage revenue growth for the remainder of 2011. Markets such as India, Brazil, and Korea will follow China closely. While demand in the United States and Europe is expected to be moderate, higher prices will likely translate into stronger revenues for chemical companies in these markets this year.

“China is likely going to be a key market for the industry. As domestic demand increases and Chinese chemical companies shift to produce more value-added products, profit margins will likely rise,” says Tim Hanley, Global Chemicals sector leader, DTTL Global Manufacturing Industry group.

The DTTL Global Manufacturing group’s outlook also anticipates oil prices to continue to trend higher. “The current 30 percent spread between oil and natural gas prices per barrel in the United States is creating market advantages for chemical companies with production facilities that are capable of feedstock flexibility,” adds Hanley. “In the long term, the sustainability of this advantage will likely be dependent on shale gas permitting, supply chain infrastructure development, and demand for natural gas in other markets.”

Merger and acquisition (M&A) activity is a bright spot for the global chemicals sector, with 2011 deal volumes and values likely to exceed pre-recession figures. China and other developing countries will likely be targets for M&A activity in both the chemical and plastics sectors, which will likely accelerate the rate of deals in 2011.

According to the report, sustainable housing and agriculture are two global megatrends in play this year for chemical companies looking to gain a competitive advantage. Chemical players that are proactively looking to capitalize on megatrends are now focusing their long-term business strategies on solutions that are critical to society. Therefore, research and development (R&D) is a significant way to bring megatrend solutions to market. More chemical producers are recognizing the need for collaborative innovation with other value chain constituents that are just as critically important to the development of solutions for a growing global economy, energy, mobility, urbanization, and climate change.

The global chemicals sector is well positioned for the remainder of 2011 to not only hit revenue forecasts, but also to create opportunities to enhance growth in the future.

To access Compass 2011: Global chemicals sector midyear outlook, please visit www.deloitte.com/manufacturing.

About Deloitte

Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee, and its network of member firms, each of which is a legally separate and independent entity. Please see www.deloitte.com/about for a detailed description of the legal structure of Deloitte Touche Tohmatsu Limited and its member firms.

Deloitte provides audit, tax, consulting, and financial advisory services to public and private clients spanning multiple industries. With a globally connected network of member firms in more than 150 countries, Deloitte brings world-class capabilities and deep local expertise to help clients succeed wherever they operate. Deloitte’s approximately 170,000 professionals are committed to becoming the standard of excellence.

Deloitte Touche Tohmatsu Limited Global Manufacturing Industry group

The Deloitte Touche Tohmatsu Limited (DTTL) Global Manufacturing Industry group is comprised of more than 750 member firm partners and 12,000 industry professionals in over 45 countries. The group’s deep industry knowledge, service line experience, and thought leadership allows them to solve complex business issues with member firm clients in every corner of the globe. Deloitte member firms attract, develop, and retain the very best professionals and instill a set of shared values centered on integrity, value to clients, and commitment to each other and strength from diversity. Deloitte member firms provide professional services to 84 percent of the manufacturing industry companies on the Fortune Global 500®, including 90 percent of the 30 global automotive companies. For more information about the Global Manufacturing Industry group, please visit www.deloitte.com/manufacturing.

Last Updated: