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• Reaction: Five trends that will shape the 2021 chemical industry

There is sound evidence supporting the need for the chemical industry to keep a focus on five areas that will emerge as critical in 2021 and beyond.

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A look back at 2020

If the chemical and performance technologies industry in the year 2020 was to be summarized in a single word, that word would be “disruption.” Some companies surged, for example, makers of disinfectants and diagnostic reagents, while others struggled—those exposed to automotive, refining, and construction end markets to name but a few. However, whether gearing up to meet sudden spikes in demand or struggling to survive, both outcomes resulted in major disruption.

So much has changed in just a year. Established strategies of the past are no longer relevant. The pandemic exposed industry weaknesses and significantly accelerated transformation programs. As businesses navigated uncharted territory, it was digital transformation that proved to be the critical lifeline. Digital will continue to be fast-tracked across every aspect of the chemical industry, as one of five key trends that will shape 2021.

Top five reasons why 2021 will be different

While the challenges of last year are not yet behind us, there is sound evidence supporting the need for the chemical industry to keep a focus on these five areas that will emerge as critical in 2021 and beyond:

1. Expanded digitalization

The pandemic raised everyone’s awareness of the fundamental importance of technology. The unprecedented scale and speed of the crisis brought a colossal surge in technology investments. In fact, rarely can a surge in digital transformation be seen in gross domestic product data, but this past pandemic year was an exception.

While few organizations would have planned for something as momentous as COVID-19, digital leaders entered the crisis in much better shape than others. Most notably, they had better infrastructure in place to deal with the immediate need to pivot to remote work and remote operations.

The 2021 digital focus will be on modifying structures and processes—connecting across front, middle, and back offices—so that information flows easily between each. This helps ensure access to all appropriate information for decision-making, planning, and support. A connected enterprise will likely require greater adoption of emerging technologies such as robotic automation, artificial intelligence, machine learning, and natural language processing. These investments will pay back in gains in revenue and efficiency—and better service to the customer.

The chemical industry, a slow mover compared to many others, should leverage digital leading practices from industries that have successfully made the transition to a connected enterprise, such as media, telecom, and technology industries.

Action steps

• Understand the full suite of available products and options—digital advancement doesn’t necessarily mean an enterprise resource planning “big bang” upgrade.
• Use technology across the front, middle, and back office. Don’t just settle for predictive maintenance or bots in shared service centers. For example, exploit digital tools for elevating the employee experience; use customer analytics to grow the top and bottom line, etc.
• Link to return on investment: apply the same core chemical industry metrics around product profitability to digital investment.

2. Elevated ESG goals

The chemical industry has been a leader on environmental, social, and governance (ESG) factors, but there is so much more to do. It’s time to double down on ESG strategies.

ESG is becoming more mainstream due to intensifying investor, regulatory, and consumer pressure holding companies accountable for ESG impacts. Some examples: surging demand for responsible investments has large fund managers exiting investments in non-climate-conscious companies; European Union sustainability-related regulations require ESG impacts on all products to be disclosed; consumers are publicly demanding that businesses move beyond token gestures and into hard action; and C-suite executives will increasingly be measured on, and rewarded for, progress against ESG targets.

A recent KPMG/Eversheds survey identified significant increase in C-suite focus on climate change.

The chemical industry holds the key to unlocking climate strategies across the industrial manufacturing value chain. This will be accomplished through the supply of sustainably produced products into downstream industries. Other prominent ESG industry focus areas include decarbonization, renewable energy, CO2 reduction, and circular plastics.

Incorporating ESG builds competitive advantage. Strong ESG practices are becoming an essential prerequisite for employee recruitment, brand enhancement, and investor funding. In short, ESG creates a virtuous circle for all—employees, customers, and investors.

Action steps:

• Get specific: articulate priority ESG initiatives that best map to your mission.
• Develop disciplined methodology to measure and report your ESG metrics journey.
• Transition energy supplies to renewable sources.
• Implement more effective reporting to publicize ESG efforts that are already going on in your company—to your employees, stockholders, and community.

3. Increased diversity in leadership

Although there has been some progress recently, participation of women and minorities in chemical leadership remains stubbornly low. Leadership has typically followed a very traditional model: most have a chemical engineering degree and comparable business experience and share similar backgrounds—these commonalties potentially leading to a lack of diversity of thought. In the current dynamic environment, greater diversity is needed to bring fresh perspectives and ideas to deliver greater agility in response to new challenges. Diversity boosts innovation, aids in talent acquisition and retention, and improves customer connections with an increasingly diverse consumer base.

Diversity needs to be reflected throughout the organization. The chemical companies that will be the most successful in the coming years will be those that can win the war for diverse and digitally-savvy talent—and that is a war that will be fought across multiple industries.

• Set challenging diversity goals with delivery tied to executive compensation.
• Invest in leadership development and establish a mentorship program to encourage diversity on all rungs of the corporate ladder.
• Recruit outside the standard pool to draw talent from nontraditional schools/majors and from other digitally strong sectors.

4. Increased M&A activity

COVID-19 didn’t stop deal activity. Even in a challenged market, there were multiple billion-dollar and multibillion-dollar deals. To name a few: Trinseo acquired Arkema’s PMMA business; BP sold its petrochemical business to INEOS; PPG acquired the global coatings manufacturer Ennis-Flint and has since announced its intention to acquire Tikkurila Oyj; and a consortium of Cinven and Bain Capital has announced its intention to acquire Lonza’s Specialty Ingredients business in a $4.7 billion deal.

In fact, right now is the most active mergers and acquisitions (M&A) market ever seen in chemicals. There are sponsor-owned assets in process of sale, large-scale corporate carve-outs (e.g., Clariant pigments business and Eastman’s tire additives and adhesives resins business units), as well as smaller corporate carve-outs comprising product lines, and even single manufacturing plants.

There are a multitude of factors driving M&A activity, among them cheap and plentiful debt, burgeoning private equity interest in the industry, liquidity pressures on distressed companies due to the pandemic impact, and a desire by some corporates to divest underperforming or noncore businesses.

There are promising possibilities on either side of the buy/sell equation. Portfolios should be strategically assessed to determine where to focus finite resources in order to meet business objectives. If there are assets in the market that would make a good fit, now might be a good time to reach out to the owner as they may be considering selling. Conversely, if a part of your business doesn’t align with your organization’s strategy, start thinking of ways to maximize value in preparation for sale—to private equity investors, corporations, or both.

• Assess noncore assets for possible spin off—are you the best owner for each individual asset/group of assets?
• Target acquisitions and think like an activist: (1) diversified portfolio and underperforming business units; (2) underperformance compared to peers; (3) value erosion due to unsuccessful M&A.
• Plan and execute better separation and integration by avoiding the three areas that tend to destroy more than 50 percent of deal value: (1) lack of execution; (2) organizational confusion/disruption; and (3) information technology systems disruption/issues.

5. Diversified portfolios

Historically, many of the biggest chemical companies have been diversified—typically as a result of past M&As, although over the past 10 years, there has been pressure to restructure portfolios to focus on fewer, core businesses—much of this exerted by activist investor pressure in the U.S. However, during the pandemic, those companies that were focused on the “wrong” segments of the market were those that suffered the worst during the crisis

Learning from the lessons of 2020, it’s a strategic imperative for all chemical companies to actively assess their portfolios and determine whether a change in direction is required. Diversification should no longer be a dirty word in the industry—as long as diversification doesn’t become an excuse for lack of focus.

• Assess whether COVID-19 showed you to be under- or over-exposed to certain segments.
• Determine whether you would benefit from an increase in portfolio diversification to protect you from potential future external shocks and become more resilient.
• Continue to improve operational performance via cost reduction, a better understanding of customer and product profitability, efficiencies captured through automation, restructured executive compensation, reconsidered pricing, the exploration of new markets, etc.

A look ahead

The global chemicals and performance technologies industry has its work cut out if it’s to rebound from the most disruptive year in memory. The encouraging news is that there is a defined path forward. By keeping these five trends at the forefront of your strategy, your company will be well positioned to promptly evaluate and respond to new opportunities…and help make the world a better place in the process.

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Reaction: Five trends that will shape the 2021 Chemical industry

While the challenges of last year are not yet behind us, there is sound evidence supporting the need for the chemical industry to keep a focus on these five areas that will emerge as critical in 2021 and beyond

Paul Harnick

Principal, Global Head of Chemicals & Performance Technologies

KPMG in the U.S.

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Chemical companies have spent the past two years in “firefighting” mode as COVID-19 tested corporate resilience and the industry struggled with supply-chain disruptions, increased feedstock volatility, changing customer behavior, and higher costs of doing business. Overcoming pandemic-driven disruption preoccupied company agendas, particularly as distorted oil and gas prices complicated feedstock management.

Looking forward, the risks and disruption facing the industry will become increasingly transformative. And while COVID-19 may not be officially done with us yet, it’s time for the industry to switch its focus from short-term problem solving to the development of strategic agendas centered on sustainability and the needs of decarbonization. 

Time’s up to act

For the past 100 years, the industry’s business model has been to sell ever greater volumes of the energy-intensive, carbon-based products that essentially define it to this day. That business model cannot survive long-term in a world that is struggling to achieve net-zero carbon emissions in the next 30 years.

We’ve reached a tipping point, and failure to deal with the challenges of climate change and the dramatic overhaul of supply chains and value propositions that it portends may spell a company’s doom — maybe not this year or in five, but certainly at some point over the next 10 to 20 years. Proving a company’s sustainability will define the decade’s winners and losers. At present, few in the industry are fully prepared to embrace that journey toward the reimagined business models that will define the industry’s next 100 years.

For an industry that depends so heavily on oil, the pressure to decarbonize will become the overarching disrupter, whether in response to regulation or pressure from activist investors and consumers.

But it’s not only about taking out the carbon. There are also increasing calls for the industry to make less-toxic products that are safer for humans and the environment.

Relying on ESG priorities 

Companies must begin evaluating all issues through an environmental, social, and governance (ESG) lens moving forward. With anticipated population growth and the increasing demand for almost everything because of it, players will need to find sustainable ways to serve these customers through alternative technologies, new feedstocks, and portfolio realignments. The bar is being raised on both corporate transparency and responsibility, and companies that fall short are also likely to find it hard to find funding.

That’s the cloud that hangs over the industry. Even so, 2022 is likely to be a year of moderate to strong expansion, as the world emerges from COVID. If the industry is forward-thinking, it will use the financial momentum in 2022 to help finance the gradual shift away from fossil fuels and invest in new ways of manufacturing and increased recycling that will define chemicals moving forward. So far, much of the industry has chosen to sit on the sidelines — producing more promises than real progress on cutting carbon emissions and redefining sustainability.

While sustainability has been on the corporate radar for a long time, most companies remain overwhelmed by both the magnitude of the problem and the investment required to address it.

Strategic levers to consider

But demands from regulators, investors, and customers are only likely to get louder, and companies that are not seen making progress are apt to get punished in the marketplace. Increasingly, failure to meet sustainability targets represents the single greatest long-term risk to companies, putting even their license to operate in jeopardy. Companies that fail the sustainability test may find themselves locked out of financing, especially as banks and other institutional investors focus on greening portfolios and making ESG priorities core to investment strategies.

The chemical industry is in a unique position for value creation for itself and other industries through the development of alternative materials and fuels. But it is time to graduate from just talking about opportunities and move toward realizing them.

Here are four strategic levers that can help chemical companies accelerate that transformation:

1. Apply a customer-centric lens.

Key to identifying ESG-related transformation opportunities is a deep understanding of the changing customer buying behaviors and new priorities that will put various parts of the portfolio at risk.

While chemical manufacturers allowed an increasingly commoditized marketplace govern their agendas, value for next-generation chemicals will be defined as much by service as by delivery of a product.

2. Think circular economy.

Reliance on a circular economy will reshape many value chains—with plastics being the most obvious one. Embracing a circular mindset requires rethinking all activities, from product development to end-use. In other words, you need not only tell customers to recycle; you need to design products with that in mind and then track every phase of product life until they make it back into raw materials.

Recycling can no longer be regarded as good citizenship; instead, it must become good economics. Besides designing with products with recyclability in mind, the industry must invest in the development of efficient, large-scale technologies. All forms of plastic must be made to be recycled and recycled easily to allow municipalities and businesses of all sizes to participate economically. 

3. Participate in new ecosystems.

With the rise of new materials and technologies, alternative energy sources and fuels, and circular-economy business models, new business ecosystems should and will emerge. The waste management industry, for example, will become a full-fledged player in the chemical industry and will need to become part of every chemical producer’s value chain. Incumbent chemical players need to understand these emerging marketplace dynamics, so they can form the partnerships and alliances necessary to thrive.

 4. Leverage technology across value chains.

Digitization is an enabler of the coming change. In this new low-carbon environment, companies will have to achieve end-to-end transparency into supply chains, tracking molecules from origin to use. For instance, intelligent transport systems can guide logistics to routes with lower emissions, or data-driven insights can support optimizing energy and resource use in customer processes. But all this presumes much deeper customer integration and interaction than exists today.

As the decade progresses, it will become painfully evident that sustainability and viability will depend on strategic transformation of business models and supply chains. And that necessity is likely to materialize as early as 2022. The industry is embarking on an exciting time full of opportunity, innovation, and hard work, but also with plenty of potential pitfalls along the way — especially for those who think they can coast.

Niklas Steinbach also contributed to this article.

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How to accelerate growth in the chemicals industry

EY Global Chemicals & Advanced Materials Industry Leader and Global Advanced Manufacturing & Mobility Supply Chain Leader

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How to accelerate revenue growth in chemicals (pdf), innovation, pricing strategy and customer-centricity are helping chemical companies find new ways to thrive amid a challenging outlook..

C hemical companies are facing slower global economic growth, trade disruptions and weakened end-market demand in key industries such as automotive and construction. The general downturn in demand, coupled with ongoing oversupply in commodity chemicals, drives weaker pricing that makes achieving organic growth even more difficult.

For most of the past decade, many chemical companies have been investing in cost and efficiency efforts as the growth agenda receded into the background. After years of consolidation, product commoditization, the rise of new competitors in growth economies and increasing cost control programs, achieving organic growth has become increasingly challenging.

Despite sluggish growth, EY Capital Confidence Barometer (CCB) 2019 survey data indicates that 64% of chemical sector respondents expect their revenue to increase in the next 12 months. The strategies and operating models of high-growth companies offer three core levers that companies should use to achieve sustainable growth: innovation, pricing strategy and customer-centricity. We explore each lever below, and in more depth in the full EY report (pdf) .

“Challenges present opportunities, and both are in abundance in the current environment for the chemical sector,” said Frank Jenner, EY Global Chemical Industry Leader. “Rethinking your approach to digital, sustainability, and talent and culture can offer differentiating advantages over the short and long term, ultimately positioning you for the next era of growth.”

of chemical sector respondents plan significant investments and see significant opportunity in improving customer experience and creating products and services, according to EY CCB.

To focus on key growth levers in a balanced and integrated manner, companies need to embed these levers in their strategy, culture and mindset. But they also need to realize it will take time to realize top-line benefits. One approach is to determine what can be changed now, over the next three years and beyond.

Lever 1: Innovation

Innovation needs to be embedded in every company’s corporate DNA to drive organic revenue growth, but no company can do it alone.

Innovation in the chemical industry should not be limited to developing new products. Chemical players need to leverage the entire chemical ecosystem to develop new business models and discovery methods, explore new markets, and increase innovation efficiency. Companies can innovate in products and new discovery methods, as well as in several additional areas.

While companies are increasingly turning to data-driven innovation, they also need to focus on new applications and processes to sustain a robust innovation pipeline. For instance, innovation across categories can encompass:

• Applications: new products with broader use cases, such as repairing human tissue, energy storage, aerospace, future of mobility
• Business models: closer collaboration with customers, cross-selling and channel consolidation; multiple players joining platform business
• Products and discovery methods: recyclability, new chemistry including green, quantum chemistry, multi-scale nano-materials, material for 4D printing, AI/ML in materials design and discovery
• Processes: process simulation; 3D printing; lower-carbon-footprint processes; conversion of CO2, coal and waste into chemicals; and use of bio-based raw materials

Companies should also consider their investment allocation. They cannot afford to miss current trends, but at the same time they need to prepare for upcoming megatrends to innovate faster than competitors. Internally, management should promote a culture and environment of open innovation through a model of test fast, fail fast, reiterate.

