The combination of low feedstock prices, modest but steady demand growth, and low interest rates are creating interesting dynamics in the chemical industry. Some may have thought that the announcement of the Dow-DuPont merger at the end of 2015 would surely be the capstone of a very active cycle for mergers and acquisitions. However, thus far in 2016, the trend seems to be continuing with the Syngenta acquisition by ChemChina the largest deal to date. Now as we await an improved offer from Bayer for Monsanto, all signs are that this consolidation will continue unless we see significant changes in stock prices, interest rates, or the regulatory environment.
Just in case the M & A activity wasn’t excitement enough, the chemical industry in North America is experiencing an investment boom as well. According to the American Chemistry Council, investment linked to low cost natural gas and natural gas liquids (NGLs) like ethane has reached $164 billion. Only about 40% of that investment is underway or completed with at least 55% still to come. With an appealing combination of low input costs and low interest rates, chemicals investments in North America have surged well past anything seen for years. This investment surge as well as the continuing surpluses of some NGLs in North America promises to rebalance parts of the global industry in a way that will take years to play out.
Amidst all the mergers and new capacity investments, many industry veterans know that now is also the time to be making investments to maximize the value of all those capital assets through improved productivity, enhanced production flexibility, and reduced downtime. It’s the best time to take stock of existing IT systems and start planning investments to remain highly competitive in today’s boom and afterward.
- Do you still have normal processes where a spreadsheet is the key tool?
- Are some of your systems outdated?
- Do you have different systems scattered across the company?
- Is the data needed to manage and improve operations across the company readily available and do you have the tools you need to analyze it rapidly?
Now is the time to start addressing those needs. Standardizing systems across numerous facilities, adding or upgrading management and maintenance tools, and developing a consolidated view of operations may not sound as exciting as building new plants, but these investments can drive significant operational improvements - increasing visibility to production and inventories, improving production planning and efficiency and decreasing costly disruptions.
In future blog posts, I’ll take a look at some trends in production and asset performance management systems in chemicals and the benefits that industry participants are seeing.
Industry veterans know that now is also the time to be making investments to maximize the value of all those capital assets through improved productivity, enhanced production flexibility, and reduced downtime. It’s the best time to take stock of existing IT systems and start planning investments to remain highly competitive in today’s boom and afterward.