In the last week of March, Victoria Meyer attended the American Fuel and Petrochemical Manufacturers or AFPM International Petrochemical Conference, which was held in San Antonio. So in this week’s episode, she will share her insights and reflections from that conference. There were thousands of attendees and people were there for meetings with business partners, suppliers, customers, and many other activities going on at that event.
Topics discussed this week:
- The chemical industry is in the process of setting a new equilibrium
- The need to tell your own story and to tell the industry story
- Be an advocate for the industry
- The demand decline in the chemical industry
- Optimism both for 2023 and for the long term
- Global markets and local impacts
- Collaboration – we’re all in this together
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Reflections from AFPM International Petrochemical Conference 2023
Welcome to The Chemical Show. In this week’s episode, I will share my insights and reflections from the AFPM International Petrochemical Conference, which was held in San Antonio during the last week of March. There were thousands of attendees and people were just there for meetings with business partners, suppliers, customers, and other activities that week. I actually had the opportunity to host a Live Chemical Show podcast panel event “Partnering for Plastic Circularity” that’s going to be getting published within the next week. So stay tuned and look for that episode.
With thousands of people in attendance, I heard a lot of things. This episode is really an opportunity to share my reflections and some of the insights and themes that came through from that conference.
Starting off with the first one. And this is the overarching theme and insight I picked up during that conference, which is the chemical industry is in the process of setting a new equilibrium or a new normal.
The industry has always been quite cyclical on a steady growth path for the past decades and yet we are at an inflection point. There are a number of drivers that are influencing the industry, and how we progress forward. Some of those drivers are geopolitics, changing consumer buying behaviors, and then, of course, corporate behaviors. When we look at what’s going on for the last three years, everything from the influence of the COVID pandemic, the Russia-Ukraine conflict, and significant supply chain disruptions. All of which have driven certain behaviors, results, and opportunities in the chemical industry.
And yet, there are other drivers coming in, including sustainability and ESG, which are major imperatives across the industry that are influencing us. So what I would say is the kind of underpinning theme throughout the AFPM IPC is that we are setting a new equilibrium. We know that there’s been some demand disruption, and some downturn that people have seen in terms of sales, buying, and selling behavior, over the past six months are continuing through to the mid-year. But those are disruptions and yet not the new path. I think what we’re going to see coming out of this over the next three to five years is a new equilibrium. We’re starting to see that this year, and we’re going to continue to see that going on.
The second big theme that came through many times throughout the conference is the need to tell your own story and to tell the industry story. Now, this is something I’ve talked about a lot on the podcast. I’m really passionate about this topic. And, I think it’s critical. We need to own our narrative.
AFPM: There were thousands of attendees at the recent AFPM International Petrochemical Conference, which was held in San Antonio. People were there for meetings with business partners, suppliers, customers, and many other activities going on at that event.
There is a concept that’s attributed to Aristotle that basically translates to the phrase “nature abhors a vacuum.” And then a vacuum or empty space will be filled. I think this is true, in particular for the narrative around the chemical industry. The benefits, the sustainability, the effects on the environment, and the effects on modern living. That is true. If you don’t tell your story, someone else will. And they are going to tell it their way with their points of view and their interpretations of the facts.
For those in the industry, we understand all the great things that we’re doing or that our products are doing back. If you look around your office, you look around your home, and you look at your car, those who are close to the industry understand all the positive effects and usages and benefits that we’ve got in all around us for modern-day living. And yet, we haven’t told that story. We haven’t told that story in the public domain. We haven’t told that story very effectively, sometimes, even to ourselves. We’ve been operating under this premise that it’s obvious what the industry is doing, the benefits, etc. Sometimes, we think that “they”, whoever they are, are going to tell our story. The reality is we are “they” and we need to tell our story.