Externally, they need to be agile to co-create with various members of the ecosystem, from suppliers and technology partners to customer organizations and consumers. They also should seek to crowdfund new ideas and work with idea providers from concept to product-scale stage.

How EY can help

Strategy consulting.

EY-Parthenon professionals recognize that CEOs and business leaders are tasked with achieving maximum value for their organizations’ stakeholders in this transformative age. We challenge assumptions to design and deliver strategies that help improve profitability and long-term value.

It’s time to understand that customer demand is not just actual or forecasted orders, but includes their buyers’ values matched with innovative, differentiated solutions. Orders then follow.

Here’s what you should be thinking about.

• Plan for multi-pronged innovation: products, process, operating model, applications
• Increase R&D spending in growth areas (e.g., electrical/autonomous vehicles, nutrition, 5G, microbiome health, 3D printing, renewable energy)
• Develop chemicals and processes that have minimal ecological impact

Next (one to three years)

• Embed an innovation strategy into corporate strategy
• Design operations to manage needs of new business models
• Ensure that new products and processes are aligned with UN Sustainable Development Goals
• Exploit data to generate new revenue streams
• Offer a combination of products and services to support recycling and the circular economy throughout the value chain
• Leverage cognitive search and analytics to amplify R&D expertise

Looking ahead

of respondents said they are significantly investing in innovation beyond traditional product R&D, according to the EY Industrial Products Innovation Survey 2018.

Lever 2: Pricing strategy

Unrealized price potential is one of the biggest lost opportunities as chemical companies try to maximize top- and bottom-line growth.

Marketing and sales excellence is a key driver for organic growth, and it has often been a hot topic for chemical companies. Within a company, the development of the sales organization is significantly connected to long-term success, including profitability and market share growth. Successful chemical companies are much better positioned with respect to the levers in the EY sales and marketing excellence model, shown below, due to their clear alignment of the sales and marketing functions. Ideas for improvement can be found in all sales functions, but implementation of those remains a challenge. A systematic review of key marketing and sales success levers is needed to navigate a digitizing environment.

The EY model provides sales excellence guidance and addresses eight fundamental elements of sales, divided into strategic or operational elements and company- or employee-driven elements. In applying this model as an analytical and optimization tool to various chemical industry segments, successful organizations were found to be significantly stronger in all eight sales elements.

Out of this framework, strategy and voice of customer heavily influence pricing strategy, which is key to achieving sustainable organic growth by capturing maximum value from each customer.

A review of the top 20 chemical players 1 that stated the impact of price on revenues in their business presentations found they were able to pass on to the customer only about one-quarter of any cost of goods increase. Numerous challenges drive this phenomenon, including increasing competition among chemical players, a volatile oil price environment, increasing environmental regulations and the continued commoditization of core products.

In addition, differentiated supply chain models for distinguished product groups are a baseline for proper allocation of production and fulfilment cost. This provides another pricing advantage in a commodity and specialty environment, since it provides real cost per product group and not just averages.

Chemical companies have rarely considered pricing as a top management priority, which explains why the industry has lagged in managing price effectively. In this era of digital transformation, where the customer has increasing access to pricing information and competitors are rapidly advancing their digital capabilities, companies that are slow to act may find it difficult to maintain margins as raw material and freight costs fluctuate. 

Related article

It’s only when you truly understand the needs of your customer’s customer that you are able to provide differentiated solutions that stand out from the rest.

However, increasing prices is not always an option, productivity gains can provide a better price position especially for commodity chemicals. Nevertheless, companies that focus on the key pricing strategy levers can outgrow the competition in terms of organic revenue while maintaining a strong bottom line.

• Manage raw material cost fluctuations by using index- or market-based price agreements
• Improve effectiveness of price increases by regularly monitoring price realizations
• Clearly define roles and ownership for the pricing process, including pricing control and transaction profitability
• Adopt dynamic pricing to enhance value-based pricing capabilities
• Align pricing with value for different customer segments based on value perception
• Embrace a digital pricing model to align prices to innovation or value delivered by products and services to monetize innovation
• Apply analytics to understand the price variance for various customers and visibility into transaction profitability
• Drive culture change so that all company employees perceive pricing as a priority issue and a major contributor to revenue growth

Lever 3: Customer-centricity

Technology advances must be embedded into the whole customer experience for chemical companies to evolve in today’s changing consumer world.

As technology advancements enable a better customer experience, the customer needs of end-use industries increase. These dynamics, coupled with intensifying competition, causes business-to-business (B2B) customers to require much more than simply a low-cost product.

They value everything from the speed of delivery, high customization, multichannel buying portals to technologically advanced and environmentally friendly products. Emerging technologies such as artificial intelligence, the Internet of Things, and augmented and virtual reality are beginning to enable solutions to increasing customer expectations.

“Chemical players need to place the customer at the beginning of their value chains — not the end — by aligning customer strategies and priority areas with their own,” said Frank Jenner, EY Global Chemical Industry Leader. “It’s only when you truly understand the needs of your customer’s customer that you are able to provide differentiated solutions that stand out from the rest.”

Satisfying these customers is a business imperative. The EY Commercial Transformation 2019 Survey indicates that 64% of leading manufacturing companies (those with revenue growth between 5% and 15%) are customer-centric.

B2B e-commerce platforms are setting standards of efficiency and speed in delivery, further increasing customer expectations. Lastly, increased demand for green products and the implementation of sustainability-oriented regulations by governments are pushing chemical players to intensify their development of sustainable products and processes.

Developing and implementing a customer-centric strategy requires revisiting the company’s strategy and moving ahead with the customer at the core. This strategy and set of values need to be reflected in the company’s policies and culture. Chemical players need to integrate their external focus areas such as marketing and sales, product enhancement and customer experience with their internal strategy, policies, communication and culture.

There’s also a need for chemical companies to move closer to the customer of their customer. Only then will they be in a position to promptly act or react to demand dynamics (tailored products, reduced time-to-market and cost savings). Such a transition will lead to a win for all participants, but moving out of a pure supplier role will not be easy for chemical companies.

While co-creating products has many upsides, end customers do not want to be locked in with a supplier and unable to switch in an environment of constant price increases and little innovation.

Moving in this direction could entail becoming part of the customer ecosystem, buying data to innovate and provide better service through enhanced AI or apps, or being a user but not necessarily an owner of a platform. 

Customer experience services

Generate long-term value and help deliver CX that improves customer engagement, traffic and revenue.

Additionally, digitization can provide key tools to enable customer engagement and add value to the customer experience beyond the product being offered. Like business-to-consumer players, chemical companies need to provide omnichannel sales networks by ramping up e-commerce, both direct and through third parties.

Further, chemical companies can enhance their offering by using machine learning for additional post-sale services, blockchain-protected processes for instilling trust, and data and analytics to help enhance post-sale product performance.

It’s clear that chemical companies need to incorporate their customers’ key focus areas within their medium- to long-term strategies. A consistent customer connection from as early as product development will lead to sales that can enable chemical players to keep pace with their customers’ evolving needs and demands.

“It’s time to understand that customer demand is not just actual or forecast orders,” said Jade Rodysill, EY Americas Consulting Chemicals Leader. “It’s the realization of their buyers’ values matched with innovative, differentiated solutions. Orders then follow.”

Here’s what you should also be thinking about.

• Shift from selling products to innovative selling solutions
• Deliver customer experience through digitalization — CRM platforms, mobility apps, blockchain-enabled transactions, data science and predictive analytics
• Strengthen sales and marketing to realize better pricing, more channels and higher brand initiatives
• Develop more personalized experience via “digital stores”
• Become an ecosystem company rather than a product company
• Offer data-enabled services to customers
• Move to new fit-for-purpose organizational structure to increase customer focus
• Enable customers to deliver differentiating solutions and grow in their markets through innovation

Toward a sustainable future

Chemical leaders must create businesses and cultures that can drive the duality of optimal performance today and innovation for the future.

The challenge for all chemical companies, regardless of size, is to consistently focus on commercial growth in all economic and industrial cycles — upward or downward. A steady focus on sustainable business growth will prove to be a firm’s competitive advantage and enable it to weather challenging times.

Chemical companies need to identify key industry or macro trends that will spur the next wave of growth. For example, meeting rising global demand for food and achieving food security is a UN Sustainable Development Goal. There is a need for strong collaboration and thus a significant opportunity for the energy, fertilizer and agricultural markets to help achieve these objectives.

As chemical companies embark on their transformation journey to accelerate revenue growth through the key growth levers, they should adopt an agile mindset. This can be more challenging than it sounds, because change involves taking people out of their comfort zones (and their current way of working) and pushing them to do things differently. The leadership role becomes most critical in driving that change throughout the organization.

There are various opportunities through which chemical companies can drive a shift in mindset from “traditional” to “agile”:

• From being a manufacturer of products to identifying as a provider of solutions and services that may require manufacturing
• From being broadly risk averse to adopting a risk profile that is fit-for-purpose — being thoughtful but agile
• From having a “do it in-house” mentality to collaborating with various ecosystem participants (e.g., suppliers, customers, universities)
• From defining customer needs by orders to defining their needs by their buyer values and their customers’ buyer values
• From focusing solely on attracting talent to focusing equally on attracting, retaining and developing talent
• From focusing on technology infrastructure too much and too soon in lieu of process and people to becoming business-led, process-driven and technology-enabled
• From having a short-term focus that self-justifies continuous improvement to having a longer-term focus enabling agile transformation
• From rewarding for responding to problems and issues to rewarding for a lack of “noise” — sensing and assessing over responding
• From running safe plays or replicating peer strategies to exploring innovative solutions built on tested, trusted methods and components

Building, accelerating and sustaining momentum across innovation, customer-centricity and pricing levers require companies to be self-critical and self-aware of the traits and tendencies typically displayed in the chemical industry. Such awareness will enable a new mindset that drives agility, individual and business performance and shareholder value.

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• As per 2018 revenues. Includes only those players that disclosed the impact of prices on their revenues.

Chemical companies need to focus on innovation, pricing strategy and customer centricity simultaneously. Each of these levers relies on strong capabilities in digital, talent and culture, and sustainability, so business leaders will need to think, operate, organize, hire and invest differently.

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Chemical Consulting: Strategy and Business Planning

Deep insight and robust analysis, provided by highly credible and experienced consultants, is crucial to effectively evaluate and determine strategies to establish and maintain growth..

Built on S&P Global reputation for integrity and our extensive industry intellectual capital and proprietary information, our consulting team has developed deep expertise performing business evaluations, to develop and propose strategies that support companies operating at any point across the chemical spectrum. Our strategy team assists clients with major decisions that entail external market and competitive considerations. From pricing, portfolio and procurement assessments, and performance improvement, to determining long term corporate plans; we help organizations formulate strategies that will maximize value.

Combining the unmatched breadth and depth of the information and insight provided in our multi-subscriber databases and reports, with our consultants' first-hand industry experience, we uniquely understand the complex and dynamic chemical industry. S&P Global is equipped to anticipate the risks and opportunities of strategic choices, and provide critical thinking to support companies to progress their most profitable strategic opportunities.

We can help answer:

• How do I pursue a downstream integration strategy?
• What are the most prosperous portfolio and product strategies?
• How do I successfully expand to a new region or entry a new market segment?
• What is the most effective corporate strategy for my company?
• What is the impact of megatrends or external shocks on my strategy?
• What strategic options do we have for maximizing shareholder value?
• What role should inorganic growth play in my strategy?

Our capabilities include:

• Corporate strategy development
• Portfolio optimization strategy
• Market entry strategy
• Diversification strategies
• Capital investment planning
• Price benchmarking and optimization
• Procurement benchmarking and strategy
• Go-to-market planning
• Supply chain design
• Performance improvement and business turnaround

Qualifications and Experience

This list is not exhaustive and is intended to serve as an introduction to Chemical Consulting’s breadth of services offered by S&P Global:

Case Studies

Challenge: A major North American resin supplier engaged Chemical to develop a polyolefin market entry strategy capitalizing on shifting global trade patterns.

Solution: We developed an analysis of the global and regional polyolefin markets to determine the viability of overseas supply to the North American market. The market analysis included the supply, demand and margin environments, detailed market segmentation and the market opportunity for imported resins. A global cost analysis was developed to determine the cost competitiveness of potential polyolefin suppliers. This project also included a detailed analysis of the polyolefin value chain in North America. Key players and prevalent business models were identified with an emphasis on resin producers, plastics converters and distributors. Buying behavior and buyer decision criteria were determined for each end use market segment.

Results: The client received a market entry strategy with various options, including addressable market segments and supplier requirements.

Challenge: A North American packaging resin producer hired Chemical to develop strategic options for maximizing shareholder value.

Solution: We examined the client’s main options, including continuation as a stand-alone company, as well as potential M&A options for enhancing shareholder value. Project analysis included a competitive cost analysis for the North American packaging resin industry, including overseas suppliers to the market. We also developed a detailed analysis of the packaging resin value chain in North America. Key players along the value chain were identified and profiled. Prevalent business models were defined. The packaging resin market was also segmented by major end uses. Market growth, industry trends and competitor positions in each end use market were determined. Competitive positions were determined based on a combination of buyer behavior-oriented bases of competition as well competitive cost position and business portfolio considerations.

Results: Based on the packaging resin industry analysis, a competitive map for the North American packaging resin market was developed. We identified potential industry evolution along alternative paths as well as the implications for shareholder maximization options.

Challenge: A Middle Eastern petrochemical producer engaged Chemical to design a more unified go-to-market approach for its diverse petrochemical and joint venture portfolio.

Solution: We benchmarked the client against leading global marketing and logistics practices.

Results: The client received a recommended go-to-market strategy that better aligned with its competitive market requirements, as well as enabled an extended market reach. We also recommended the client realign its market organization to more effectively conduct sales for the client and its joint venture partners.

Challenge: A global confectionary company hired Chemical to help formulate a response to its narrow and declining supplier base against a background of increasing price volatility for its petrochemical-based raw materials.

Solution: As part of the engagement, we helped the client better understand the nature of the factors driving the supply and demand and pricing of these key raw materials.

Results: Working with the client, we developed a procurement strategy that reduced supply risk, increased the long-term supply base and optimized category spending through a combination of improved contracting structures and practices, as well as the identification of potential alternative suppliers and alternative raw materials.

Challenge: Chemical was retained to examine the financial viability of constructing a world-scale, gas-based petrochemical complex in the Far East of Russia.

Solution: As part of the study, we examined the facilities at three different locations in the Far East of Russia that would deliver product into China, Northeast Asia and the global markets.

Results: We provided the client with a cash flow analysis of potential options and a marketing plan indentifying the optimal mix of sales into each of the regions.

Challenge: An energy company in Southeast Asia/Oceania hired Chemical to provide a systematic and strategic master plan that identified midstream and downstream opportunities tied to natural gas.

Solution: We analyzed target markets, project descriptions, estimated economic returns, capital requirements and joint venture and alliance opportunities.

Results: The client received a study comparing and recommending multiple products over several years.

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Chemical Consulting: Commercial and Feasibility Studies

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Chemical Trading Business Plan [Sample Template]

By: Author Tony Martins Ajaero

Home » Business Plans » Chemical Sector

Are you about starting a chemical trading company? If YES, here is a complete sample chemical trading business plan template & feasibility report you can use for FREE .

Okay, so we have considered all the requirements for starting a chemical trading company. We also took it further by analyzing and drafting a sample chemical trading marketing plan template backed up by actionable guerrilla marketing ideas for chemical trading companies. So let’s proceed to the business planning section.

Interested in making money as an aspiring entrepreneur? Then, you should consider starting a chemical trading business. Those who are involved in chemical trading purchase and resell chemicals and allied products.

It is important to state that the chemical industry is a very delicate industry hence proper training is required if you want to do business in the industry. As a matter of fact, you would need chemical handling permits and other relevant permits before you can be legally allowed to go into the trading of chemicals.

If you are sure that this type of business is what you truly want to do after you must have conducted your market research and feasibility studies.

The next step is to write a good business plan; a detailed blueprint of how you intend raising your capital, setting up the business, managing the flow of the business, sorting out tax and marketing your services amongst others. Below is a sample chemical trading business plan template that will help you to successfully write your own.

A Sample Chemical Trading Business Plan Template

1. industry overview.

