The chemical industry is in a period of significant change and readjustment. This movement represents an opportunity for industry leaders to embrace big changes to strengthen their companies’ positions and gain market share. Conversely, companies that fail to adapt to the current environment quickly enough may find their competitiveness severely hampered, and find it difficult, if not impossible, to catch up. 

Four chemical industry trends to watch

There are four broad trends currently defining the chemical industry, each affecting a different element of business, from operations through production and compliance. They were all on display in 2016 and will continue through 2017.

  • Mergers and acquisitions: 2016 saw notable consolidation in the form of multiple mergers and acquisitions. A result of slow overall industry growth and a desire to consolidate resources and capabilities in the areas with the most promising growth, M&A is also being driven by growing pressure to gather the resources needed for digital transformation. Mega mergers are radically altering the top of the industry­­–a fact that has not escaped the attention of farmers, legislators, and regulatory bodies.
  • A new regulatory environment: Governments and regulatory bodies around the world are overhauling chemical regulations for the first time in decades. Both environmental and industry groups note that these changes could signal a kind of détente between the chemical industry and its watchdogs over the next few years. In other parts of the world, however, the relationship between the industry, activist groups, and regulatory bodies remains more acrimonious.
  • Investment: After decades of taking a back seat to emerging markets, North America saw a significant wave of investments in new multi-billion-dollar production facilities from a number of chemical manufacturers. Factors involved in this growth include the considerable size and strength of the regional market, and favorable political and regulatory environments in American states with significant chemical production segments.
  • Digital transformation: Rising demand and growing competition have increased the pressure on all chemical manufacturers to adopt advanced technologies and transform their operations and structures. Improved efficiencies, safety, and reliability can be realized through implementation of advanced technology–all of which can reduce costs for the manufacturer. These transformations are also enabling new business models that could bring chemical manufacturers closer to their suppliers, their direct customers, and even their end customers. 

Moving forward in 2017

Rising standards of living and a growing middle class in emerging markets will drive ongoing strong demand for chemicals, as more end-users purchase appliances, consumer goods, automobiles, and other products that require the use of chemicals and plastics. 

But to capitalize on the growth opportunities, the trend toward digital transformation has become an urgent need that will enable chemical companies to modernize their development, planning, and production processes.

As the chemical industry looks for ways to differentiate and excel in a fiercely competitive consolidated environment, leading companies will accelerate their digital transformations–via technology, processes, and people. The most successful companies may be those willing to take the most disruptive, challenge-the-conventional-industry-wisdom approaches to their business models. 

For a more in-depth study of the four trends defining today’s chemical industry, check out the paper that I co-authored with Martin Valek, GE Digital and the State of the Chemical Industry, 2016 in Review and 2017 Outlook. 

The State of the Chemical Industry


On Demand Webinar

This webinar discusses the major trends that are shaping the chemical industry, what happened in 2016 and what the outlook is for 2017.

Industry thought leaders from GE Digital and Strategy& Germany (Part of PwC network) will exchange perspectives on how the industrial internet of things (IIoT) couples with these trends can help chemical companies to improve their performance and overcome challenges.


The State of the Chemical Industry, 2016 in Review and 2017 Outlook

State of Chemical thumbnail

A GE Digital Perspective: Manufacturing Industry in 2017

In this in-depth analysis, GE Digital analysts Mark Thompson and Martin Valek outline key trends that shaped manufacturing in 2016 and what that means for 2017.


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About the author

Mark Thompson

Industry Analyst, GE Digital

Mark Thompson focuses on how the chemical industry is changing and how technology can help companies both drive change internally and react to the evolution of the industry around them.  He believes that technology can drive greater returns from existing assets as well as maximize the value of new investments.

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