Raw Materials are Biggest Growth Risk to Record-Breaking German Chemical Industry

16-Jun-2011 - Germany

The German chemical industry continues to break record after record, and despite the partly historic peaks in production, sales and workforce figures, well over half of the decision-makers questioned believe that the impressive growth rates will continue over the next twelve months. These were the findings of the recent CHEMonitor survey carried out by CHEManager and strategy and organization consultancy, Camelot Management Consultants. Raw materials are becoming the greatest threat to growth, with two-thirds now considering the availability and price of raw materials to be a top strategic issue. In order to safeguard security of supply, almost half are committed to active supplier management and adherence to contractual regulations. Currently, alternative raw materials have yet to offer a way out, although their significance will increase in the coming years, particularly for large companies. The survey covered more than 300 managing directors, executive board members and decision-makers in the chemical industry, two-thirds of whom were from companies with fewer than 5,000 employees.

“Whether it’s production, sales or capacity utilization, the chemical industry continues to break records,” says Dr. Josef Packowski, Managing Partner at Camelot Management Consultants. In view of these impressive figures, it almost comes as a surprise that only one-third of those questioned assume that the positive trend in business growth will not continue. “The proportion of managers who expect a deterioration increased by 30 percent compared to the last survey. In particular, companies with more than € 500 m in sales increasingly see no more scope for further gains,” explained Dr. Sven Mandewirth, chemical industry expert and partner at Camelot Management Consultants. The growth rate in the chemical industry is even currently accelerating at a faster rate: while the focus on reducing costs is at an extremely low level (7 %), in contrast more than half the companies are committed exclusively to growth.

Raw materials become a key strategic issue

Availability and fluctuations in the price of raw materials are becoming the greatest threat to growth. Almost half of chemical industry managers believe that the issue of security of supply will increase in importance, while almost two-thirds expect the trend in the price of raw materials and energy to have a negative effect on their operating results. “Companies with flexible supply chains and a rigorous complexity management strategy have a clear competitive advantage,” says Packowski. In order to secure their raw material supplies, companies rely first and foremost on active supplier management (44 %) and adherence to contractual regulations (38 %). On the other hand, fewer than a third consider building up stocks to be appropriate. “The chemical industry is running at full capacity. In order to be able to maintain this pace, measures to safeguard operations against threats to supplies are currently of the highest priority,” says Mandewirth. “The best way to do this is through innovative and closer cooperation with suppliers.”

Alternative raw materials increase in significance – in future

While alternative raw materials might offer a way out, only 16 % of companies currently attach great importance to them. In the near future, however, that is set to change, as more than two-thirds of large companies plan to expand the proportion of alternative raw materials utilized in the next five years. Protection from rising energy prices also remains an issue. What is striking here is that - despite the considerable efforts made in recent years - still more than half of companies continue to be committed to reducing their energy consumption. Renewables are considered by just over two percent as a suitable energy source.

https://www.chemeurope.com/en/news/133033/raw-materials-are-biggest-growth-risk-to-record-breaking-german-chemical-industry.html