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2023 chemical industry outlook

Finding the formula for chemical industry transformation

The disruption of 2022 has helped the chemical industry position itself to lead the coming materials transformation. But with macroeconomic indicators such as volatile energy prices, higher costs, and the fracturing of trading patterns signaling uncertainty in the global economy, how can companies plan to overcome potential headwinds and position themselves for a bright long-term future? Our 2023 chemical industry outlook explores four trends that are top of mind for business leaders in the year ahead.

Materials transformation is coming—2023 could set the stage

The racecourse on which US chemical companies run has been dramatically altered in 2022, setting the trajectory for the next major change and greater sustainability in the chemical industry. This evolution will likely continue in 2023 amid an emerging new industrial policy in the United States, evolving consumer preferences, supply chain challenges, and economic uncertainty. But chemical companies have stewarded a good “war chest” for these uncertain times. As an industry, businesses in the United States have performed well in recent years.

Chemical producers can play a crucial role in effectively tackling climate change. Chemicals and materials are ubiquitous in a modern-day lifestyle, and for chemical producers to operate in an evolving global geopolitical landscape, there will be a strong need to make fundamental changes, either proactively or reactively. In the coming year, chemical companies will likely have to plan for challenges—from global inflation to oil price volatility. This combination could make 2023 an important year for a strategic shift. Explore the four trends below that will likely influence the direction of the industry over the next 12 months.


Four chemical industry trends to watch

Integrating innovation and sustainability to move beyond abatement

Global chemical producers need to focus on their stated objectives of emissions reduction to meet their 2030 goals, starting with Scope 1 and 2 emissions and, in many cases, driving noticeable reductions across Scope 3 as well. And to impact the larger ecosystem, these efforts should reach beyond abatement to harness material or product alternatives on a larger scale. Achieving desired outcomes and results, however, will likely require additional capabilities and approaches beyond those necessary for the invention of new materials.

Near-term portfolio action positions the industry for long-term transformation

Heading into 2023, the chemical industry is in a strong financial position. The year ahead could be a turning point when companies emphasize the long-term viability of product portfolios in the context of sustainability in a move toward asset-oriented deal-making. This trend will take longer to scale, given the uncertainty around feedstock prices, energy demand, supply chain, and end-market demand, affecting the appetite for strategic buyers. But the foundations for this shift are being laid in the current environment.

Rearchitecting to balance costs, carbon footprint, and resilience

Over the coming year, reevaluating supply-chain structures will be critical for producers to meet the scale of changes required for the next decade. Overall, supply chains will need to balance costs and carbon footprint while managing resiliency—a tough act that will require companies to consider strategies markedly different than those of the past three decades.

Emerging technologies drive value chain improvements and sustainability

Digital implementation is changing the decision-making landscape of chemical producers. However, the near-term focus will be on stabilising current platforms and capabilities, with the intent to monetise the current investment pool before expanding to newer areas. Producers may increasingly use digital technologies to empower materials innovation and expedite low-cost formulations by evaluating, optimising and assimilating ingredient recipes and domain knowledge.

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