North American chemical producers who rely on natural gas feedstocks are in a strong industry position heading into 2011, says a report released today from Booz & Co., Inc. (New York; www.booz.com).
The 2011 Chemicals Industry Perspective report discussed the overall improved state of the North American chemical industry, pointing out that the industry is experiencing smaller numbers of plant closings, a stronger focus on growth initiatives and increased mergers and acquisitions activity. However, the report argues that the recovery has favored companies who use natural gas, rather than oil as feedstock for their products. This assessment is supported by data from the Energy Information Administration, which cite natural gas as a key feedstock for the next two decades at least (see story).
In many cases, chemical companies produce a wide range of gas-based and oil-based products, and so can compete in more than one of the four categories that the Booz report has set up to analyze: gas-based commodity, gas-based specialty, oil-based commodity and oil-based specialty producers.
Gas-based commodity chemical makers have an opportunity in the near future to purchase smaller U.S. companies to gain scale efficiencies, the Booz report says, because the North American petrochemical sector has excess capacity.
Also in an advantaged position, gas-based specialty producers “can afford to be more aggressive in the market and focus on innovation,” the report says.
Meanwhile, oil-based chemical producers in North American are at a competitive disadvantage with regard to feedstock cost compared to their Middle East counterparts. “The key question facing these companies is how to fix underperforming businesses and return to profitable growth,” the Booz report states. Recommendations for moving forward include putting more effort into operational excellence, retooling assets to manage more feedstocks, and investing in supply-chain improvement programs.