INSIGHT: Chems need more than cost cutting during multi-year slump

COLORADO SPRINGS, Colorado (ICIS)–Chemical companies can find more ways to grow profits beyond cost cutting as they enter another year of slow economic growth in the longest downturn in years.

• Early in 2025, chemical companies lost faith that economic growth will be strong enough to contribute to profit growth, and that drought could extend into 2026.
• A five-year global chemical buyer value study conducted by the consultancy Accenture shows areas where chemical companies can wring value out of their operations that go beyond cost-cutting. The study was conducted in December 2024-February 2025.
• Cost cutting is not off the table. The study found that chemical companies have overestimated their customers’ preferences for some products and services.

MULTI-YEAR DOWNTURN
The downturn in the chemical industry started about three years ago after consumers stopped splurging on big-ticket items following the pandemic.

Higher inflation caused interest rates to increased, which raised house prices and depressed demand for plastics and chemicals used in construction.

Consumers moved less because they could not afford new or existing houses, so that lowered demand for durable goods like furniture and appliances.

The war between Russia and Ukraine caused a surge in energy costs. In Europe energy prices never returned to levels before the conflict. Higher costs lowered demand and contributed to de-industrialization in Europe.

This year, tariffs and uncertain trade policy from the US have made companies and consumers more reluctant to purchase goods and make investments.

The performance of US-listed shares of chemical companies illustrates how difficult these past few years have been for the industry.

The following lists Wednesday’s closing prices for the US listed companies followed by ICIS and their 52-week highs. Figures are in dollars/share.

Company	Price	52 Week High
AdvanSix	24.81	33.00
Avient	36.06	54.68
Axalta	30.29	41.66
Braskem	3.75	7.71
Chemours	11.87	25.80
Celanese	58.19	150.31
DuPont	69.40	90.06
Dow	30.68	57.22
Eastman	80.04	114.50
HB Fuller	56.58	87.67
Huntsman	12.04	25.12
Kronos	6.73	14.37
LyondellBasell	61.12	100.46
Methanex	35.05	54.49
NewMarket	667.15	667.15
Olin	21.80	52.17
PPG	113.01	137.24
RPM	115.11	141.79
Stepan	56.53	94.77
Sherwin-Williams	357.13	400.42
Tronox	6.01	20.29
Trinseo	3.39	7.05
Westlake	80.19	156.64

For now, a recession is not in the outlook, but neither is a strong recovery.

ICIS expects that US economic growth will slow to 1.5% in 2025 from 2.8% in 2024. Growth in 2026 could be 1.7%. The country has a 34% chance of slipping into a recession in the next 12 months.

HOW TO GROW IN A SLOW GROWTH WORLD
Chemical companies don’t have to wait for the recovery to increase profits, according to the chemical buyer study from Accenture.

It found that 36% of chemical customers are willing to pay 5% or more above market price if their needs are fully met, and 43% are willing to buy 10% or more if all of their product and service needs are met, the study said. Chemical companies can increase revenue if they know where to look.

The following table shows the top 10 customer needs for 2025, according to the Accenture study.

Product Performance

Reliable Delivery

Quality Technical Support

Product Consistency

Data Privacy & Cybersecurity

Secure & Seamless Transactions

Trust

Product Innovation

Brand Strength

Product Offerings

Source: Accenture

Making high-quality molecules will always be a priority, but chemical companies can do a better job of meeting their customers’ needs by targeting services, Accenture said. Many underestimated needs cited by customers centered around services.

The following table lists the top 10 services valued by chemical customers.

Reliable delivery

Quality technical support

Data privacy and cybersecurity

Secure and seamless transactions

24/7 access

Order flexibility

Complaint resolution

Easy access to product info. & regulatory support

E-commerce

Comprehensive product support & expert guidance

Source: Accenture

New technologies are opening more opportunities for chemical companies to stand out by improving their services. Accenture mentioned the following:

• AI-based transport management solutions
• E-commerce platforms for seamless transactions
• Web portals and large language model-supported platforms for 24/7 access.

CUSTOMER NEEDS HAVE EVOLVED SINCE 2020
Chemical companies can extract more value by updating their priorities to keep up with the changing demands from their customers. The following table lists the top five needs that customers are underestimated by chemical companies. It compares those needs with Accenture’s list from 2020.

2025	2020
24/7 access	Packaging customization
Reliable delivery	Reliable delivery
Product consistency	Water conservation
Environmental health & safety compliance	Complaint resolution
Product innovation	Digital interfaces & experiences/chatbots

Source: Accenture

HOW TO CUT THE RIGHT COSTS
Companies may still have some fat they can cut, based on the Accenture study. It showed a gap between what customers want and what chemical companies think they want.

The following lists the top five overestimated needs by chemical companies in 2025 and compares them with those in 2020.

2025	2020
Renewable-based products	Value-added services
Market intelligence	Product consistency
Product customization	Quality technical support
Value-added services	Product sampling/trails
Local/regional supply source	Recyclable products

Source: Accenture

Renewable-based products, which also covers recycled materials, can demand a premium, but it may fall short of what producers need to generate a profit.

While 74% of chemical customers are willing to pay more for sustainable products, only 38% are willing to pay a premium of more than 5%, according to Accenture. Only 13% are willing to pay a premium of at least 15%. That is short of the premium of 20% that is likely to be needed to produce sustainable products.

HOW CAN CHEMICAL COMPANIES GET ON THE SAME PAGE AS THEIR CUSTOMERS
Chemical companies have a tendency to focus on innovation even when it does not align with their customers’ needs, because that is the nature of a science-based industry, said Denise Dignam, CEO of Chemours, a US-based producer of pigment and fluoromaterials. She spoke on a panel that discussed the findings of Accenture’s study during the annual meeting held by the American Chemistry Council (ACC).

“We are scientists. We like innovation,” she said.

Chemical companies need to be mindful that customers value mundane but critical services like supply chain logistics.

One strategy to keep customer needs front and center is to rely on front-line sales people, said Alastair Port, executive president of Indorama Ventures: Indovinya. Port cautioned against relying too heavily on point-of-time surveys. Someone who fills out those surveys is providing feedback that is tied to one moment in time. It does not encompass overall satisfaction with the company’s products and services.

Ed Sparks, CEO of catalyst producer WR Grace, said technical resources and sales people are the best resources for gauging the actual needs of customers. Their collect data from their interactions with customers, convert it into information that can then become market intelligence.

Companies that produce commodity chemicals can find ways to stand out even when their products vary little from their competitors, Port said.

Buyers of commodity chemicals vary greatly in size. Smaller ones may not have innovation departments or elaborate purchasing departments. Commodity chemical producers can tailor their services to match the needs of their varied customers.

Chemical producers can replicate molecules, but they cannot replicate service, Sparks said. WR Grace’s refining catalyst business has a prominent service component, under which the company helps refiners optimize their operations.

“That service component is really hard to replicate,” Sparks said.

The ACC Annual Meeting ended on 4 June.

Insight article by Al Greenwood

Thumbnail shows money. Image by ICIS.