Specialty Additives play a vital role in keeping public health and safety and national security. How is COVID-19 affecting the specialty additives segment, what are the recovery direction, and what are the lessons for the specialty additive industry?

 At the beginning of 2020, the world faced with one of the significant economic, financial, and social crises: the COVID-19 pandemic. While the complete consequences are yet to be fully known, it is the chemical industry, and in particular specialty additives, that have played an important role in keeping public health & safety and national security. As the global pandemic unraveled, the specialty additives industry continued to put forth efforts to meet urgent supply needs to be caused by COVID-19, including increasing the production of chemicals and materials used in disinfectants, hand sanitizers, and personal protective equipment.

 Impact of Coronavirus on the specialty additives segment

 In the recent few months, the specialty additives industry, like others, was focusing on managing safety, operational risks, supply chain disruption, and coping with the financial burden. Thanks to the essential nature of production, chemical manufacturing carried on through the pandemic. Regardless of the circumstances, society still required to eat, drink and wash, and therefore packaging played and continues to play a critical role over the coming months. Therefore, we expect the low impact of COVID-19 on the packaging industry.

As the world continues to be concerned about health and safety, growth in sales of industrial and institutional cleaners, disinfectants, and sanitizers are higher than usual. For example, demand for hand sanitizers and disinfectants in January 2020 increased by a substantial number as compared to December 2019. Therefore, as demand grew, makers of household cleaning supplies and hand sanitizers were rising up production.

Current market conditions are bringing abiding cynical consequences in the construction sector. Disturbance includes canceled and delayed projects, and declining demand for dispensable projects related to entertainment and sports facilities. This impacts demand for necessary construction chemicals such as concrete admixtures, emulsions, waterproof coatings, and many others.

What next for the specialty additive industry?

 As economies are moderately reopening for business, companies are turning their heads towards recovery. There are many various dynamics across industries that will influence the specialty chemicals industry in the mid-term as well as long-term. There remain two main questions unanswered. How will the long-term demand pattern look like? Should we invest in new dimensions of a particular product and in particular markets?

 As of the current situation, we forecast the following developments in the chemical industry over the mid-term (2-3 years). In general, demand for specialty chemicals is expected to return to the historically projected GDP. However, segments which rely on macro trends for their growth are more likely to return to their normal long-term growth course.

 Nevertheless, we still anticipate that chemical companies will continue to grow organically through expansions of their capacity. However, this expansion will become more targeted and follow more well-defined growth opportunities and privatization in the specialty additives space is likely to accelerate as a result of value chain disruptions caused by COVID-19.

 The current economic downturn brings noteworthy disruption which brings extensive pressure on the ability of the chemical sector to remain profitable, cash flow. Companies will be able to survive and thrive during this challenging time only if they will be able to manage and maintain vital cash flow.

The Digital Revolution is widely discussed over recent years. However, it is now when companies will be really pressured to do more with less and will start looking at investing more in information technology, and digital solutions to increase efficiency.