Chemical trading business is part of the chemical wholesaling industry and players in this industry wholesale chemicals and related products, including compressed gas, chemical additives and synthetic rubber, to the manufacturing, construction and mining industries.

This industry does not wholesale agricultural or medicinal chemicals, paints or varnishes, fireworks or plastics materials.

If you are conversant with happenings in the Chemical Wholesaling industry, you will agree that the Chemical Wholesaling industry plays an important role in the chemical supply chain. The construction and manufacturing sectors are the key customers of chemical wholesalers and, as a result, their production levels largely determine industry demand.

As overall conditions have improved in the US economy, downstream demand has grown, boosting industry production over the five years to 2017. Looking ahead, the industry is projected to experience strong demand from the manufacturing and construction sectors, which, in conjunction with recovering oil prices, will drive up revenue.

The Chemical Wholesaling industry is indeed a large industry and pretty much active in most countries of the world most especially in the united states of America, Taiwan, Japan, China, Germany and India et al.

Statistics has it that in the United States of America alone, there are about 8,734 registered and licensed chemical trading cum wholesaling companies scattered all across the United States responsible for employing about 127,480 people and the industry rakes in a whopping sum of $177 billion annually.

The industry is projected to enjoy -0.7 percent annual growth within 2012 and 2017. It is important to state that no company has the lion share of the available market in this industry.

Research carried out by IBISWorld indicates that the industry is in the mature phase of its life cycle. While newer technologies enable a more efficient distribution process, there are few new developments that could push the industry back into the growth phase.

Additionally, the report shows that the industry’s key buying markets remain in the manufacturing sector (e.g. chemical and construction material manufacturers).

In the 10 years to 2022, industry value added (IVA), or the industry’s contribution to the overall economy, is expected to increase at an annualized rate of 2.1 percent. GDP is expected to increase at an annualized 2.0 percent over the same period, indicating that the industry is growing at roughly the same rate as the economy as a whole.

Over and above, the chemical wholesaling industry is a profitable industry and it is open for any aspiring entrepreneur to come in and establish his or her business; you can choose to start on a small scale or you can choose to start on a large scale servicing a wide range of clientele not only in the United States’ market space, but exporting to other countries of the world.

2. Executive Summary

Parsley Rowlands® Chemicals Trading Co, Inc. is a registered chemical trading company that will be located in Dover – Delaware; in an ideal location, highly suitable for the kind of business we want to establish.

We have been able to secure a long-term lease for a facility in a strategic location with an option of a long-term renewal on terms and conditions that are favorable to us. The facility has government approval for the kind of chemical trading business we want to run and the facility is easily accessible.

Parsley Rowlands® Chemicals Trading Co, Inc. will be involved in trading cum wholesaling chemicals such as alkalies and chlorine, industrial gases, detergents and soaps, biofuels, adhesives, automotive chemicals and other organic and inorganic chemicals.

We are set to service a wide range of clientele in and around Dover – Delaware and throughout the United States of America.

We are aware that there are several chemical trading companies all around the United States of America, which is why we spent time and resources to conduct thorough feasibility studies and market survey so as to be positioned to favorably compete with all our competitors.

Parsley Rowlands® Chemicals Trading Co, Inc. will at all times demonstrate her commitment to sustainability, both individually and as a firm by actively participating in our communities and integrating sustainable business practices wherever possible.

We will ensure that we hold ourselves accountable to the highest standards by meeting our customers’ needs precisely and completely whenever they patronize our products.

Parsley Rowlands® Chemicals Trading Co, Inc. will ensure that all our customers are given first class treatment whenever they visit our warehouse. We have a CRM software that will enable us manage a one on one relationship with our customers no matter how large they may grow to.

We will ensure that we get our customers involved when making some business decisions that will directly or indirectly affect them.

Parsley Rowlands® Chemicals Trading Co, Inc. is a family business that is owned by Parsley Rowlands and his immediate family members. Parsley Rowlands has a Degree in Business Administration, with over 10 years’ experience in the chemical wholesaling industry .

3. Our Products and Services

Parsley Rowlands® Chemicals Trading Co, Inc. is in the chemical wholesaling industry to service a wide range of clients and of course to make profits, which is why we will ensure we go all the way to give our clients and potential clients options.

We will do all that is permitted by the law of the United States to achieve our business goal. Our product offerings are listed below;

• Wholesaling acids
• Wholesaling chemical additives (e.g. concrete, food, fuel and oil)
• Wholesaling compressed gases (except liquefied petroleum gas)
• Wholesaling explosives (except ammunition and fireworks)
• Wholesaling industrial chemicals
• Wholesaling laundry soap, chips and powder
• Wholesaling oil additives
• Wholesaling resins and synthetic rubber
• Wholesaling sulfuric acid
• Wholesaling synthetic rubber

4. Our Mission and Vision Statement

• Our vision is to become one of the leading brands in the chemical wholesaling industry not just in Dover – Delaware but in the whole of the United States of America.
• Our mission is to establish a one stop chemical trading company that will become a major distributor for topflight chemical products manufacturing companies in the United States of America.

Our Business Structure

Parsley Rowlands® Chemicals Trading Co, Inc. do not intend to start a chemical trading business like the usual mom and pop business; our intention of starting a chemical trading company is to build a standard business whose business influence will transcend Dover – Delaware to other States in the US and of course other countries of the world.

We will ensure that we put the right structures in place that will support the kind of growth that we have in mind while setting up the business. We will ensure that we hire people that are qualified, honest, customer centric and are ready to work to help us build a prosperous business that will benefit all the stakeholders.

As a matter of fact, profit-sharing arrangement will be made available to all our senior management staff and it will be based on their performance for a period of ten years or more. In view of that, we have decided to hire qualified and competent hands to occupy the following positions;

• Chief Executive Officer (Owner)
• Shop Manager
• Human Resources and Admin Manager

Sales and Marketing Manager

Merchandize Manager

• Accountants/Cashiers
• Customer Service Executive
• Distributors/Truck Drivers

5. Job Roles and Responsibilities

Chief Executive Officer – CEO:

• Increases management’s effectiveness by recruiting, selecting, orienting, training, coaching, counseling, and disciplining managers; communicating values, strategies, and objectives; assigning accountabilities; planning, monitoring, and appraising job results; developing incentives; developing a climate for offering information and opinions.
• Responsible for fixing prices and signing business deals
• In control of providing direction for the business
• Creates, communicates, and implements the organization’s vision, mission, and overall direction – i.e. leading the development and implementation of the overall organization’s strategy.
• Responsible for signing checks and documents on behalf of the company
• Evaluates the success of the organization

Admin and HR Manager

• Responsible for overseeing the smooth running of HR and administrative tasks for the organization
• Maintains office supplies by checking stocks; placing and expediting orders; evaluating new products.
• Ensures operation of equipment by completing preventive maintenance requirements; calling for repairs.
• Defines job positions for recruitment and managing interviewing process
• Carries out induction for new team members
• Responsible for training, evaluation and assessment of employees
• In charge of arranging travel, meetings and appointments
• Oversees the smooth running of the daily office activities.

Store/Warehouse Manager:

• Responsible for overseeing the smooth running of the chemical trading store/warehouse
• Responsible for managing the daily activities in the store
• Ensures that proper records of goods are kept and warehouse does not run out of products
• Ensures that the store facility is in tip top shape and goods are properly arranged and easy to locate
• Ensures that the warehouse meets the expected safety and health standard at all times.
• Controls chemicals distribution and supply inventory
• Supervises the workforce in the warehouse / store
• Manages external research and coordinate all the internal sources of information to retain the organizations’ best customers and attract new ones
• Models demographic information and analyze the volumes of transactional data generated by customer purchases
• Identify, prioritize, and reach out to new partners, and business opportunities et al
• Identifies development opportunities; follows up on development leads and contacts; participates in the structuring and financing of projects; assures the completion of development projects.
• Responsible for supervising implementation, advocate for the customer’s needs, and communicate with clients
• Develops, executes and evaluates new plans for expanding sales
• Documents all customer contact and information
• Represents the company in strategic meetings
• Helps to increase sales and growth for the company
• Manages vendor relations, market visits, and the ongoing education and development of the organizations’ buying teams
• Helps to ensure consistent quality of chemicals in our warehouse / store
• Responsible for the purchase of goods and products for the organizations
• Responsible for planning sales, monitoring inventory, selecting the merchandise, and writing and pricing orders to vendors

Accountant/Cashier:

• Responsible for preparing financial reports, budgets, and financial statements for the organization
• Provides managements with financial analyses, development budgets, and accounting reports; analyzes financial feasibility for the most complex proposed projects; conducts market research to forecast trends and business conditions.
• Responsible for financial forecasting and risks analysis.
• Performs cash management, general ledger accounting, and financial reporting
• Responsible for developing and managing financial systems and policies
• Responsible for administering payrolls
• Ensuring compliance with taxation legislation
• Handles all financial transactions for the organization
• Serves as internal auditor for the organization

Distribution Truck Drivers

• Assists in loading and unloading chemicals meant for distribution
• Maintains a logbook of their driving activities to ensure compliance with federal regulations governing the rest and work periods for operators.
• Keeps a record of vehicle inspections and make sure the truck is equipped with safety equipment
• Assists the transport and logistics manager in planning their route according to a delivery schedule.
• Inspect vehicles for mechanical items and safety issues and perform preventative maintenance
• Complies with truck driving rules and regulations (size, weight, route designations, parking, break periods etc.) as well as with company policies and procedures
• Collects and verifies delivery instructions
• Reports defects, accidents or violations

Client Service Executive

• Welcomes guests and clients by greeting them in person or on the telephone; answering or directing inquiries.
• Ensures that all contacts with clients (e-mail, walk-In center, SMS or phone) provides the client with a personalized customer service experience of the highest level
• Through interaction with clients on the phone, uses every opportunity to build client’s interest in the company’s products and services
• Manages administrative duties assigned by the manager in an effective and timely manner
• Consistently stays abreast of any new information on the company’s products, promotional campaigns etc. to ensure accurate and helpful information is supplied to clients
• Receives parcels/documents for the company
• Distributes mails in the organization

6. SWOT Analysis

Parsley Rowlands® Chemicals Trading Co, Inc. is in business to become one of the leading chemical trading companies in the whole of Dover – Delaware and we are fully aware that it will take the right business concept, management and organizational structure to achieve our goal.

We are quite aware that there are several chemical wholesaling cum trading companies all over the United States of America and even in the same location where we intend locating ours, which is why we are following the due process of establishing a business.

We know that if a proper SWOT analysis is conducted for our business, we will be able to position our business to maximize our strength, leverage on the opportunities that will be available to us, mitigate our risks and be welled equipped to confront our threats.

Parsley Rowlands® Chemicals Trading Co, Inc. employed the services of an expert HR and Business Analyst with bias in wholesaling business to help us conduct a thorough SWOT analysis and to help us create a Business model that will help us achieve our business goals and objectives. This is the summary of the SWOT analysis that was conducted for Parsley Rowlands® Chemicals Trading Co, Inc.;

Part of what is going to count as positives for Parsley Rowlands® Chemicals Trading Co, Inc. is the vast experience of our management team; we have people on board who understand how to grow business from the scratch to becoming a national phenomenon.

So also, our large distribution network and of course our excellent customer service culture will definitely count as a strong strength for the business.

A major weakness that may count against us is the fact that we are a new chemical trading company and we don’t have the financial capacity to engage in the kind of publicity that we intend giving the business especially when big names are already determining the direction of the market both in the United States and in the global market.

• Opportunities:

The opportunities for chemical trading companies are enormous. This is because chemical products are used in our daily life.

As a result of that, we were able to conduct a thorough market survey and feasibility studies so as to position our business to take advantage of the existing market and also to create our own new market. We know that it is going to require hard work, and we are determined to achieve it.

We are quite aware that one of the major threats that we are likely going to face is economic downturn and unfavorable government policies . Another threat that may likely confront us is the arrival of a new chemical trading company in same location where ours is located.

7. MARKET ANALYSIS

• Market Trends

If you are conversant with the trends in the Chemical Wholesaling industry, you will agree that the industry has benefited from improved industrial activity over the last half a decade. Revenue from generic chemicals and related products has been falling due to product standardization, with increasing competition from low-cost, low-priced imports produced in China and elsewhere.

Economic recovery and increasing manufacturing activity have helped boost chemical sales. Operators have altered their current business procedures to correspond with new laws and profit margins. On the other hand, the chemicals and similar products segment has been growing steadily and its sales are becoming more significant to the overall performance of the industry.

Precision-turned products are high in demand in the pharmaceutical production industry, as well as agriculture, medical manufacturing and other applications. In the coming years, the industry is expected to benefit from persistent demand for chemicals by downstream markets and from rising world chemical prices.

The chemical wholesaling landscape has seen tremendous changes in the last 20 years; it has grown from the smaller enterprise to a more organized and far reaching chemical trading company. This trend has benefited them in such a way that they can comfortably sell their chemicals and related products nationally and also export them to other countries of the world.

8. Our Target Market

It will be safe to submit that the chemical wholesaling industry has the widest range of customers as chemicals and related products are used in various industries. In view of that, we have positioned our chemical trading company to service a wide range of clientele in and all around Dover – Delaware and every other location where we intend distributing our products.

We have conducted our market research and feasibility studies and we have ideas of what our target market would be expecting from us. We are in business to trade a wide range of chemicals and related products for the following clients;

• Chemical retailers
• Paint manufacturing companies
• Pesticide manufacturing companies
• Pharmaceutical manufacturing companies
• Celluloid and film production companies
• Inorganic fertilizer manufacturing companies
• Cosmetics and beauty care manufacturing companies

Our Competitive Advantage

A close study of the chemical wholesaling industry reveals that the market has become much more intensely competitive over the last decade. As a matter of fact, you have to be highly creative, customer centric and proactive if you must survive in this industry.

We are aware of the competition and we are prepared to compete favorably with other leading chemical trading companies in Dover – Delaware and throughout the United States of America.

Parsley Rowlands® Chemicals Trading Co, Inc. is launching a standard chemical trading company that will become the preferred choice of businesses in Dover – Delaware. Our chemical trading company is located in an ideal property highly suitable for the kind of manufacturing company that we want to run.

Part of our competitive advantages are guaranteed supply of key inputs, we have robust links with suppliers and we have a loyal customer base cum far reaching national distribution network.

One thing is certain; we will ensure that we trade in a wide range of chemicals to meet international standards. One of our business goal is to make Parsley Rowlands® Chemicals Trading Co, Inc. a one stop chemical trading company for both cottage companies and chemical retailing stores.

Our excellent customer service culture, online store, various payment options and highly secured facility will serve as a competitive advantage for us.

Lastly, our employees will be well taken care of, and their welfare package will be among the best within our category in the industry meaning that they will be more than willing to build the business with us and help deliver our set goals and achieve all our aims and objectives.

We will also give good working conditions and commissions to freelance sales agents that we will recruit from time to time.

9. SALES AND MARKETING STRATEGY

• Sources of Income

Parsley Rowlands® Chemicals Trading Co, Inc. is in business to trade a wide range of chemicals to clients in the United States of America.

We are in the chemical wholesaling industry to maximize profits and we are going to go all the way out to ensure that we achieve or business goals and objectives. Parsley Rowlands® Chemicals Trading Co, Inc. will generate income by engaging in;

10. Sales Forecast

When it comes to the chemical trading business, if your warehouse is well located and you have good business network, you will always attract customers cum sales that will sure translate to increase in revenue generation.

We are well positioned to take on the available market in the United States of America and we are quite optimistic that we will meet our set target of generating enough profits from the first six months of operation and grow the business and our clientele base beyond Dover – Delaware to other states in the United States of America.

We have been able to critically examine the chemical wholesaling industry, we have analyzed our chances in the industry and we have been able to come up with the following sales forecast. The sales projections are based on information gathered on the field and some assumptions that are peculiar to startups in the United States of America.

• First Fiscal Year: $250,000
• Second Fiscal Year: $650,000
• Third Fiscal Year:  $900,000

N.B : This projection was done based on what is obtainable in the industry and with the assumption that there won’t be any major economic meltdown and there won’t be any major competitor wholesaling same products as we do within same location. Please note that the above projection might be lower and at the same time it might be higher.

