The short - term impact of the epidemic intensified the adjustment of the operation strategy of American chemical manufacturers
Release Date: 2020-05-18   |   Concen: 366

With the development of the New Coronary Pneumonia epidemic and the continued slump in energy prices, US chemical manufacturers have rapidly changed their strategies to respond to the dramatic changes in market prospects. American chemical companies generally expect that the short-term impact of market impact on companies will be great, but manufacturers are adjusting their business and business strategies to meet external challenges. Chemical manufacturers are ready to deal with the short-term demand impact caused by the epidemic and have achieved good results in the first quarter.

Downstream products are affected to varying degrees

Because there are many products covered by chemical industry, under the epidemic situation, the performance of various products is not the same. Howard Unglad, president and chief financial officer of Dow Chemical, said: "Due to the outbreak, demand for some products has been very strong, while demand for others has plummeted. Our business portfolio focuses on consumer-driven Applications, such as packaging materials, cleaning materials, personal care products, and healthcare applications. During the epidemic, the market demand for consumables and consumer products was very strong, while the demand for durable goods declined significantly, and even interrupted demand. "

Huntsman President and CEO Peter Huntsman has also seen different trends in the terminal market. Huntsman said: "I think the company's sales volume will decline considerably in the second quarter compared with GDP. But for specific products, the sales of automotive chemicals will be much worse than GDP, while construction Chemical sales will perform better. "

Mark Kanchira, PPG ’s Vice President for Environment, Health and Safety, said: “This crisis is affecting PPG ’s global business in many ways, some of which will surpass the current crisis. Weakness in the automotive and aviation industries has restrained us Demand for some products. In many of PPG's production facilities around the world, taking into account the significant reduction in customer demand and the reduction in economic activity, we have adjusted production and even temporarily closed it. "

Conversely, under the epidemic, some of PPG's business activities have increased. Kanchira said: "Our packaging coatings business is growing strongly. PPG also provides coating products for the medical, electronics and construction industries. These industries are currently in high demand. Our antibacterial and biocide coating products are also in rapid demand Growth, we continue to actively look for opportunities to donate these products to help prevent disease. "

Quick response adjustment strategy

Under the epidemic, chemical manufacturers have quickly formulated crisis response and continuous production plans to maintain safe operations and accelerate the production of key materials. Howard Angled said: "The executive committee of Dow Chemical meets every day to review and evaluate the current situation. The company ’s management at all levels also communicate and arrange work with employees through video conferences. Most assets are running, and some assets may have logistics problems or lack of demand, but to a large extent, we are running all assets. "

Dow Chemical is stepping up to meet urgent needs. Howard Angled said: "We have never produced hand sanitizers, but within about two weeks, we produced hand sanitizers in 5 different locations around the world. The Dow Chemical Company currently produces 500,000 to 1 million bottles per month Ounces of hand sanitizer. The company is taking steps to increase other supplies related to health, hygiene and medical applications. "

Chemical manufacturers said that supply chain and logistics bottlenecks are not unsolvable. Howard Angled said: "Dow has built a war room for logistics and supply chain. We haven't seen anything that makes operation or delivery impossible."

Learn from past mistakes

The first quarter financial report showed that although the epidemic was difficult, the situation of American chemical companies was not bad. Among them, Huntsman still achieved adjusted earnings before interest and taxes of 165 million US dollars, although it has declined from the previous year, but it is still considerable, and the balance sheet is running well. Huntsman ’s response to the crisis deserves attention.

Huntsman said: "The best way to deal with the crisis is to be prepared. Of course, no one can accurately predict when the crisis will come, but our good balance sheet, lessons learned from the 2008 global financial crisis, and experience The experience of recession puts us in a better position than it was 12 years ago. "

Huntsman said that the company has learned four key lessons from the last crisis, namely, maintaining flexibility to respond to a sharp decline in raw material prices, transparency in order books and rapid adjustment of production according to demand, ensuring sufficient liquidity, and doing Good disruption affects preparation for occurrence.

During the 2008 financial crisis, crude oil prices fell sharply from nearly US $ 150 per barrel to US $ 32 per barrel in the second half of 2008. At the same time, the price of benzene, one of the company's key raw materials, fell from $ 4 / gallon to $ 1 / gallon. Huntsman said: "Frankly, we are unprepared, so we are in a dilemma of digesting high-priced benzene stocks and have lost tens of millions of dollars. The current plunge in energy prices has dragged down the April benzene contract price by more than 50% from March , But Huntsman has prepared in advance, and inventory has fallen to the lowest level in history. "

Huntsman also pays close attention to the order book. Huntsman said: "The size of the organization and the negligence of employees sometimes buried orders that have been cancelled, but this time we actively learn in advance to ensure that we understand the order in a timely and accurate manner and adjust production around canceled orders." At the same time, Huntsman ’s liquidity position is much better. At the end of 2019, the company had approximately $ 1.7 billion in cash and unused borrowing capacity.

Another lesson is to adapt to disruptive trends. Huntsman said: "In 2008, we saw a set of disruptive trends that instantly changed the market trend. The company must be prepared for this possible disruptive impact.

Huntsman is also closely tracking capital expenditures. All investments related to environment, health or safety will continue, but now every project must be reviewed.

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