This theme of telling your story came up several times. I had the opportunity to join a luncheon where Larke Williams, who is the United States’ lead plastics negotiator for the UN Plastics Treaty, spoke. She is representing the US and the industry on this plastics treaty, which is going to be in effect over the next couple of years. Alignment across 180 countries is not easy. She is taking insights and taking things forward. One of the things is that she’s there for us to ensure that we have a seat at the table. We need to participate to ensure that any global policies that are enacted make sense for the US and for others and that we keep the options open for innovation, and future opportunities. The fact that we don’t have all of the solutions today for what we’re going to need in 10 to 25 years. But one of the things that were asked: “How can the industry help?” Her response: “Share your story. Share the story of the success, innovation, and impact of the chemical industry.” So that’s one example there.Tell your own story and tell the industry story. We need to own our narrative. Click To Tweet
There was a panel hosted by AFPM that featured four CEOs from across the industry. One of the questions was “How do we attract people to the chemical industry? How do we ensure we get the right talents and the right resources in the industry?” The answer is there. “Tell your story. Tell the story of the opportunities that innovation is the ability to make a difference that new entrants into the industry will bring and will have and provide.”
Thirdly, on the panel Partnering for Plastic Circularity which I hosted, as we wrapped things up, one of the comments that came through from each of the panel participants was that we need to be part of the narrative. Be an advocate for the industry. Be an advocate for the benefits of plastics. (t was a plastics-focused panel.) Ensure that your local governments, etc, understand the importance of advanced recycling, or chemical recycling, and ensure we’re telling the story of why we do what we do. I think that one of the other key themes that came through when I talked to different people across the industry, when I participated in some of the events that AFPM sponsored was, tell your story. Tell the industry story. Own the narrative. That’s my second big theme coming out of this.
My main business, Progressio Global, is a consulting business. We advise chemical companies on how to create sustainable growth by understanding what their customers and their customers’ customers truly value and really connecting with their brand value story. Again, if we understand what’s valuable, if we understand what we bring to the table that’s valuable, we control the narrative. We control the story. And together, we get great results. If you’re not sure what your customers or business partners really value or what they value, and how to make that connection back to what you do and how you’re doing it, and using that insight to create your sales and marketing narrative, reach out. Set up a call or message me on LinkedIn. Send me an email, go to my website, and we can talk more about that.
Certainly, a hot topic of conversation was the demand decline that we’ve seen. Starting at the tail end of 2022, and here into the first half of 2023, it really varies depending on which part of the value chain you’re in. And it’s maybe 15% to 25%, demand destruction, or demand decline. It’s not really destruction. That’s an interesting thing. But we’re seeing a decline in ordering. Maybe that’s the right way to think about it. It’s up to 40% decline in some areas versus 2022. The result of this is really due to inventory adjustments, and less so about a structural demand change. So that’s one thing, I think there’s a view across the industry that this is temporary, and not long-term.
AFPM: One of the key themes coming through from AFPM was optimism. People are very optimistic that by the second half of the year, we're back on the uptick. So we expect recovery there.
Going back to my first key theme, we are setting a new normal and setting a new equilibrium. There are probably going to be some adjustments across the industry. There’s an expectation of this demand decline. What do we see going on there? One is the economic environment. There is inflation. We’ve all seen that, and it’s hit us personally. The effects of the Russia-Ukraine war have been really significant in particular, in Europe, but again, we are a globally connected industry. So it affects us all. And then there are the effects of China’s complete lockdown during COVID, to the reopening. I think we’re still waiting to see what the full effects of China’s reopening are. That’s definitely been part of the demand, and the ordering story. There’s an assumption and a belief that demand is steady. It’s really the buying behaviors that have changed.
One is the economic environment and the second piece is around the inventory buffer and the supply chain. Somebody told me that there are a lot of companies sitting on a lot of really expensive inventory. If we look back over the past couple years, it became so uncertain about when your orders were going to come in, and when there was a lot of supply chain disruption. It felt like everything was really tight, and taking a really long time to get in when you place these orders. Companies started just ordering a lot. They placed orders on top of orders. They extended their safety stock and increased their safety stocks significantly. There was the whole question around fulfillment. So what we’re seeing now is that supply chain and logistics have really lined out, have gotten more steady, and more certain. The value chain is resetting.We need to be part of the narrative. Be an advocate for the industry. Click To Tweet
People are working their way through inventory. They’re assessing where they are. It’s definitely impacting sales here in the first half of 2023. But the expectation that it levels out in lines out. Now, I think what’s interesting is that in some cases, there may very well be a net demand decline and reset. It varies quite significantly by the value chain. individual consumer behaviors are changing if I think about the cleaning value chain. We got really obsessive for a while about cleaning and sanitizing, and we’re less obsessive. So it’s not all going away, but it’s tempering back to just above pre-pandemic levels. It’s what the expectation is. The home makeover boom of 2020 and 2021 has turned into the travel boom. So there is a shifting of where the products are that consumers want and corporate industrial buyers and how that’s translating to chemical products.