• Marketing Strategy and Sales Strategy

Prior to choosing a location to establish Parsley Rowlands® Chemicals Trading Co, Inc. we conducted thorough market survey and feasibility studies in order for us to penetrate the available market and become the preferred choice for stakeholders in and around Dover – Delaware.

We have detailed information and data that we were able to utilize to structure our business to attract the number of customers we want to attract per time.

We hired experts who have good understanding of the chemical wholesaling industry to help us develop marketing strategies that will help us achieve our business goal of winning a larger percentage of the available market in Dover – Delaware and throughout the United States of America.

In summary, Parsley Rowlands® Chemicals Trading Co, Inc. will adopt the following sales and marketing approach to win customers over;

• Introduce our chemical trading company by sending introductory letters alongside our brochure to key stake holders in and around Dover – Delaware and parts of the United States
• Ensure that we distribute a wide range of chemicals and related products
• Make use of attractive hand bills to create awareness and also to give direction to our warehouse
• Position our signage / flexi banners at strategic places around Dover – Delaware
• Position our greeters to welcome and direct potential customers
• Create a loyalty plan that will enable us reward our regular customers
• List our business and products on yellow pages ads (local directories)
• Leverage on the internet to promote our business
• Engage in direct marketing and sales
• Encourage the use of Word of mouth marketing (referrals)
• Join local chambers of commerce and industries with the aim of networking and marketing our products

11. Publicity and Advertising Strategy

Regardless of the fact that our chemical trading company is well located, we will still go ahead to intensify publicity for the business. We are going to explore all available means to promote our company.

Parsley Rowlands® Chemicals Trading Co, Inc. has a long – term plan of opening warehouse outlets in various locations around Delaware and key cities in the United States which is why we will deliberately build our brand to be well accepted in Delaware before venturing out.

Here are the platforms we intend leveraging on to promote and advertise Parsley Rowlands® Chemicals Trading Co, Inc.;

• Place adverts on community based newspapers, radio and TV stations.
• Encourage the use of word of mouth publicity from our loyal customers
• Leverage on the internet and social media platforms like; YouTube, Instagram, Facebook, Twitter, LinkedIn, Snapchat, Google+ and other platforms to promote our business.
• Ensure that our we position our banners and billboards in strategic positions all around Dover – Delaware
• Distribute our fliers and handbills in target areas in and around our neighborhood
• Advertise our chemical trading company in our official website and employ strategies that will help us pull traffic to the site
• Brand all our official cars and trucks and ensure that all our staff members and management staff wear our branded shirt or cap at regular intervals.

12. Our Pricing Strategy

The fact that chemical manufacturing companies are in the position to determine the amount they intend selling their products means that we will abide by their pricing template.

Since we are just a chemical trading company, we will ensure that we get the best deal when it comes to distributing and wholesaling of chemical products. Aside from getting the best deal, we will work on our overhead so that it will not increase our cost of doing business.

With that, we will be able to distribute our chemical products at prices below the average prices amongst chemical trading companies.

• Payment Options

The payment policy adopted by Parsley Rowlands® Chemicals Trading Co, Inc. is all inclusive because we are quite aware that different customers prefer different payment options as it suits them but at the same time, we will ensure that we abide by the financial rules and regulation of the United States of America. Here are the payment options that Parsley Rowlands® Chemicals Trading Co, Inc. will make available to her clients;

• Payment via bank transfer
• Payment with cash
• Payment via credit cards / Point of Sale Machines (POS Machines)
• Payment via online bank transfer
• Payment via check
• Payment via mobile money transfer
• Payment via bank draft

In view of the above, we have chosen banking platforms that will enable our clients make payment for the purchase of our products without any stress on their part. Our bank account numbers will be made available on our website and promotional materials.

13. Startup Expenditure (Budget)

From our market survey and feasibility studies, we have been able to come up with a detailed budget on achieving our aim of establishing a standard and highly competitive chemical trading company in Dover – Delaware and here are the key areas where we will spend our start – up capital;

• The total fee for registering the business in the United States of America – $750.
• Legal expenses for obtaining licenses and permits as well as the accounting services (software, P.O.S machines and other software) – $3,300.
• Marketing promotion expenses for the grand opening of Parsley Rowlands® Chemicals Trading Co, Inc. in the amount of $3,500 and as well as flyer printing (2,000 flyers at $0.04 per copy) for the total amount of $3,580 .
• The total cost for hiring Business Consultant – $2,500.
• The total cost for payment of insurance policy covers (general liability, workers’ compensation and property casualty) coverage at a total premium – $9,400.
• The total cost for long – term leasing of a standard warehouse and showroom – $120,000
• The total cost for remodeling the warehouse – $20,000.
• Other start-up expenses including stationery ( $500 ) and phone and utility deposits – ( $2,500 ).
• Operational cost for the first 3 months (salaries of employees, payments of bills et al) – $60,000
• The total cost for start-up inventory (acids, chemical additives (e.g. concrete, food, fuel and oil), compressed gases (except liquefied petroleum gas), explosives (except ammunition and fireworks), industrial chemicals, laundry soap, chips and powder, oil additives and resins and synthetic rubber amongst others) – $80,000
• The total cost for store equipment (cash register, security, ventilation, signage) – $13,750
• The total cost for the purchase and installation of CCTVs: $10,000
• The cost for the purchase of office furniture and gadgets (Computers, Printers, Telephone, TVs, Sound System, tables and chairs et al): $4,000
• Total cost of purchasing distribution trucks – $20,000
• The total cost of launching a Website: $600
• The total cost for our opening party: $7,000
• Miscellaneous: $10,000

We would need an estimate of three hundred thousand dollars ( $300,000 ) to successfully set up our chemical trading company in Dover – Delaware. Please note that this amount includes the salaries of all the staff for the first month of operation.

Generating Startup Capital for Parsley Rowlands® Chemicals Trading Co, Inc.

Parsley Rowlands® Chemicals Trading Co, Inc. is a family business that is owned and financed by Parsley Rowlands and his immediate family members. They do not intend to welcome any external business partner which is why he has decided to restrict the sourcing of the startup capital to 3 major sources.

These are the areas we intend generating our startup capital;

• From personal savings and sell of stocks
• From family members and friends
• Apply for loan from the bank

N.B: We have been able to generate about $100,000 ( Personal savings $80,000 and soft loan from family members $20,000 ) and we are at the final stages of obtaining a loan facility of $200,000 from our bank. All the papers and documents have been signed and submitted, the loan has been approved and any moment from now our account will be credited with the amount.

14. Sustainability and Expansion Strategy

The future of a business lies in the number of loyal customers that they have, the capacity and competence of their employees, their investment strategy and business structure. If all of these factors are missing from a business, then it won’t be too long before the business closes shop.

One of our major goals of starting Parsley Rowlands® Chemicals Trading Co, Inc. is to build a business that will survive off its own cash flow without the need for injecting finance from external sources once the business is officially running.

We know that one of the ways of gaining approval and winning customers over is to distribute a wide range of chemicals a little bit cheaper than what is obtainable in the market and we are well prepared to survive on lower profit margin for a while.

Parsley Rowlands® Chemicals Trading Co, Inc. will make sure that the right foundation, structures and processes are put in place to ensure that our staff welfare are well taken of. Our company’s corporate culture is designed to drive our business to greater heights and training and retraining of our workforce is at the top burner.

As a matter of fact, profit-sharing arrangement will be made available to all our management staff and it will be based on their performance for a period of six years or more. We know that if that is put in place, we will be able to successfully hire and retain the best hands we can get in the industry; they will be more committed to help us build the business of our dreams.

Check List/Milestone

• Business Name Availability Check: Completed
• Business Registration: Completed
• Opening of Corporate Bank Accounts: Completed
• Securing Point of Sales (POS) Machines: Completed
• Opening Mobile Money Accounts: Completed
• Opening Online Payment Platforms: Completed
• Application and Obtaining Tax Payer’s ID: In Progress
• Application for business license and permit: Completed
• Purchase of Insurance for the Business: Completed
• Leasing and remodeling the facility (warehouse): In Progress
• Conducting Feasibility Studies: Completed
• Generating capital from family members: Completed
• Applications for Loan from the bank: In Progress
• Writing of Business Plan: Completed
• Drafting of Employee’s Handbook: Completed
• Drafting of Contract Documents and other relevant Legal Documents: In Progress
• Design of Company’s Logo: Completed
• Printing of Promotional Materials: In Progress
• Recruitment of employees: In Progress
• Purchase of the needed distribution trucks, furniture, racks, shelves, computers, electronic appliances, office appliances and CCTV: In progress
• Creating Official Website for the Company: In Progress
• Creating Awareness for the business both online and around the community: In Progress
• Health and Safety and Fire Safety Arrangement (License): Secured
• Compilation of our list of products that will be available in our warehouse: Completed
• Establishing business relationship with manufacturers of chemicals and related products: In Progress

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Start a Chemical Manufacturing Business in 9 Simple Steps

By henry sheykin, resources on chemical manufacturing company.

• Financial Model
• Business Plan
• Value Proposition
• One-Page Business Plan

Opening a Chemical Manufacturing Company: A Lucrative Business Venture in a Rapidly Growing Industry

Are you considering starting your own chemical manufacturing company? The chemical industry in the United States is experiencing unprecedented growth, presenting an exceptional opportunity for aspiring entrepreneurs like yourself. With a diverse range of applications in construction, agriculture, and industrial manufacturing, the demand for chemicals continues to rise.

According to industry reports, the US chemical manufacturing sector is projected to reach a market value of $1.08 trillion by 2024, driven by growing industrial and consumer demand. This robust growth represents a 3.6% increase in compound annual growth rate (CAGR) over the next few years.

As a chemical manufacturer, establishing your business in this thriving industry requires careful planning, a strategic approach, and a solid understanding of the market. To help you navigate this complex process, we have developed a comprehensive checklist featuring nine essential steps for starting your chemical manufacturing company.

From researching market demand and securing funding to obtaining permits and developing quality control measures, this checklist will guide you through the entire process of launching your business successfully. By following these steps diligently, you will be well on your way to establishing a reputable company within the chemical manufacturing industry.

9 Steps to Start a Chemical Manufacturing Company Business: Checklist

Starting a chemical manufacturing company business requires careful planning and strategic implementation. Before launching your business, it is crucial to complete the following steps:

Research and Identify Market Demand and Competition

Before starting a chemical manufacturing company, it is essential to conduct thorough research to determine market demand and assess the level of competition. This step is crucial in ensuring the viability and success of your business.

Here are some key steps to follow:

• Identify target industries: Research and identify the industries that heavily rely on chemical materials. This could include construction, agriculture, pharmaceuticals, or manufacturing.
• Analyze market trends: Stay updated on market trends, technological advancements, and regulations in the chemical manufacturing industry. This analysis will help you understand the current and future demand for specific chemical products.
• Evaluate competition: Identify existing chemical manufacturers in your target market and analyze their products, pricing, distribution channels, and customer base. This analysis will help you understand your competitive advantage and how you can differentiate your business.
• Identify potential customers: Research and identify potential customers in your target industries. This can be done through market research, attending industry trade shows, or networking with professionals in the field. Understand their needs, challenges, and preferences.
• Consider conducting surveys or interviews with potential customers to gather insights into their chemical material requirements.
• Monitor industry publications, news articles, and industry association websites for valuable market information.
• Stay informed about regulatory requirements and compliance standards to ensure your business meets all necessary guidelines.

By thoroughly researching and identifying market demand and competition, you can develop a strategic plan to position your chemical manufacturing company for success.

Develop A Comprehensive Business Plan Outlining Goals, Strategies, And Financial Projections

A comprehensive business plan is essential for the success of any chemical manufacturing company. It serves as a roadmap, guiding your company towards its goals and helping you make informed decisions along the way. Here are some important steps to consider when developing your business plan:

• Define your company's goals: Clearly outline the objectives and targets you aim to achieve. These could include market share, sales growth, product quality, or customer satisfaction.
• Identify your target market: Conduct thorough market research to identify potential customers and their needs. Determine the size of your target market and assess the demand for chemical products in your chosen industry sectors.
• Create a competitive analysis: Identify your competitors and analyze their strengths, weaknesses, and market positioning. This will help you understand how to differentiate your company and formulate effective strategies.
• Develop a marketing and sales strategy: Outline how you plan to promote and sell your chemical products. This may include online marketing, trade shows, direct sales, or partnerships with distributors.
• Estimate financial projections: Prepare detailed financial projections, including sales forecasts, production costs, overhead expenses, and profit margins. Consider different scenarios and potential risks to ensure your financial plan is realistic.
• Identify funding sources: Determine how you will finance your chemical manufacturing company. Explore options such as loans, investors, grants, or partnerships. Clearly communicate how the funds will be used and the expected return on investment.
• Seek professional assistance from an accountant or financial advisor to ensure your financial projections are accurate.
• Regularly review and update your business plan as market conditions change or new opportunities arise.
• Include contingency plans in your business plan to mitigate potential risks and uncertainties.

Developing a comprehensive business plan will not only help you secure funding but also provide a solid foundation for the growth and success of your chemical manufacturing company. It is a valuable tool for making strategic decisions and ensuring the long-term sustainability of your business.

Secure Funding Through Loans, Investors, Or Grants.

Securing funding is a critical step in starting a chemical manufacturing company. The capital required for facility setup, equipment purchase, and initial operations can be substantial. Here are some important steps to consider when securing funding:

• Research and evaluate funding options: Begin by researching and evaluating financing options such as bank loans, venture capitalists, angel investors, or grants. Determine which option aligns best with your business objectives and financial needs.
• Prepare a comprehensive business plan: A well-prepared business plan is essential when approaching potential lenders or investors. Highlight the market demand, competitive advantage, and projected financials to demonstrate the potential return on investment.
• Seek out loans: Approach banks or financial institutions that specialize in business loans. Prepare a detailed loan application, including financial statements, projections, and collateral. Be prepared to negotiate terms and interest rates.
• Attract investors: Present your business idea to venture capitalists or angel investors who are interested in supporting chemical manufacturing companies. Emphasize the growth potential, profitability, and market demand to capture their interest.
• Explore grant opportunities: Research and apply for grants from government agencies, private foundations, or organizations that support entrepreneurial ventures in the chemical manufacturing industry. Grants provide non-repayable funds but often have specific eligibility criteria.
• Prepare a compelling elevator pitch to quickly grab the attention of potential investors or lenders.
• Network extensively through industry events, trade shows, and business associations to increase your chances of finding suitable investors.
• Consider approaching angel investment groups or crowdfunding platforms to broaden your fundraising options.

Obtain All Necessary Permits And Licenses From Relevant Regulatory Agencies.

Before starting a chemical manufacturing business, it is essential to obtain all necessary permits and licenses from the relevant regulatory agencies. This step is crucial to ensuring compliance with legal and safety requirements and avoiding any potential legal issues or penalties.

• Research Applicable Regulations: Thoroughly research and understand the regulations and requirements specific to the chemical manufacturing industry. Identify the regulatory agencies responsible for issuing permits and licenses in your jurisdiction.
• Complete Permit Applications: Gather all the necessary information and documentation required for the permit application process. This may include business registration documents, insurance certificates, safety protocols, and environmental impact assessments.
• Submit Applications: Carefully follow the instructions provided by the regulatory agencies and accurately complete the permit applications. Ensure that all required fees are paid and all supporting documents are included.
• Comply with Inspections: Prepare your business for inspections by regulatory agencies to confirm compliance with health, safety, and environmental standards. Address any areas of concern or non-compliance promptly.
• Maintain Compliance: Once you have obtained the necessary permits and licenses, it is crucial to continuously monitor and maintain compliance with regulatory requirements. Stay updated on any changes in regulations that may affect your operations.
• Seek professional guidance: Consider consulting with legal experts or experienced professionals in the industry who can provide guidance on navigating the permit and licensing process.
• Start early: Begin the permit and license application process well in advance to allow sufficient time for review and approval.
• Be organized: Keep all permit and license documentation in a secure and easily accessible manner for future reference and inspections.

Step 5: Secure A Suitable Location And Acquire Necessary Equipment And Supplies.

Choosing the right location for your chemical manufacturing business is crucial for its success. Look for a location that offers ample space for your production activities, storage facilities, and potential future expansion. Consider proximity to transportation routes and availability of utilities.

