Specialty Gaines | June 2023
Critical Intel from the Show Floor at Chemspec Europe
It’s an Unpredictable Year, So Hold On Tight!
The SOCMA Pavilion at Chemspec Europe in Basel, Switzerland, May 24-25, was hopping. For almost 30 years, SOCMA has facilitated opportunities for member companies to do business on the global stage, and this year was particularly busy with companies looking to diversify their supply chains due to inflation, rising costs of raw materials and logistics challenges.
A Varied and Volatile Year
The themes onsite in Basel were as varied and volatile as this year has been for the specialty chemical industry. Industry colleagues discussed global trends such as onshoring and near-shoring, flow chemistry, jobs being pulled due to over-supply, lack of demand, poor economic conditions and cheaper prices in China, among a host of other issues. Here is just a sampling of what I heard on the show floor:
- Tolling Business is Strong; Proprietary Products Lagging – On the tolling side, companies reported business has significantly increased, and some have more business than they can handle. However, they have seen a decrease on the proprietary products side, which they believe is a result of companies stockpiling product during the pandemic and now having to shed the excess. They believe this will level out a bit more in 2024. As a toller, are you experiencing similar slowdown of orders? As a buyer, are you shedding excess inventory?
- Russia – Ukraine War, Rising Energy Costs and Inflation Impacting Business in the EU – The Russia/Ukraine war has caused exorbitant energy costs because there is no supply of safe gasoline, according to some EU-based companies. While some of their business units have weathered the disruption, it has been tough for those that sell into markets such as housing and paint for example – things people are putting off due to inflationary costs. Have geopolitical issues impacted your business?
- Current State of Economy Leading Companies to Make Hard Choices – While the call for onshoring or near-shoring has been strong, several companies say they have lost work or had jobs pulled because if China is just 1-cent cheaper, companies will go there. They also say some jobs were pulled due to economic conditions, overstock and loss of demand. Has your company lost business due to similar conditions?
- Reality of Onshoring and Near-Shoring will Take Government Support – While there is a tremendous call for onshoring and near-shoring products to the U.S. to be closer to their customers, some manufacturers and distributors still face the reality of a longer, more complex supply chain, especially for pharmaceuticals. Pharma companies are evaluating what products they would onshore or near-shore and realistically assessing how long it may take –some say it could take up to decades. The government moved swiftly during the pandemic to affect change. Is the government willing to do that again to onshore or near-shore these products?
- Flow Chemistry vs. Small Molecule Chemistry – Specialty chemical manufacturers selling into the pharma space have their customers calling for more flow chemistry, but companies are holding true and continuing to invest in small molecule chemistry. Is flow chemistry here to stay?
- Bio-Tech Investing Good for Some Companies – Companies in the bio-tech world are not as affected by the current state of the economy, and some reported they are not seeing the impact on their business, employees or salaries. Is your company in the bio-tech space and enjoying this same positive economic scenario?
- Need for ESG Resources Globally – Companies across the globe continue to seek guidance and resources on the demand for implementation of ESG resources and meeting Net Zero requirements. Has your company begun implementing ESG initiatives due to internal calls and/or external demand?
- Employee Turnover Continues – Companies are still facing challenges with recruiting and retaining quality employees, especially operators. One company says it has been a “ridiculous” trend for them, and they aren’t seeing improvement. How has your company fared since workforce issues were exacerbated by the pandemic? Has hiring improved for you?
- Employee Health Insurance Costs Rising – Companies report having to pass on more health insurance costs to their employees. They are paying for primary care and offering other incentives, but they can no longer afford to pay for insurance for their workers. How are health insurance costs impacting your company?
- Cautious Optimism for 2024? – While the first half of 2023 has seen a slowdown, especially on the proprietary products side of the industry, some specialty chemical manufacturers are cautiously optimistic this reset of the industry and inflated economic conditions will be short-lived and stabilize in 2024. Is your company’s 2024 outlook strong, or still to be determined?
Do these trends hold true for your company and your view of the state of the industry? I would love to hear your feedback! Send your comments to firstname.lastname@example.org.