Throughout the pandemic, a lot of it related to the availability of chips and semiconductors. It has had a knock on effect the chemical industry. There are recent reports from the auto industry that suggests that sales are up because the availability of those other products is up, but we’re certainly seeing some continuing impacts across certain sectors of the chemical industry. So demand declines. That’s one of the themes.
These are the 6 key themes from the AFPM IPC in 2023.
And I think what was also one of the key themes coming through from AFPM was optimism. People and companies and customers and industrial and consumers are continuing to need our chemical products. The underlying demand is there. It’s an adjustment from inventory. People are very optimistic that by the second half of the year, we’re back on the uptick. So there’s an expected recovery. There’s maybe the big question mark. It hit hard due to the effects of the Russia-Ukraine war, and the impact on energy, and we’ve certainly seen big companies, such as BASF, have made some structural decisions to close assets in Europe. It’s because they don’t think they willl be long-term competitive. There’s an aspect of short-term and long-term behavior that is going on in Europe. But solutions are underway. I would even categorize us as cautiously optimistic, but a lot of work to be done still.
The other theme tied into optimism that people keep talking about is the energy transition and its impact on the chemical industry. Certainly, across some value chains, there’s an impact when we think about reducing the amount of oil production, and the number of refinery products that have feeds into certain parts of the chemical industry. On a net basis, though, the view is that it’s actually good for the chemical industry. Electric vehicles rely on petrochemicals. Solar panels and windmills rely on petrochemicals for raw materials or feedstock to create these items. And then there’s a significant investment and focus and innovation across the value chains in particular areas like carbon capture, hydrogen, and more. I think what we’re hearing and what we’re seeing, and what I was feeling was actually optimism. In some places, it’s cautious optimism, but definitely optimism about what the future of the chemical industry is.
My fifth theme here is global markets and local impacts. Certainly, the effects of China and the effects of the Russia- Ukraine conflict are on the minds of executives. There’s a lot of talk of localization. We’ve been seeing this across the media. There were bits of talks at AFPM about localization and localizing supply chains. And yet, this recognition that our global supply chains are still really critical, and that China is still critically important as a trading partner, not just for chemical products, but for finished goods, etc. Though this, one of the key messages is really coming through is a China-for-China strategy.
We’re seeing a lot that this aspect of all the global markets is important, making really mindful choices about localization and regionalism and how you utilize both production and assets and customers in the different regions. And I think one of the things that came out as this China-for-China strategy is growing across the industry as certainly amongst the global players who are really trying to manage supply chain, manage opportunities, and effectively utilize, manage, and grow their businesses.How do we ensure we get the right talents and resources in the industry? The answer is there. Tell your story. Click To Tweet
The final theme that came through was collaboration, and the sense of we’re all in this together. Certainly, it comes through and we start talking about things like net zero, sustainability, carbon capture, and plastic circularity. We are seeing, and we’ll continue to see partnerships and collaboration across the industry. I think we’re all in this together goes back to even what I talked about earlier as telling your story. We, together, have to be telling the story of the industry, of your companies, of your impacts, and of the positive benefits because anybody that’s on social media knows that there are a lot of other voices out there. We have a big collective voice and an opportunity. We have the opportunity to collaborate on solutions and innovations and collaborate on the future of the industry.
Those are the six pieces of my reflections on the key themes emerging from AFPM IPC 2023. One is setting a new equilibrium in the chemical industry. The second is telling your story and telling the industry story. Three is that this demand decline. I’m really going to call it an ordering decline. It is going to be tempered by mid-year. Four is optimism both for 2023 and for the long term. Five is global markets and local impacts, and six is collaboration. So those are my six.
Tell me, did you attend AFPM this year? What stood out for you? I’d love to hear your point of view, see what resonates, and see if you heard anything different. Send me an email, leave a message on LinkedIn, and we’ll be talking and following up soon. Thanks, everyone for listening to The Chemical Show. Keep listening, keep following, and keep sharing. We will talk to you again soon.
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