When acquiring the necessary equipment and supplies, it's important to prioritize quality and reliability. Invest in state-of-the-art machinery and technology that meets industry standards and can handle the type of chemical manufacturing you plan to undertake. Additionally, ensure a steady supply of raw materials by establishing relationships with trusted suppliers.

• Conduct thorough research to find an optimal location that suits your business requirements.
• Seek advice from experts or consultants when selecting equipment and assessing supplier reliability.
• Consider leasing equipment to minimize initial costs and enable upgrades as your business grows.
• Create a contingency plan to address any potential disruptions in the supply chain.

Hire Qualified Personnel And Develop A Strong Team

Building a competent and dedicated team is crucial for the success of your chemical manufacturing company. Hiring qualified personnel who possess the necessary skills and expertise will ensure smooth operations and drive growth. Here are some essential steps to help you navigate this process:

• Define job roles and responsibilities: Start by clearly outlining the positions you need to fill and the key responsibilities associated with each role. This will help you attract candidates with the right skill set.
• Write compelling job descriptions: Craft detailed and enticing job descriptions that highlight the qualifications, experience, and traits you are seeking in potential candidates. Clearly communicate your company's values and vision to attract like-minded individuals.
• Implement an effective recruitment strategy: Leverage various channels, such as online job boards, professional networks, and industry-specific forums, to reach a diverse pool of candidates. Consider partnering with recruitment agencies specializing in the chemical manufacturing industry to access their expertise and network.
• Screen and interview candidates: Carefully review each application to shortlist candidates who meet the required qualifications. Conduct thorough interviews to assess their technical knowledge, problem-solving abilities, and cultural fit within your organization.
• Consider practical assessments and reference checks: Depending on the nature of the roles, conduct practical assessments to evaluate candidates' hands-on skills and their ability to perform specific tasks. Additionally, contact references provided by the candidates to gain insights on their past performance and work ethics.
• Invest in training and development: Once you have hired your team members, provide them with comprehensive training to familiarize them with your company's processes, expectations, and safety protocols. Offer ongoing professional development opportunities to enhance their skills and keep them motivated.
• Promote a positive work culture: Foster an environment that encourages teamwork, collaboration, and open communication. Recognize and reward your employees' accomplishments to boost morale and create a strong sense of belonging.
• Consider hiring individuals with relevant industry experience, as they may already possess valuable knowledge and contacts.
• Don't underestimate the importance of interpersonal skills. Look for candidates who can communicate effectively and work well within a team.
• Encourage diversity and inclusivity within your team to bring in different perspectives and ideas.
• Offer competitive compensation packages and benefits to attract and retain top talent in the industry.

Remember, hiring qualified personnel and fostering a strong team is an ongoing process. Continually assess the skills and needs of your workforce, provide opportunities for growth, and adapt your recruitment strategy to stay competitive in the industry.

Develop And Implement Quality Control Measures And Processes.

Quality control is a critical aspect of running a successful chemical manufacturing company. It ensures that the products you produce meet the required standards and specifications, providing consistent and reliable solutions to your customers. Here are some essential steps to develop and implement effective quality control measures and processes:

• Evaluate industry-specific regulations: Familiarize yourself with the applicable regulations and quality standards in the chemical manufacturing industry. This will help you understand the specific requirements and ensure compliance with safety, environmental, and quality guidelines.
• Establish testing procedures: Create a comprehensive testing plan that covers various stages of your manufacturing process, from raw material inspection to final product analysis. Define testing methods, parameters, and acceptance criteria to ensure accurate and consistent results.
• Incorporate quality checks at each production stage: Identify critical control points and develop procedures for monitoring and verifying quality during different production stages. Implement checks for purity, concentration, consistency, and other critical factors to maintain product integrity.
• Implement employee training programs: Ensure that your employees are well-trained in quality control procedures and techniques. Provide regular training sessions to keep them updated with the latest industry practices and improve their understanding of quality standards.
• Document and analyze data: Establish a system for recording and analyzing quality data throughout the manufacturing process. Regularly review and analyze this data to identify trends, address any deviations, and continuously improve your processes.
• Perform regular equipment maintenance: Regularly inspect and maintain your equipment to ensure accuracy and reliability. Schedule routine maintenance and calibration to minimize the risk of equipment malfunction that could impact product quality.
• Consider implementing a comprehensive quality management system, such as ISO 9001, to demonstrate your commitment to quality and continuous improvement.
• Engage your employees in the quality control process by fostering a culture of accountability and continuous learning. Encourage them to provide feedback and suggestions for process improvement.
• Regularly communicate with your suppliers to ensure the quality of incoming raw materials, as this can significantly impact the quality of your final products.

By following these steps and continuously refining your quality control measures, you can build a strong reputation for delivering high-quality chemical products and gain a competitive edge in the market.

Establish Partnerships With Suppliers And Potential Customers.

In order to successfully launch a chemical manufacturing company, it is crucial to establish partnerships with suppliers and potential customers. These partnerships will not only ensure a steady supply of raw materials but also create a customer base for your products. Here are some important steps to take when establishing these partnerships:

• Research and identify potential suppliers: Conduct thorough research to identify reputable suppliers who can provide the necessary raw materials for your chemical manufacturing process. Look for suppliers who offer competitive pricing, high-quality products, and reliable delivery schedules.
• Reach out and initiate contact: Once you have identified potential suppliers, reach out to them to express your interest in forming a partnership. This can be done through emails, phone calls, or even in-person meetings. Clearly articulate your needs and requirements and inquire about their capabilities and pricing.
• Negotiate terms and conditions: Establishing partnerships requires negotiating mutually beneficial terms and conditions. Discuss pricing, payment terms, and delivery schedules to ensure both parties are satisfied. Consider exploring long-term contracts or bulk purchasing options to secure better deals.
• Develop relationships with potential customers: Networking and building relationships with potential customers is crucial to the success of your chemical manufacturing company. Attend industry events, trade shows, and conferences to meet potential customers and understand their needs. Engage in conversations, showcase your products, and offer samples to generate interest.
• Offer value-added services: To differentiate yourself from competitors and attract potential customers, consider offering value-added services such as technical support or customized formulations. These additional services can help establish strong partnerships and increase your profit margins.
• Regularly communicate and maintain relationships with your suppliers and customers to address any concerns or issues that may arise.
• Stay updated with industry trends and market demand to identify new opportunities for partnerships.
• Consider joining industry associations or organizations that can provide valuable networking opportunities.

By establishing strong partnerships with suppliers and potential customers, your chemical manufacturing company will have a solid foundation to thrive and grow within the industry.

Market And Advertise The Business To Attract Customers.

Once you have established your chemical manufacturing company and are ready to start operations, it is crucial to market and advertise your business effectively to attract customers. Here are some key steps to consider:

• Create a strong brand image: Develop a distinctive and attractive brand identity that resonates with your target customers. This includes designing a compelling logo, creating a professional website, and developing consistent messaging and visual elements.
• Utilize digital marketing: Leverage the power of online platforms to reach a wider audience. Build a robust online presence through search engine optimization (SEO), social media marketing, content marketing, and pay-per-click advertising. Utilize relevant platforms such as LinkedIn, industry forums, and online directories to promote your chemical products and services.
• Showcase your expertise: Demonstrate your industry knowledge and expertise by providing informative content through blogs, videos, case studies, and webinars. This not only positions your company as a thought leader but also helps potential customers understand the value your chemical products can bring to their businesses.
• Participate in industry events: Attend trade shows, exhibitions, and conferences related to the chemical manufacturing industry. This provides an opportunity to network with potential customers, showcase your products, and learn about emerging trends and technologies.
• Offer incentives and promotions: Attract new customers by offering discounts, free samples, or other promotional offers. This can encourage trial usage of your products and ultimately lead to long-term partnerships.
• Collaborate with influencers or industry experts who can endorse your products and increase your brand visibility.
• Collect customer testimonials and reviews to build credibility and trust.
• Regularly analyze and evaluate the success of your marketing strategies to identify areas for improvement and adapt your approach accordingly.

By implementing a well-rounded marketing and advertising strategy, you can effectively showcase your chemical manufacturing business, attract customers, and ultimately drive growth and success in the industry.

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Five Steps to Create a Marketing Plan for a Chemical Business

Selling chemicals to new customers is always a challenge, but an effective marketing plan can help.

Why create a chemical marketing plan?

Why should you create a marketing plan for your chemical business? Marketing chemicals to new customers is always a challenge. But it doesn’t have to be difficult, especially in today’s raw materials and ingredients market — where you can use newer, more cost-effective digital tools to convert leads into customers.    A marketing plan helps you to take a more scientific approach to marketing. It requires you to:

Think carefully about how you want to spend your marketing dollars.

Make sure your spending aligns with your business goals.

Measure the effectiveness of your campaigns at the end of the year.

A marketing plan can also help you to:

• Set a realistic budget — for your marketing efforts.
• Make your efforts more efficient — by setting a goal.
• Consciously choose tactics — then measure their effectiveness.
• Measure the overall effectiveness — of your marketing strategies, year over year.

Read on to learn how you can create an effective marketing plan for your chemical business.

How do you create a marketing plan?

The five steps to creating a good marketing plan for a chemical business include:

Step 1 — Choose a target audience

When you’re ready to find new customers for your raw materials or ingredient, the first question to ask yourself is:

Who buys our product? Knowing which companies, industries, and job roles buy your products will ultimately help you choose the right industrial marketing tactics — whether it’s more traditional outbound marketing, or newer, digital inbound marketing (ideally, you’ll use a mix of both).

Real-life examples So, what does this look like in real life? Let’s take a peek at how a chemical marketing plan works, using three different raw materials and ingredients. These three raw materials and ingredients are being sold to different audiences:

Organic butter CO2 extract

Target audience - Organic baked goods and frozen food manufacturers in Europe.

Betaine alternative for personal care cleansers

Target audience - “All natural” shampoo and facial cleanser manufacturers in the U.S.

Production-grade thermoplastic for industrial 3D printing

Target audience - Industrial 3D printing companies that create industrial prototypes.

Step 2 — Define your goals

Your next step is to write specific, measurable goals for the coming year. What do you want to achieve with your marketing efforts over the next 12 months?

Goal - Sign 12 new clients by Dec. 31.

Goal - Get 1,000 clicks on UL Prospector ® searches of our newest product in 2020.

Goal - Sell $250,000 (USD) of product in the next 12 months.

Step 3 — Create a cost-effective marketing plan

Next, create a budget for your chemical marketing plan. This budget will guide which marketing tactics to choose. For example:

Budget - $50,000 (USD).

Budget - 1.5% of annual revenue.

Budget - $13,800 (USD)/year.

Step 4 — Choose your marketing tactics

Finally, you’ll want to add some specific marketing tactics to your plan. Look for a good mix of inbound and outbound strategies.

This may require some experimentation from year to year, as you measure your success (step 5) — and see which tactics work best for your business.

Inbound marketing — allows new customers to discover your business and products through web content — such as your website, social media, blogs, articles, white papers.

Outbound marketing — includes more traditional forms of manufacturing marketing — such as cold calling, trade shows, print ads, digital ads, emails and newsletters.

Applying these concepts to our existing examples might look like the following:

• Visit two new manufacturers every month.
• Run four pay-per-click ads on Google.
• Participate in three trade shows this year.
• Run one print ad for four quarters in an industry journal.
• Publish two blogs/month for 12 months.
• Write one new white paper for formulators.
• Cold-call three companies per week.
• Run four digital ads on Prospector.
• Send e-newsletter to 500 client leads every month.
• Publish five technical articles.

Step 5 — Measure your success

Check on your progress every three months to find out:

• How much new business has each marketing tactic earned so far?
• How much progress has been made toward your overall goal (in revenue, new customers, product sold, etc.)?
• How much money have you spent on each marketing tactic?
• How much of the total marketing budget have you spent so far?

See which marketing tactics work well, and which need to be changed. Then share your progress with staff — and use the learnings specific to your chemical business to revise your marketing plan for next year.

Need help executing a marketing plan for your chemical business?

A Marketing Leader’s Guide to the Chemicals Industries

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The chemical industry: What investments need to be made to get to net zero?

The chemical industry faces many sustainability challenges. Image:  Getty Images/iStockphoto.

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Stay up to date:, chemical and advanced materials.

• Over the next decade the chemical industry must accelerate its sustainability transformation.
• The industry must also navigate changes in regulation, technology, consumer behaviours to name a few.
• Here's how the industry is likely to evolve and the strategies it needs to succeed.

The chemical industry cannot change its image without a deliberate and significant sustainability transformation. This agenda must be both broad and deep. The magnitude of investments required to become more sustainable is daunting and the challenge is to pace initiatives and investments that balance progress on sustainability objectives with shareholder expectations for acceptable returns.

Mega trends shaping the chemical industry over the next five to 10 years (and beyond) are the foundation for the strategic scenarios in which these decisions and investments will be made and they continue to offer a framework to structure the industry’s position. They include energy and resource transitions, changes in consumer buying habits, changing needs for and from agriculture (especially given the dual use of traditional food sources as feedstocks for chemicals production), post-globalization changes in trade flows, changes in the consumption of consumer and healthcare products, and new digitally-enabled business models that change how chemicals products are bought and sold.

The Fostering Effective Energy Transition 2023 report showed that after a decade of progress, the global energy transition has plateaued amid the global energy crisis and geopolitical volatilities.

The World Economic Forum’s Centre for Energy and Materials is driving the transition to a “fit for 2050” energy system. It is a cross-industry platform building new coalitions and delivering insights required for a sustainable, secure and just energy future.

Learn more about our impact:

• Clean energy in emerging economies: We are advancing country-specific renewable energy finance solutions for four of the biggest emerging and developing economies : India, Brazil, Nigeria and Indonesia. In the latter, a new solar and battery initiative is bringing 15MW of clean energy to the East Sumba region – enough to power 4,000 homes and avoid 5.5KtCO₂ yearly emissions.
• Energy Transition Index: We have measured the progress of 120 countries on the performance of their energy systems, enabling policymakers and businesses to identify the necessary actions for the energy transition.
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• Clean power and electrification: We are accelerating the adoption of clean power and electric solutions in the next decade to help increase clean energy consumption threefold by 2030.

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The pace of change continues to accelerate, driven by changes in regulation, technology, consumer buying behaviours, new markets and shifting sources of feedstocks.

Chemical and advanced materials companies are getting ready to make investments within strategic scenarios that include, for example:

• The pace of transition to net-zero , with distinct differences across geographies, with a clear need to reduce overall greenhouse gas (GHG) emissions that get them to net-zero on Science Based Targets initiative (SBTi) timelines.
• The increase in localization of value chains , which themselves have to become far more circular and sustainable in terms of recycled-based materials and reduced emissions.
• The dislocations in historical trade flows impacting arbitrage of feedstocks and product flows with investments in sustainability that can meet expected returns within investment time horizons that are being disrupted by changes in flows.
• The plastics value transition from convenience to performance and sustainability products, in some cases eliminating products that won’t meet sustainability objectives while creating new ones that substitute other, less sustainable materials and a better understanding of post-use value.

These four scenarios are not mutually exclusive and represent the context in which strategic decisions and investments are currently being made at the enterprise level.

Chemical industry's focus on objective-setting

Facing the breadth of the sustainability challenges ahead, companies will increasingly need to formulate, commit to, and deliver against specific sustainability objectives. As an example, LyondellBasell has developed specific objectives across over twenty targets today including:

• Reducing GHG emissions: Scope 1 and 2 initially, then Scope 3 across entire value chains. This will require, at the individual enterprise level, significant cumulative investment.
• Circularity: dramatically reducing waste that goes into landfills, oceans, etc., via value chains and business models that extend the lives of materials as long as technically and economically feasible.

Achieving much greater sustainability requires a careful rebalancing of the policy and business mix to meet the needs of multiple stakeholder groups while ensuring the chemical industry is economically sustainable and can continue to attract investments. At the enterprise level, this requires a deeper understanding of customer and consumer demand-side requirements while simultaneously developing more sustainable solutions via existing and emerging technologies and business models.

Have you read?

The chemical industry’s overlooked role ushering in the low-carbon economy, the chemical industry can wean itself off fossil raw materials. here's how, what are low-carbon emitting technologies an expert explains.

