The chemical suppliers industry may be entering a new territory

The global chemical industry is no stranger to the setback in capital market performance. From the recent trend, the chemical suppliers industry may enter a new field.


Since 2000, the chemical industry has been in the leading position of its value chain peers in terms of total shareholder return (TSR). However, the industry's TSR performance has faltered in the past 18 months. This has happened once before. In 2014, the sharp drop in oil prices had a profound impact on the entire chemical industry - not only the petrochemical industry, but also led to long-term instability. However, the strong performance of the Chinese market, among other factors, has enabled chemical suppliers to overcome capital market concerns about the economy. In fact, the industry's TSR performance rebounded in 2016 and 2017 with a compound annual growth rate (CAGR) of 24% and peaked in January 2018.





However, the decline in TSR performance over the past 18 months has been significant. The most obvious decline is in diversified companies, with a CAGR of - 10% from December 2017 to June 2019. This decline marks a sudden shift in investor sentiment, which until the end of 2017 has been enthusiastically supporting diversified industries by investing in companies that focus on markets or technologies. Bulk chemical suppliers were also affected, with a CAGR of - 7% from December 2017 to June 2019. At the same time, special products maintained a positive trend, with a compound annual growth rate of 3%. However, this figure is significantly lower than the 18% growth rate achieved by the industry in 2016-17, and it is not enough to keep the chemical industry as a whole in a positive position. In fact, the industry as a whole is down 3%.


From 2000 to the end of 2017, the chemical industry is obviously the leader of TSR in its value chain. In the past 18 months, the company has lagged behind upstream and pharmaceutical companies, despite outperforming most downstream customers, such as automobiles. Our research shows that the industry is entering a new field - the performance of the industry's capital markets may face more profound challenges than in the previous recession.

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