Impact Of Covid-19 On Petrochemical Industries
2020 was the year of unpredictability. The coronavirus pandemic has collapsed the petrochemical industry that was already downsizing. From 2012 to 2017, the petrochemical industry saw significant revenue reduction as crude oil and natural gas prices downturned.
Petrochemical Industry plays a significant role in the world economy. This industry produces a wide range of valuable products that are very useful in modern societies, including plastics, synthetics, fertilizers, pharmaceuticals, explosives, and adhesives. Thus, making itself the cornerstone of many industries.
Covid-19 is an added turmoil to the petrochemical industry. Lower demand & supply, growing expenses, and shrivelling revenues were already the causes for its downfall. That time, the pandemic has only de- accelerated its performance, forcing the industrialist to re-evaluate its future.
In this article, we will try to analyse the future of the petrochemical industry while evaluating and interpreting its past and present growth statistics. Let’s discuss more enlightening facts about the petrochemical industry in detail.
PETROCHEMICAL INDUSTRY PREVIEW- GROWTH SUPPRESSED
Tensile strength is the maximum load a metal can resist in extreme environments without being fractured or tempered. Technically, the tensile strength of Inconel is higher than that of Stainless Steel. Inconel exhibits high-temperature tolerance, even at 2000-Degree F than other metals.
Operating temperature is the temperature range in which machinery or piping systems can function smoothly. Usually, the Inconel metal can perform better in higher operating temperature areas than the stainless steel. During the heat-generating process, a passivating oxidizing layer forms on the Inconel surfaces, preventing corrosion and further damages.
Corrosion Resistance refers to the protection of the materials against uncertain reactions, which can corrode them instantly. Inconel provides resistance to oxalic acids and high-temperature oxidations. On the other hand, Stainless Steel exhibits excellent overall resistance to high-chloride areas.
PETROCHEMICAL INDUSTRY PREVIEW- GROWTH SUPPRESSED
Petrochemical industries play a pivotal role in supporting and strengthening the world economy to a greater extend. It provides raw materials and crucial chemical components to some leading manufacturing units, including agriculture, healthcare, textiles, and infrastructures.
The petrochemical industry has shown remarkable growth from 2010 to 2018. According to Mckinsey & Company, the aggregate revenue escalated by 8 percent per annum. Also, there was an increase in the marginal utilization rate of ethylene to 90% in the year 2017-18.
The market was flourishing and creating rooms for jobs, new technologies, and innovations across the globe. In a nutshell, the industry had the volume of more than 12% of petroleum products in the world.
By 2019, the petrochemical industry began to witness challenges on the global level. Due to volatility in crude oil prices and scarcity of feedstocks, the revenue started to diminish. Further, the coronavirus pandemic in 2020 severely disrupted the industry. The impact of Covid-19 on the petrochemical industry are as follows:
A. IRREGULAR EFFECT ON VALUE CHAIN ACROSS VARIOUS INDUSTRIES
Petrochemical Industry is highly efficient and provides a versatile range of products and services to other sectors. Due to this pandemic crisis, consumers were spending more on essential products, which caused a drop in industries; automotive, aviation, infrastructure, etc. However, mainline businesses like food, hygienic products, and healthcare were high in demand and driving factors during this crisis.
B. DEGLOBALISATION OF THE PRIMARY GOODS TO ESSENTIAL PRODUCTS
“When in the Rome, Do as the Romans Do“
A classy cliche that ideally represents the situation of coronavirus pandemic. Many companies turned to manufacture items serviceable to fight Covid-19. Fuel-grade companies started to manufacture hand sanitizers and disinfectants while plastic manufactures were making medical guards. Many industrialists turned their factories and warehouses to Covid-19 help centres, helping to treat the patients adequately.
C. DECLINATION ON AGGREGATE CHEMICAL PRODUCTION
Covid-19 has drastically affected global chemical production, statistically by 2.4 percent in February 2020 and 1.3 percent in April 2020. Unfortunately, many units had to shut down their manufacturing units to reduce their financial and operational expenditures. However, other companies modified their plants to produce isopropyl alcohol (for hand-sanitizers) and ethanol, which were then in high demand.
FUTURE MANAGERIAL STEPS OF PETROCHEMICAL INDUSTRY
During the pandemic, companies struggled to create a systematic balance between physical distancing and operating their plants to produce necessary raw materials for the primary sectors.
The impact was severe, which forced the manufacturing units to shut down. The industrialist expected that the basic functioning and demands for petrochemical products to recover by the first half of 2021. Accommodating for the new normal is challenging but very vital for growth.
AS per the Mckinsey & Company, there are some illuminating lessons and facts that any petrochemical management team can learn:
1. STUDYING THE MARKET
We all need to start from the basics. There is no clear vision or precise direction for the next 12-24 months. The management should concentrate on building a market survey, undertaking the current scenario, value chains, and geographic areas to run their business efficiently. We need to focus on a bigger picture, keeping in mind the current situation of the economy.
2. PREPARE FOR DEGLOBALISATION OF SUPPLY CHAINS
Deglobalisation immediately started by the first half of the pandemic crisis. Industrialists had already begun to refill their feedstocks and regionalize their supply chain to produce essential products. We need to strategically create a blueprint of new products, keeping in mind the operational expenses to increase our profits and cash flow. To increase your productivity, you can also install new machinery or plants.
3. DIGITAL TRANSFORMATION IN OPERATIONS
The Petrochemical management must transform their operational and analytical functioning on digital platforms. Today, digitalization helps you to connect with numerous clients and consumers across the globe. It encourages you to reduce your expenses, lower energy consumption, and improves efficiency within the organization. Digitalization helps the industry to stock, source, and supply resources promptly.
The petrochemical industry is the mammoth of the world economy. However, it does not get as much attention as it deserves. It had faced several obstacles in the past, and numerous are yet to come. Management must analyse the past few months and create a detailed survey for achieving futuristic goals. We hope this article helped you to understand the future prospects of Petrochemical Industry across the globe. Stay tuned for more updates.