What we need to understand as an industry, to make these decisions for each company, is how the industry is likely to evolve and what strategies can succeed. Key questions to address include:

• Customer/demand side: What are the specific sustainability requirements that chemical companies need to be able to deliver to meet the buying criteria of customers? What are the substitute products that may offer better monetary value for customers to meet the criteria? What are the buying behaviours of different customers and brand segments, and which can be served profitably? What mix of offerings can satisfy customer needs where there is a realistic willingness to pay that will sustain supply-side offerings?
• Supply side: What technologies are available and what investments are required to meet net-zero and materials circularity commitments? What sequencing of investments is economically feasible and can sustain a transition to lower emissions and greater circularity?
• Getting to scale: What investment strategies over the next five to 10 year event horizon can achieve viable, economic scale that will allow chemical companies to justify investments to their shareholders? What regulatory conditions are required to create a playing field in which investments and actions at the enterprise level will be supported?

The technologies that are required to drive toward greater sustainability are either already available or sufficiently well understood that it is possible to anticipate many of the investments required for the next wave of sustainability improvements. Clearly, technology and associated business models will continue to evolve. Therefore, the challenge for the chemical industry is finding the right balance that addresses the challenges and new opportunities from sustainability goals while also being economically viable and attractive to shareholders who will rightfully demand acceptable financial performance.

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The views expressed in this article are those of the author alone and not the World Economic Forum.

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Blog  /  ERP Beginners Guide for the Chemical Industry

ERP Beginners Guide for the Chemical Industry

Panni management.

• October 12, 2022

Are you a mid-size company in the chemical industry? Do you want a 360-degree view of your operations? Then enterprise resource planning (ERP) software, specially created for chemical companies, is just what you need. You can even integrate your customer relationship management (CRM) system with the ERP software to have a single platform overview of your business.  

Panni’s enterprise resource planning (ERP) for the chemical industry by Sage X3 offers broad scope, deep functionality, and configurability that meets the needs of today’s chemicals market. Industry-specific capabilities include:

• Integrated customer relationship management and new product development
• Sales forecasting with campaign support, seasonal profiles, and collaboration
• Trade management with sales promotions, campaigns, and rebates
• Mixed-mode production capabilities ranging from high-volume, make-to-stock, and made-to-order custom-formula solutions
• Multiple measurement units
• Batch balancing for best capacity utilization
• Multi-level traceability and shelf life/expiration date management
• Integration with compliance to ensure all materials comply with environmental regulations
• Operations delivered to the shop floor
• Integrated warehouse management systems (WMS) on mobile devices.

Now that we know some capabilities that comprehensive enterprise resource planning (ERP) offers the chemical industry let’s learn more about ERP in general, and how it is relevant to the industry. 

What Is an ERP?

Enterprise resource planning (ERP) is a platform that companies use to manage and integrate essential parts of their business, eliminating incompatible technologies and costly duplicates. 

It links information about the production, distribution, finance, and human resources. The platform, for example, integrates accounts payable, order-monitoring systems, stock control systems, and customer databases into one system. Besides the chemical industry, enterprise resource planning software is available for the food and beverage, manufacturing, and cannabis industries.   

What are some general benefits of using enterprise resource planning (ERP) solutions? 

• Improved accuracy and reporting
• Increased efficiency
• Increased compliance and risk mitigation
• Centralized data collection and analysis
• Improved service delivery
• Ability to adapt swiftly to unexpected changes
• Integration and unification of departments
• Improved interdepartmental communication.

An ERP can be a solution to most of the problems faced by a company. However, ERP implementations can fail. What would cause its implementation to fail?

• Lack of buy-in from senior management
• Not appointing a senior resource from the company side for the implementation
• Failure to implement a project plan approved by all stakeholders
• Data migration is not carried out properly
• Insufficient testing prior to go-live
• Companies don’t rethink how they are organized
• Companies are reluctant to abandon old working processes
• Companies are reluctant to let go of old software that worked well in the past.

Importance of ERP Testing    

Testing ERP applications can be challenging, as a small change could have a substantial effect on interfaces, system configurations, supporting infrastructures, business process steps, and security. As a business solution for the chemical industry, an enterprise resource management (ERP) system might need to integrate with unique chemical industry software and replace or complement accounting software, while maintaining customer satisfaction, safety management, and compliance management. 

Automating ERP testing, instead of doing manual testing, saves on cost, time, and resources. While test automation monitors data structures routinely, business-critical applications continue to run. Sage X3, the preferred chemical enterprise resource planning (ERP) solution used by Panni, includes an automated test platform that simplifies upgrades and configurations. It is scalable and extensible to support real-world scenarios. Upgrades are done quickly and accurately, with minimal downtime and financial loss. You can be confident that customizations and modifications have gone through full, end-to-end regression testing. 

Enterprise resource planning (ERP) testing is especially important in customized areas, to ensure critical business functionality is achieved before going live.

ERP Features to Look Out for in the Chemical Industry 

Enterprise resource planning (ERP) software for the chemical industry has the same essential tools as a generic system, but offers additional features tailored to the operational needs of the industry. Panni’s chemical ERP software is delivered with a modern user interface and hosted in the cloud or on-premise. Features available to chemical companies are: 

Formulation and R&D. Help research and development (R&D) teams develop new formulas or modify existing formulas. Bills and materials can be specified as ‘in-development’ to protect the configuration. Formula versions and seasonal formulas are maintained. 

Safety Data Sheet (SDS) and a globally harmonized system. Ensures compliance by maintaining and tracking all levels of regulatory information. Information for the Globally Harmonized System of Classification and Labeling of Chemicals (GHS) is fully maintained by the product. SDS sheets are available for printing in the required standards. 

Potency management. Support accurate tracking and measuring of product potency. 

Location control and bin restrictions. Warehouses can be divided into various staging types, including staging, quality control, subcontractor, and traditional storage areas. The staging types are user definable. It offers high-level control over how and where inventory is stored. 

Quality control. Support and enforce your specific quality standards. Test results are recorded and maintained together with the product’s history to serve as the basis for the Product Lot Certificate of Analysis (CoA).      

With the right implementation, you can improve the flow of your chemical stock inventory, simultaneously responding faster to customers and marketplace trends. Track inventory from development to delivery with a barcode label system and use the access to a live purchasing database to stay ahead of fluctuations in product and shipping, taking control of the costs. 

The Benefits of an Industry-Specific ERP   

Every industry has key friction points and bottlenecks in its business processes. Industry-specific enterprise resource planning (ERP) solutions are designed to include problem-solving tools for these weaknesses. There are multiple regulations for the chemical industry, and another benefit of a dedicated solution is that it will integrate complex compliance processes into everyday workflows.   

Industry-related suites will use experts that understand the business to provide inputs during the software design period. It results in a solution unique to the industry and a service provider offering more informed troubleshooting and support. Less customization is needed with industry-relevant ERP offerings, as many key features are already available. This complete offering saves time and costs as the implementation process is smoother. Customization may still be required in specific instances, but they will be smaller as the enterprise resource planning software already fulfills most business needs.      

One of the final benefits of an industry-specific enterprise resource planning (ERP) solution is that it already contains all the basic tools required to run a business. You get the business features such as accounting and inventory control, together with the industry tools, for an all-in-one solution.

Panni works with mid-size chemical industry clients throughout North America. The company understands the key challenges facing the chemical manufacturing and distribution industry, including having to comply with domestic and international regulations for hazardous materials. Sage X3 enterprise resource planning (ERP) solutions make these challenges more manageable. Do you need a solution that understands and delivers your chemical industry business needs? Contact Panni today. 

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C&EN’s World Chemical Outlook 2023

We analyze the business trends, government policies, and societal forces that will affect chemistry in the year ahead, january 11, 2023 | a version of this story appeared in volume 101, issue 2.

Credit: Shutterstock

• What are glow sticks, and what’s the chemical reaction that makes them light up?
• Is ammonia the fuel of the future?
• What’s in sunscreen, and how does it protect your skin from the sun’s rays?
• C&EN’s Global Top 50 chemical firms for 2022
• Who wants to buy Teva’s API business?

US chemical industry will take a hit from a mild recession

By alex tullo.

⇨ Economists say the US is in for a recession in early 2023.

⇨ Lower demand is making for a weak US chemical outlook after a strong 2022.

⇨ US chemical producers enjoy raw material advantages over foreign competitors, but overseas demand might not support exports.

The US chemical industry is headed for a soft patch. Most economists expect a mild recession early this year, which would throw cold water on chemical demand and production. Advantageous raw material prices continue to make the US industry globally competitive, however, and exports should be brisk—provided that offshore demand holds up.

Already, higher prices born of inflation have hit the wallets of US consumers. In response, the Federal Reserve has been combating inflation by raising interest rates, which increases the cost of borrowing for major purchases like houses. Add weakening European and Chinese economies to the mix, and it spells a likely US recession.

“However, the recession is projected to be short and mild, amid a strong labor market and relatively healthy consumer and business balance sheets,” wrote the Conference Board, an economics think tank, in a November report .

The American Chemistry Council (ACC), an industry group, also expects a shallow recession. After a strong 2022, in which US chemical production rose 3.9%, the ACC forecasts that output will decline by 1.2% in 2023.

One reason, the group says, is that construction of new homes, a big market for the chemical industry, will slip in 2023 because of the high cost of borrowing.

But another big chemical market—automotive manufacturing—could be a bright spot, now that a computer chip shortage that had been weighing on the industry is clearing up. The ACC forecasts that US sales of light vehicles will increase from 13.8 million units in 2022 to 14.9 million this year. “There’s some decent pent-up demand for vehicles in the system right now,” the council’s chief economist, Martha Gilchrist Moore, told reporters in December.

As always, the US chemical industry’s fortunes will depend to a large degree on the global competitiveness of its ethylene and other basic petrochemicals. Ashish Chitalia, head of petrochemicals, polymers, and sustainability management at the consulting firm Wood Mackenzie, says business was good in the first half of 2022. Demand was strong, and a tangled supply chain kept imports out of the market.But toward midyear, he says, demand slowed and the supply chain straightened out. Inventories spiked and petrochemical makers had to reduce operating rates.

The industry will work down this inventory during the year, according to Chitalia. “We are expecting in the second quarter of 2023 we’ll see a balanced situation in North America,” he says.

Relatively low energy prices should be a positive for the US chemical industry in 2023. Russia’s invasion of Ukraine shocked energy markets in 2022. Oil prices soared, rising by about 50% through June before falling.

The war’s impact on natural gas prices was even stronger. It was greatest in Europe, which depends on Russia for much of its supply, but the US wasn’t spared. US natural gas prices hit their highest levels in more than a decade as producers redirected liquefied natural gas exports to Europe.

But US prices never got so high that natural gas was more expensive than oil on an energy-content basis. This is good news for US chemical producers, which typically extract petrochemical raw materials from natural gas instead of petroleum, as most of the world does.

“Right now, it costs twice as much to produce ethylene in Asia as it does in the US,” Chitalia says.

Michael McMurray, chief financial officer of the petrochemical maker LyondellBasell Industries, told the Citi Basic Materials conference in November that he is watching whether the Chinese market will be robust enough to draw US exports. China imports 40% of the polyethylene it consumes, but the country’s zero-COVID policies have slowed its giant economy.

“We really need China to kind of reopen, I think, for the overall demand environment to improve and hopefully for margins to start improving as well,” McMurray said.

Talks to continue on a plastics pact and chemical agreements

By cheryl hogue.

⇨ Negotiations on a plastics treaty will be in full swing.

⇨ Governments will consider whether to control groups of related chemicals, rather than just single compounds, under a treaty on persistent organic pollutants.

⇨ Countries will try to revive an expired agreement to improve the global management of commercial chemicals.

Controlling plastic pollution and persistent pollutants and improving the management of commercial substances will top the international policy agenda for chemicals this year.

The first talks on a global agreement to curb plastic pollution ended in December , and negotiators have scheduled second and third rounds of negotiations for later this year. The fourth round and a final, fifth round are set for 2024.

Major issues are whether a future agreement will include restrictions on production of single-use plastics and on toxic chemicals intentionally added to plastics to impart useful characteristics.

Negotiators also haven’t determined whether to embrace chemical recycling techniques being pushed by the plastics industry and the US government. The main commercial form of this technology, pyrolysis, is not available in much of the world, and questions remain about its economic viability.

Also up in the air is the role scientists will play in advising negotiators and partners to the completed agreement.

Bethanie Carney Almroth , a professor of environmental science at the University of Gothenburg, is part of an informal network of about 150 scientists from around the world who are looking to help. They want to provide guidance so that negotiators can craft a science-based agreement and prevent regrettable substitutes for current plastic items, she says.

Some governments are skeptical about this idea. They prefer to rely on international agencies, including the UN Environment Programme, World Health Organization, and Food and Agriculture Organization to provide scientific advice for the talks.

Other countries are suggesting that the plastics agreement establish an official science advisory group to counsel governments on future actions—similar to a panel formed under the Stockholm Convention on Persistent Organic Pollutants. That body reviews scientific data and makes recommendations to treaty partners on which chemicals should be banned or severely restricted.

The chemical industry supports the idea of a scientific advisory group for the plastics pact, says Stewart Harris, speaking on behalf of the International Council of Chemical Associations , an umbrella group of industry organizations. He says the sector wants to ensure that industry scientists, who have deep expertise on plastics, are part of the advisory group.

Meanwhile, governments will gather in Geneva in early May to determine if they will add more chemicals to the Stockholm Convention. They are scheduled to decide whether to ban the once widely used chemicals perfluorooctane sulfonic acid (PFOS) and its salts and perfluorooctane sulfonyl fluoride, which was used to make PFOS . PFOS is highly persistent and is toxic even at very low concentrations.

They will also decide whether to adopt recommendations from the convention’s Persistent Organic Pollutants Review Committee to ban the insecticide methoxychlor. And governments are considering controls on the ultraviolet stabilizer UV-328, which is used in many types of plastic.

At the May meeting, governments will consider controlling classes of chemicals rather than individual substances under the Stockholm Convention, according to Bjorn Beeler , international coordinator at the nonprofit International Pollutants Elimination Network . Classes could include UV stabilizers, certain flame retardants, per- and polyfluoroalkyl substances (PFAS), and chlorinated paraffins. Each of these groups has members with similar toxicity and persistence.

Chemical makers have concerns about a class-based approach to chemicals under this treaty, says American Chemistry Council spokesperson Andrew Fasoli. At times, he says, it is appropriate to list more than one chemical—such as PFOS and its salts. But to legally list broad classes of molecules in the treaty, governments will need to negotiate an amendment, Fasoli adds.

This year, governments will also attempt to revive an agreement to improve the management of chemicals globally. The Strategic Approach to International Chemicals Management (SAICM), established in 2006, is a set of policy guidelines that expired in 2020. Negotiations to extend SAICM through 2030 were interrupted by the COVID-19 pandemic.

Negotiators will restart work on SAICM at the Fifth International Conference for Chemicals Management in Bonn, Germany, Sept. 25–29. The chemical industry has backed SAICM since its inception as a way to ensure that all actors in the supply chain are trained and accountable for the safe handling of commercial chemicals.

Environmental justice advocates will monitor the path of federal funding

By rick mullin.

⇨ Commitment of federal dollars for environmental justice has reached a record level under the Biden administration.

⇨ Community leaders are mobilizing to ensure federal money reaches communities of need.

⇨ Environmental justice leaders have taken an advisory role at the federal level.

“I think 2023 will be a very busy year,” says Robert Bullard, director of the Bullard Center for Environmental and Climate Justice. “Busy from the standpoint of building on some of the wins that we were able to achieve in 2022, particularly as it relates to getting environmental and climate justice integrated into federal policy, and making sure resources and funding follow those priorities.”

Bullard, Distinguished Professor of Urban Planning and Environmental Policy at Texas Southern University, notes that federal funds and programs from President Joe Biden’s administration amount to a level of support that the environmental justice movement has never seen before. The $369 billion Climate Bill, part of the Inflation Reduction Act of 2022, for example, commits $60 billion to establishing grants and funding clean energy and environmental mitigation projects in disadvantaged communities.

More broadly, the Biden administration has committed to channeling 40% of the benefits of relevant federal investment to communities that bear a disproportionate environmental burden —a program called Justice40.

The problem now, Bullard says, is ensuring that the money—especially the federal funding that is distributed through state and local governments—gets to the right places. The prospect of inexperienced community organizations forming to compete for funding with groups that have been working on the front line for years concerns him.

“We are saying that we will not sit idle while we see money siphon off into places and into programs and going to projects that bypass our communities,” Bullard says. “That is the 2023 challenge.”

Peggy Shepard, executive director of We Act for Environmental Justice, says the onus of seeing that promises to communities are kept is on the communities themselves.

“The whole foundation of working to achieve environmental justice is local,” Shepard says. But essential resources are lacking at the local level. “We have some communities with maybe one staff person. You can’t really do a lot if you don’t have staff. If you don’t have a policy person, how are you engaging with the federal government? How do you engage on the state level on climate change?”

Shepard adds that local and state elected officials, and even some members of Congress, are unfamiliar with the Justice40 initiative. Last month, We Act kicked off an 11-city tour intended to bring community leaders and elected officials together to raise awareness of the 40% directive.

Awareness of the broader environmental justice movement has risen, however, beginning with the focus on racial inequality in the US that followed the murder of George Floyd in 2020 and then-candidate Biden’s avowed commitment to environmental justice. Shortly after his inauguration in 2021, the administration announced establishment of the White House Environmental Justice Advisory Council.

Shepard, cochair of the council, says environmental justice has been given a much more prominent seat at the federal table. “We might have known one or two people at a federal agency, generally the EPA,” she says, referring to the Environmental Protection Agency. “But the council has provided more access and input to other agencies—the Department of Transportation, Department of Energy, Department of the Interior.”

And these agencies require guidance on where resources are needed at the local level, Shepard says. “The issue with the federal government is they are trying to implement something transformational and formative, but they have not created the structure to do that.”

Community advocates also plan to be heard on the international climate policy stage in 2023. We Act, the Bullard Center, and the Deep South Center for Environmental Justice hosted a climate justice pavilion at last year’s UN Climate Change Conference, or COP27, in Sharm el-Sheik, Egypt. The pavilion, which in recent years has been located in the general area known as the Green Zone, was for the first time in the Blue Zone, where policy makers and delegations have pavilions.

The groups held several panels, one of which included EPA administrator Michael S. Regan. “We explained the challenge that all our states are not created equal,” Bullard says. “There are some that will do a great job in distributing money in a way that will follow need, and others in a way that will be problematic. And [Regan] said in public that if a state is not spending money in a way that is designed, EPA will withhold the money.”

Europe faces painful new normal of higher natural gas prices

By alex scott.

⇨ Natural gas price inflation will be a major burden in 2023.

⇨ The German chemical sector expects “persistently difficult” conditions.

⇨ Leading European chemical firms plan to cut costs in Europe and expand in North America and Asia.

The industrial woes Europe faced in 2022—high energy prices and depressed economic conditions resulting from Russia’s decision to turn off its supply of natural gas to the region—are set to continue in 2023, according to economists and industry leaders.

The European Union’s economic outlook for 2023 “has weakened significantly,” Paolo Gentiloni, the European Commissioner for economy, said at a press conference in November. The commission forecasts that the region’s economy will grow just 0.3% in 2023 and 1.6% in 2024.

Or as Peter Huntsman, CEO of the US chemical maker Huntsman, put it in a recent call with stock analysts: “Europe continues to be a basket case. There just seems to be a great deal of uncertainty.”

A silver lining is that natural gas prices have fallen from their record highs in the summer of 2022—when they forced some chemical companies to idle or close plants—and are now below what they were right before the war. This is partly because a mild winter in Europe has reduced demand. Additionally, US liquefied natural gas is playing a critical role in meeting European energy demand, Kristy Kramer of the consulting firm Wood Mackenzie writes in an outlook report.

Analysts at the investment firm Jefferies forecast that any sustained improvement in financial performance among leading European chemical firms is “unlikely” in 2023 and that recovery will be volatile.

VCI, Germany’s main chemical industry association, described conditions as “persistently difficult” in a press release published at year-end. VCI president Markus Steilemann expects that “more dark months are ahead” for the industry.

Sounding a more optimistic note, the American Chemistry Council, a US trade group, predicts that chemical production in Western Europe will grow by 0.8% in 2023 after declining 3.2% in 2022. The European Chemical Industry Council, Europe’s main industry group, hasn’t yet published a forecast for 2023.

Even if modest growth is on the horizon, European chemical companies like BASF and Evonik Industries are responding to market conditions by substantially reducing operating costs and investment in the region. BASF aims to cut costs by nearly $500 million annually for the next 2 years, mostly in Europe. Evonik cites the planned sale of its performance materials business as a key positive for 2023, as it will reduce the firm’s exposure to Europe.

Evonik forecasts that its energy and natural gas costs will increase by $310 million in 2023, to $1.7 billion, following a $620 million price hike in 2022. The firm expects to shave some energy costs by adding the ability to switch fuel for the power plant at its site in Marl, Germany, from natural gas to liquefied petroleum gas.

Huntsman, which has a substantial manufacturing presence in the UK and elsewhere in Europe, recently upped its planned cost cuts in Europe by 20%, to $280 million per year, by the end of 2023.

“It’s more than just saying we’ve got to suck in our gut and stop buying newspaper subscriptions for the next year,” Peter Huntsman said on a call with analysts. “We’ve got to fundamentally restructure in Europe, because Europe itself is being fundamentally restructured. And you are seeing a massive deindustrialization.”

Peter Huntsman expects high natural gas prices to become “permanently embedded” in the region. “Europeans are doing a horrible job when it comes to long-term energy security and competitiveness,” he added.

China’s chemical industry is poised for a rebound

By hepeng jia, special to c&en.

⇨ China’s chemical industry is expected to rebound after the lifting of COVID-19 restrictions.

⇨ Sectors such as pharmaceuticals and agricultural chemicals are poised for growth.

After a bumpy 2022, China’s chemical industry is poised to benefit this year from the country’s recent lifting of its zero-COVID-19 policies.

In the first 10 months of 2022, profits for China’s chemical manufacturing sector declined by 3.6% from the same period in 2021, to about $93 billion, according to China’s National Bureau of Statistics. Owing mostly to rising oil prices, industry sales rose by 13.6%, to $1.1 trillion.

That dim profit picture is a change from 2021 and even the first quarter of 2022, when intense global demand for Chinese electronics and consumer products drove a boom in chemical sales. But the lockdowns that started in the second quarter of 2022—especially the 2-month shutdown of Shanghai, the country’s main economic hub—severely injured China’s economy, including its chemical sector.

The loosening of quarantine requirements has created a very different environment for 2023. The Chinese government removed nearly all restrictive measures Dec. 7, and state media changed their tone to play down the risk of severe illness from COVID-19.

Notably, the expected explosion in COVID-19 infections is spurring the pharmaceutical sector, including demand for analgesics such as acetaminophen. Meanwhile, the agricultural chemical sector is looking forward to a prosperous year as pesticide and fertilizer prices climb.

Ye Yingmin, president of the Beijing-based consulting firm Chem1, is optimistic about the year ahead. “The year 2023 will be a starting year for a new industrial boom,” Ye says. Yet, with reports of COVID-19 infections and deaths flooding social media platforms in China, the challenge for economic and industrial recovery remains tremendous.

On Jan. 3, the China Federation of Logistics and Purchasing and the National Bureau of Statistics announced that the Purchasing Managers Index for the manufacturing sector declined from November to December, indicating shrinking economic activity despite the changed COVID-19 policy.

Sustainability

Industry will coalesce around standards for how to count carbon, by craig bettenhausen.

⇨ Governments and consumer product makers want comparable sustainability scores.

⇨ USDA BioPreferred is likely to incorporate carbon footprints.

As pledges to reduce greenhouse gas emissions become part of the social license to operate for companies in almost every sector, methods of counting carbon dioxide have proliferated. In 2023, the chemical industry will respond to customers demanding scores that they can compare by starting to coalesce around a select few approaches to sustainability accounting.

Charlie Quann, climate change lead at the sustainability consulting firm Antea Group, says some strong standards have already emerged. He says the Global Reporting Initiative is the main game in town for reporting sustainability to shareholders and financial regulators. In addition, he says, the Science Based Targets Initiative leads for setting and tracking greenhouse gas targets, and the Climate Disclosure Project ’s environmental reporting framework—already popular—will grow in impact because of a new Biden administration rule requiring federal contractors to participate.

For individual products, the US Department of Agriculture’s BioPreferred ecolabel is already influential, and an effort underway to improve it could bear fruit in 2023. Right now, products earn the USDA Certified Biobased Product ecolabel by meeting a threshold for biobased content—generally 25% or higher. Products also state the percentage of biobased content, based on carbon isotope ratios.

The label is effective at boosting biobased materials and influencing consumer behavior but doesn’t directly measure sustainability, according to Rina Singh, executive vice president for policy at the nonprofit Alternative Fuels and Chemicals Coalition. Singh is working with the testing organization ASTM International to publish a full-life-cycle carbon footprint method and with the USDA to incorporate the result in an updated USDA ecolabel. The new BioPreferred label would include a color code indicating that a product is a net carbon sink, carbon neutral, or a net carbon emitter.

The method Singh is working on is now in early balloting at ASTM, and she predicts that it will pass midyear. She says her group’s early conversations with the USDA and key lawmakers are going well, and she expects the change to be part of the 2023 farm bill.

Stefan Unnasch, managing director of the life-​cycle-analysis firm Life Cycle Associates, says governments are in the best position to anoint standard methods and metrics. He cites the US Department of Energy’s GREET model as another robust platform for counting CO 2 . But making standards align across international borders has not been a priority, causing headaches for global businesses.

CHEMICAL REGULATION

Another challenging year ahead for us chemical regulators, by britt e. erickson.

⇨ The US Environmental Protection Agency is likely to finalize a ban on chrysotile asbestos imports this year, despite opposition from the chlor-alkali industry.

⇨ The agency is not on track to meet deadlines related to evaluating the risks of a few dozen high-priority chemicals under the Toxic Substances Control Act.

⇨ The EPA is unlikely to meet the 90-day deadline to review the risks of new chemicals before they enter the market.

Ensuring the safety of chemicals is one of the most serious management challenges facing the US Environmental Protection Agency, according to a recent report from the EPA’s Office of Inspector General . The agency is not on track to meet statutory deadlines in 2023 related to chemical safety because of an increased workload and the need for resources, particularly scientists trained in chemical risk assessment, the report finds.

The EPA has not been able to meet deadlines under the Toxic Substances Control Act (TSCA) ever since Congress revamped the law in 2016 . And the agency is slipping further behind each year.

In 2020, under former president Donald J. Trump’s administration, the EPA completed the first 10 risk evaluations for high-priority chemicals on the market . Several of those assessments were 6 months late.

In June 2021, under the new leadership of Michal Freedhoff, the EPA’s chemical office changed how it conducts risk assessments to ensure they are science based and legally defensible. The agency spent the last year and a half revising the first 10 assessments to reflect those policy changes.

To date, the EPA has proposed a rule to manage the risks for only 1 of the 10 chemicals— asbestos . That rule, proposed in April 2022, would ban US imports of chrysotile asbestos. The carcinogenic substance is used exclusively by the chlor-alkali industry. Chlorine makers claim the ban would have a negative impact on water disinfection and chemical supply chains. The agency is likely to finalize the rule in 2023 amid industry opposition, and chemical makers are likely to challenge it in court.

The EPA has nearly finished revising the assessments for the other 9 chemicals, except for the solvent 1,4-dioxane . The agency is completely redoing that one.

$64 million and 201 full-time employees

The additional resources the Environmental Protection Agency says it needs to implement the Toxic Substances Control Act.

Source: US EPA

“We’re working as quickly as we can to put measures in place to protect people from exposures to dangerous chemicals like trichloroethylene, methylene chloride, and asbestos,” Freedhoff told the Senate Environment and Public Works Committee in June 2022. The deadlines for proposing rules for reducing risks of the 10 chemicals have passed, and the EPA didn’t meet any of them. “Without additional resources, we won’t get more than a handful of those rules on the books before 2025, or beyond,” Freedhoff testified.

In addition to the first 10 chemicals, the agency is evaluating the next set of about two dozen high-priority chemicals. Deadlines for those evaluations started in late 2022, and the EPA missed all of them. “It’s unclear whether we’ll even be able to complete half of them before 2025,” Freedhoff said at the June hearing.

The agency is also struggling to meet the 90-day deadline to review the risks of new chemicals before they hit the market. Freedhoff told lawmakers in June that fixing scientific integrity issues and hiring additional staff in the new chemicals program is the top priority for her office.

To get TSCA implementation back on track, the EPA asked Congress for an increase of nearly $64 million and of 201 full-time employees for fiscal 2023, which began Oct. 1. “There’ll be real consequences if we don’t get these resources,” Freedhoff told lawmakers in June. “Communities, workers, children—all of us, really—would go even longer without the health protections we need and deserve.”

Lawmakers passed the 2023 budget just before the new year, giving the EPA $9 million for TSCA implementation. The EPA must collect that amount from industry paid user fees to offset the costs.

The EPA proposed raising TSCA-related fees in November and will have to do so this year to comply with the 2023 appropriations bill. Those fees, paid by chemical manufacturers, help support the agency’s review of the safety of new chemicals and those already on the market that may pose a health risk. The EPA can collect up to 25% of the cost of reviewing chemicals from industry-paid user fees, but so far those fees have covered only about 12% of the costs.

Persistent Pollutants

Epa is poised to impose cleanup liability for 2 pfas.

⇨ The EPA intends to establish liability for cleaning up two formerly used PFAS that are widespread pollutants.

⇨ The agency wants more data from chemical manufacturers about PFAS production and by-products, worker exposure, and disposal methods.

Companies in the US are expected to face new liability this year for cleanup of two widespread per- and polyfluoroalkyl substances (PFAS) . In addition, the US Environmental Protection Agency intends to require chemical manufacturers to provide regulators with more data about PFAS production.

PFAS are synthetic chemicals that are highly resistant to degradation, providing qualities such as waterproofing and grease proofing. Though there are thousands of these substances, few have been studied for their health or environmental effects. Some have been found to be highly toxic.

This year, the EPA intends to finalize its designation of two PFAS as hazardous substances under the federal Superfund program for cleaning up sites contaminated with toxic waste, according to an agency report issued in November . The action would affect companies and others that released perfluorooctanoic acid (PFOA) and perfluorooctanesulfonic acid (PFOS), including their salts and structural isomers.

PFOA and PFOS are contaminants widely found in water, soil, and sediments. Published evidence indicates that they are toxic to humans at very low levels. The two chemicals were formerly ingredients in foams used to extinguish liquid-fuel fires. They also had applications in a number of industrial processes, including the production of fluoropolymers.

The EPA’s planned designation would make companies liable for PFOA and PFOS releases . The agency could either require polluters to clean up these substances­ or could conduct cleanups and recover costs from those responsible for the contamination.

The American Chemistry Council, a chemical industry trade group, opposes the EPA’s liability plan , calling it expensive and unworkable.

In addition, the EPA plans to complete a rule this year that would require companies to report on the quantities of PFAS that are produced in or imported into the US or are by-products of manufacture, the agency report says. This regulation would also require companies to provide information about worker exposure to and disposal methods for these chemicals.

Energy Storage

Public money will make 2023 the year of the battery factory, by matt blois.

⇨ The US government is funneling $142 billion into the electric vehicle industry.

⇨ Many projects catalyzed by that funding will be announced in 2023.

A tsunami of public funding is motivating companies to draw blueprints for scaling up every part of the US battery industry, especially for electric vehicles.

RMI, a nonprofit promoting clean energy technology, estimates that the Jobs and Infrastructure Act, the CHIPS Act, and the Inflation Reduction Act (IRA) will funnel a total of $142 billion into the US battery industry through tax credits for making battery components and through direct grants for factories.

The biggest impact will come from production tax credits in the IRA, says Nathan Iyer, an associate with RMI. Starting this year, battery cell manufacturers in the US will get tax credits that could cover 30% of their costs. Companies making components for battery cells, such as cathode and anode materials, additives, and electrolytes, will get tax credits for about 10% of their production costs. A tax credit for electric cars made with components and minerals from North America serves as a longer-term incentive.

While it will take years to build those factories, Iyer expects most of the plans to be set in the next 12 months. The tax credits expire after 10 years, so companies have to move quickly. “In 2023, the wheels start turning,” he says.

$142 billion

The estimated amount that the Inflation Reduction Act, the 2021 infrastructure bill, and the CHIPS Act will funnel into the US battery industry

The tax credit that manufacturers will receive through the Inflation Reduction Act for making battery components in the US

Source: RMI.

In February 2022, Graphex Technologies, which makes anode materials in China, announced plans for a graphite processing facility in Michigan that is expected to open in 2023. CEO John DeMaio says the passage of the IRA in August 2022 encouraged the company to expand further. The company is now planning a second US plant that would carry out a separate graphite processing step. “We were already on the path to domesticating the supply chain because it makes good business sense,” DeMaio says.

Venture capital funding for batteries is also accelerating, according to Eric Rosenblum, managing partner with the investment firm Foothill Ventures. He says promising start-ups can now raise enough money to jump from the research lab to the factory in just a few years, partly because more venture firms now understand the technology. “The ecosystem that’s developing around these kinds of scientific founders is new,” he says. “You have a group of deep-tech investors . . . who can do the due diligence and support the company.”

Cell-grown meat to move closer to dinner plates

⇨ US regulators could green-light cell-grown meat this year.

⇨ Chemistry will be key for lowering the cost of media for growing cells.

Companies growing meat from animal cells are poised to take big steps forward in 2023 after reaching a major regulatory milestone for the industry last year.

In November, the US Food and Drug Administration said it didn’t dispute Upside Foods’ studies claiming that its cell-grown chicken is safe. The company still needs regulatory approval from the Department of Agriculture before it can sell its product in the US.

Claire Bomkamp, a scientist at the Good Food Institute, a think tank, says that could happen before year-end. More importantly, she says, the FDA’s announcement is a sign that the industry is gaining momentum. “It gives a slightly clearer picture of what the regulation is going to look like for other companies,” she says.

Eric Schulze, who oversees regulatory affairs at Upside, expects the firm’s accomplishment to help others move more quickly. “We intentionally built our submission to be copied, built upon, and used by others,” he says.

Clearing regulatory hurdles isn’t the only challenge for cell-grown-meat companies. To compete with traditional producers, they will need to lower costs. That means finding cheaper chemicals for the media used to grow animal cells. Those chemicals represent the bulk of costs for producing cell-grown meat.

Upside’s cell culture medium includes amino acids, fatty acids, sugars, trace elements, vitamins, and recombinant proteins. The most expensive components are the proteins, including growth factors and albumin. Cells need only small amounts of growth factors but require substantial amounts of albumin—making a low-cost source a must, Bomkamp says. Researchers are trying to find cheap plant proteins to replace animal- derived or recombinant albumin. “My hope is that it would be something fairly simple,” she says.

Schulze says Upside is working on ways to reduce costs but that it will take years for the price of cell-grown meat to match that of conventional meat. In the coming months, he adds, the focus will be on getting consumer feedback for the first time and making the chicken taste more “ideally chicken-y.”

Biobased Chemicals

Fermentation will grow as a way to make chemicals.

⇨ Improved process engineering is enabling larger-volume chemical fermentation.

⇨ Genetic engineering is opening up more molecular targets to microbial manufacturing.

Most consumer-facing markets are seeing increased demand for low-carbon, plant-based products. In 2023, the volume and diversity of biobased chemicals made via fermentation will grow as microbe engineering gets better and synthetic biology unlocks a wider range of molecular targets.

One example of this trend is the growth of the industrial biotechnology firm Genomatica , which is rapidly commercializing fermentation routes to large-volume chemicals normally made from petroleum. Biobased 1,4-butanediol (BDO)—a starting material for many foams, plastics, and fibers—has been a star performer for the company.

The firm licensed its bio-BDO process to the bioplastics firm Novamont, which started up a 30,000-metric-ton-per-year plant in Italy in 2016. More recently, it licensed the technology to Qore, a joint venture between the chemical distributor Helm and the agriculture giant Cargill. Lisa Kennedy, Genomatica’s vice president for strategic partnerships, says she expects Qore to open a plant in Iowa in 2024 that is twice as big as the Italian facility. Qore already has the spandex maker Lycra signed up as a customer.

Steve Weiss, a consultant who works with Genomatica and other biobased fuel and materials companies, says buy-in from such major firms is a strong endorsement of synthetic biology’s ability to compete at large scale with synthetic chemistry. “You wouldn’t expect companies like Cargill and Helm to proceed with a project like that unless the economics were solid.”

Kennedy says Genomatica is also pursuing projects to make butylene glycol, caprolactam, hexamethylenediamine, and other small molecules.

Similarly, the gene-editing and strain-optimizing powerhouse Ginkgo Bioworks dotted 2022 with announcements of new customers looking for its help to produce organic acids, personal care ingredients, enzyme catalysts, and medicines. The firm says many more partnerships will become public in 2023.

Weiss expects to see growth in 2023 in the types of molecules that companies are making by fermentation—especially flavors, fragrances, and other specialty chemicals. He also says fermentation will continue to edge toward larger volumes. “I think the trend lines are good that this may be a field that’s beginning to come up to speed and put numbers up on the scoreboard.”

Informatics

Chemical firms will standardize digital platforms.

⇨ One-off digitalization projects will be consolidated.

⇨ Employee adoption will be a key focus.

The chemical industry has invested heavily in information technology over the past 5 years, implementing a framework on which to convert most if not all of its operations to digital ones. Digitalization , as it’s called, has moved into a new phase of consolidation and standardization that will likely define IT strategies this year.

“I think in ’23 we will see chemical companies pushing their digital strategies to scale, by which I mean moving from one-off proof of concepts here and there to enterprise-wide impact,” says Adam Rothman, an analyst at Boston Consulting Group. The effort, he says, will emphasize employee adoption of digital tools.

David Yankovitz, a chemical analyst at Deloitte, says companies will capitalize on years of heavy investment in core IT infrastructure​—projects that have introduced mobile devices, sales portals, and a shift of enterprise computing to the cloud. Rothman and Yankovitz concur that the next phase of investment across the industry will center on improving supply chain resilience and on transparency, particularly in managing carbon dioxide emissions .

Henrik Hahn, chief digital officer at Evonik Industries, agrees with the consultants. He adds that much of the benefit to be gained at this point will accrue from consolidating so-called lighthouse projects done in isolation and implementing a standard for deploying digital technology.

“In the past there were lighthouse topics, like having an online shop, doing social media outreach, doing data analytics,” Hahn says. “This is all now part of a framework approach where we more and more elaborate a standard procedure that, in the end, scales within the company.”

Melanie Kalmar, chief digital officer at Dow, also emphasizes the importance of working toward a standard digital infrastructure . Dow has put $400 million into digital platforms in recent years, she says. “Our focus is going to be driving further adoption of what we’ve implemented to really get the most out of the capabilities.”

Dow is also bringing employees up to speed in a new world of work by presenting technologies as “digital assists,” Kalmar says. “It’s not just, ‘Here’s a tool you will use in your job.’ It’s, ‘Here is how we are going to change how you do your job because you have these tools’ ”.

Research Funding

New research security requirements, oversight coming for scientists and universities, by andrea widener.

⇨ The first parts of a US research security directive aimed at identifying and preventing foreign influence will go into effect in 2023.

⇨ Uniform reporting requirements for conflicts of interest will be the first rule to go into effect.

⇨ Universities should get guidance on what their new research security offices need to do.

A year ago, the US Office of Science and Technology Policy (OSTP) released guidelines designed to make academic research funding more transparent and less vulnerable to foreign interference.

In 2023, many of the requirements, which stem from the National Security Presidential Memorandum-33 (NSPM-33) during the administration of Donald J. Trump, will become reality for scientists and universities seeking federal funding.

The first requirement will be new disclosure forms that agencies use to collect information about a principal investigator’s funding sources. The goal is to make those forms—the biographical sketch and a list of current or pending funding—the same across all federal research agencies. The standardization is intended to streamline work for scientists applying for grants and eliminate confusion about what they need disclose to the government.

National Science Foundation actions against people or institutions with connections to foreign talent programs

Grant awards suspended a

Grant awards terminated

Government-wide suspension from applying for future grants, for 9 researchers and 4 institutions b

Individuals barred from getting future federal funding; 2 institutions were debarred

Individuals barred from serving as reviewers

Universities are concerned that individual agencies will be able to add their own questions above what is required in the form, says Deborah Altenburg, associate vice president for research policy and government affairs at the Association of Public and Land-grant Universities. Schools want to “make sure that the bar is very high if you’re going to allow agencies to add something, because then you’ve made it different,” which defeats the point of a universal form, she says.

Another requirement is that universities with over $50 million in US funding must create their own research security offices to oversee cybersecurity, foreign travel security, research security training, and export control training.

Rebecca Keiser, chief of research security, strategy, and policy at the National Science Foundation (NSF), says that after an internal review, all the requirements will go out for public comment—hopefully sometime this month. “We’re all really anxious to get these draft standards out as soon as we possibly can,” she says, because universities are eager to move forward.

Training for scientists is another part of the new mandates. The CHIPS and Science Act , which Congress passed in July 2022, required the NSF to fund training modules that university research security offices can use. Those contracts were scheduled to go out in December, and Keiser hopes the resulting training will be available before the end of 2023.

The NSTC is just starting work on another NSPM-33 requirement: common consequences across agencies for failing to report foreign funding or other conflicts. Until now, most consequences have been handled case by case, Keiser says, and that complicates the process. “We want to be really careful that we don’t overgeneralize, but we also want at the same time to be very clear about what could trigger particular consequences,” such as termination of a grant or referral to law enforcement, she adds.

The NSF previously announced that it would start using an artificial intelligence tool to search for unreported conflicts of interest or foreign interference. Keiser says that will happen as soon as guidelines for how the tool will be used come out, hopefully this month.

US agencies will release plans for immediate public access to publications and data

⇨ Plans for how US research funders will implement immediate open access to publications and data are due this year.

⇨ The plans include access to data, whether they underlie a publication or not. An NIH data-sharing plan goes into effect in January.

Scientists and publishers are eager to see US government agencies’ plans to give the public immediate access to publications and data created from federally funded research.

In August, the US Office of Science and Technology Policy (OSTP) announced that it would require immediate open access for its funded research, and agencies’ policy plans are due this year. A 2013 plan had made research publicly available a year after publication for agencies that fund over $100 million in research. The new plans include immediate availability for both publications and data.

The requirement extends to all federal agencies. Plans from larger funders are due in February; smaller funders, which are creating open-access plans from scratch, have until August.

Agencies seem enthusiastic about the possibilities of the plans they’re developing, says Heather Joseph, executive director of the Scholarly Publishing and Academic Resources Coalition (SPARC), an organization of libraries and academic institutions that promotes open access. “It’s a sea change in how the agencies are approaching it.”

The National Institutes of Health (NIH), which has been at the forefront of public access among agencies, has already created a data openness plan that will go into effect this month. Making publications available isn’t enough, says Lyric Jorgenson, the NIH’s acting associate director for science policy. “At the end of the day, data are the catalysts for every biomedical discovery.”

Just like the OSTP directive, the NIH plan applies to data whether or not they underlie a publication. “A ‘no’ finding is just as important as one that gets put in the journal. It is very important that we get that information out there,” Jorgenson says.

The NIH has tried not to be prescriptive about how a scientist’s data are made available, she says, since it is dealing with many types of data and different data-sharing cultures.

The same is true for the OSTP, which is not telling scientists how to make their publications available. They may publish open access—many federal funders allow payments, when required, to be charged to their grant—or place them in a repository.

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4 Ways a Settlement Could Change the Housing Industry

The influential National Association of Realtors agreed to make several changes to its policies to settle class-action lawsuits brought by home sellers who say they were forced to pay inflated commissions to real estate agents.

By Debra Kamin

In the early hours of Friday morning, the National Association of Realtors agreed to a global settlement deal that would resolve several lawsuits against the trade group.

A group of Missouri home sellers sued N.A.R. over their policies on agent compensation, arguing that a N.A.R. rule requiring home sellers to pay commissions to their agents and the agents of their buyers led to inflated fees and price fixing. The lawsuit also called into a question another rule requiring agents to list homes on N.A.R.-affiliated databases in order to sell them. In October, a jury agreed that both practices were anticompetitive, and a judge ordered damages of at least $1.8 billion.

More than a dozen copycat cases, all accusing N.A.R. of stifling competition and violating antitrust laws, have followed.

With the settlement agreement, N.A.R. will pay $418 million in damages , but more important, it has agreed to rewrite a number of rules that have long been central to the U.S. housing industry. Here’s how things stand to change, pending court approval.

Home prices will drop.

In the United States, most agents specify a commission of 5 or 6 percent, paid by the seller. That means that someone with a $1 million home should expect to spend up to $60,000 on real estate commissions alone, with $30,000 going to his agent and $30,000 going to the agent who brings a buyer. Even for a home that costs $400,000 — close to the current median for homes across the United States — sellers are still paying around $24,000 in commissions, a cost that is baked into the final sales price of the home.

With the settlement agreement, sellers’ agents will no longer be required to make offers of commission to buyers’ agents, a practice called decoupling. This will save homeowners billions.

“Decoupling will allow commissions to be removed and negotiated down, lowering both housing prices and overall consumer costs,” said Steve Brobeck, the retired executive director of the Consumer Federation of America. Mr. Brobeck said that Americans spend about $100 billion a year in real estate commissions, and with the settlement, that number is expected to dip by at least $20 billion and up to $50 billion.

Since commissions are tacked onto the price of a home, “Over time, both sellers and buyers will force rates down through negotiation and comparison shopping in a more price-transparent marketplace,” he said.

The 6 percent commission will cease to be the norm.

The lawsuits argued that N.A.R., and brokerages that required their agents to be members of N.A.R., had set rules that led to an industrywide standard commission of 5 or 6 percent — one of the highest rates in the world. Without that guaranteed rate, agents will now most likely be forced to lower their commissions to compete for business.

“U.S. commissions are unlikely to decline to the 1 or 2 percent rate level in England, where only one agent and an attorney are usually involved in a home sale. But they certainly will decline substantially, and commissions will also increasingly reflect the competence and efforts of agents on sales,” Mr. Brobeck said in an email.

Steering — the practice of agents directing buyers to more expensive houses — will be less common.

Most of the databases where homes are listed for sale in the United States are restricted to dues-paying members who belong to N.A.R., a dominance that has led to antitrust allegations against N.A.R.

One N.A.R. rule demands that a listing agent, when posting a home on the database, clearly state the amount of compensation that a buying agent will receive should they bring a buyer. This is a practice that critics say has long led to “steering,” in which buyers’ agents direct their clients to pricier homes in a bid to collect a bigger commission check.

Under the settlement, any fields displaying broker compensation will be eliminated entirely, which will help damper the practice.

About one million real estate agents could leave the profession.

The number of real estate agents swelled during the pandemic, when mortgage rates plummeted and the housing market boomed. In 2020 and 2021, more than 156,000 people got their real estate licenses, and membership in the National Association of Realtors hit a peak of 1.6 million members in 2022.

A lot of that growth was predicated on the idea of easy money.

But now a lot of those agents are struggling, and a reduction in commission rates will only increase the pain. Half of the agents in the country sold one house — or no house s at all — last year. With the industry now staring down a massive overhaul, veteran agents predict their less experienced peers will leave the field all together.

Some analysts predict a mass departure. One widely cited report from investment banking firm Keefe, Bruyette & Woods projects 1 million agents leaving the field as shared commissions vanish.

“Veteran agents have built strong relationships, established reputations and extensive networks. Newer real estate agents may struggle,” said Jen McDonald, who leads LPT Realty in Reno, Nev., and has spent 24 years in the industry. “Without established reputations or strong clients bases, they are going to find it challenging to retain clients or attract new ones.”

Debra Kamin reports on real estate, covering what it means to buy, sell and own a home in America today. More about Debra Kamin

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Additional reporting by Gleb Stolyarov and Kirstin Ridley in London; Editing by Elisa Martinuzzi and Alexander Smith

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Thomson Reuters

Chief companies correspondent for Russia, Alexander covers Russia’s economy, markets and the country's financial, retail and technology sectors, with a particular focus on the Western corporate exodus from Russia and the domestic players eyeing opportunities as the dust settles. Before joining Reuters, Alexander worked on Sky Sports News' coverage of the 2016 Olympics in Brazil and the 2018 World Cup in Russia.

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