This article aims to address the impact of COVID-19 on surfactants market focusing on industrial applications.
Due to the unprecedented coronavirus health crisis, many countries around the world have employed nationwide lockdowns, and as they are reopening, safety measures such as social distancing continue to apply. A side effect of these measures will likely be a significant economic downturn. And while many companies were preparing for it long before coronavirus stagnated the global economy, few expected a pandemic could be among its key triggers.
With billions of people in lockdown, consumer consumption patterns have changed significantly. Some of these changes could potentially be part of the “new normal” we see coming. On top of this, the economic downturn will bring an increased unemployment rate and lower disposable income for many consumers. Obviously, this will affect many areas of our economies and industries. Analysts’ thoughts on the depth and the length of the coming crisis differ, but they all agree the entire global economy will be affected, and a contraction of the global GDP is to be expected.
Real GDP growth, % change
Source: IMF, April 2020
Specialty chemicals, in general, and surfactants, in particular, are used in a variety of applications, ranging from detergents to beauty products through to industrial applications such as crop protection, oil & gas, and paints. This variety in applications can act as a damper for the industry when a large-scale crisis is approaching.
Preliminary findings of our research on HI&I ingredients are showing an unprecedented growth of ingredients consumption in household cleaning products. Clearly, hard-surface cleaners and disinfectants flourish during a pandemic’s phase of extreme sanitization. Laundry detergents and dishwashing products are also benefiting from the increased willingness of global consumers to keep their household clean and reduce the risk of infection. While this can’t come as a surprise, the real question in this market segment will be what part of this consumption is going to stay after the health crisis is over. Plus, will the positive effect reflected in the household segment be enough to make up for the negative impact on the industrial & institutional segment? Indeed, the I&I sector has been hit hard by the health situation. The hospitality sector has been shut down in many countries, and questions remain on the recovery pace. In addition, many factories, offices, or schools have been closed for weeks in various countries in the world, mechanically reducing cleaning needs.
Long-term implications of the current situation on the HI&I sector will be key for surfactants producers to understand, as nearly half of the global consumption of surfactants is coming from HI&I applications.
Another key application for surfactants is personal care applications, which have traditionally been less cyclical than other applications and have weathered recession better. This is one of the reasons this segment is attractive for specialty chemical suppliers. A decade ago, during the 2009 crisis, we observed the resilience of the personal care industry market, and the situation is not expected to be different today.
Behind those two downstream applications, surfactants are significantly consumed in a variety of more upstream industrial applications. Each of these applications is expected to follow specific patterns in the next months, and the impact of COVID-19 is expected to be different from one application to another. For instance, crop protection and food & beverages are among basic needs and are essential applications. As consumers’ expenditures focus on essential needs, these segments could be positively impacted. Other applications such as lubricants, metalworking fluids, construction, and paints & coatings—very cyclic and GDP-related by nature—are likely to be most affected both in the short and long term. Oilfield & mining could also be one of the applications to see its demand shrink the most, as oil demand decreases together with price (a key factor for unconventional production, which is the largest surfactants consumer).
Expected Impact of COVID-19 on the Demand for Surfactants in Industrial Applications
This behavior will be different from one country market to another, and supply chain disruptions could also be an influencing factor. Nevertheless, the consumption of surfactants in industrial applications is expected to decrease significantly across countries covered in Kline’s latest analysis (United States, Europe, China, Middle East, Southeast Asia, and Brazil). The contraction in demand for surfactants in industrial applications in these countries is expected to be between 0.7% and 2.6 % in 2020 compared to 2019. In the longer term, based on different recovery scenarios, the 2019-2024 CAGR is expected to range from 0.8% to 1.7%. In none of these scenarios the consumption in 2024 is projected to reach the level it would have been without the pandemic, proving that COVID-19’s consequences are expected to last for a lengthy amount of time. The current situation and related uncertainty are, of course, a threat to surfactants suppliers, and being able to navigate those threats will be key in the years to come.
Surfactants Volume Consumption in Industrial Applications, 2019-2024
Kline's Industrial Surfactants: Global Market Analysis and Opportunities report focuses on surfactants in industrial applications, which often offer strong growth opportunities. They are driven by complex, application-related drivers, the identification of which is key for building a successful, targeted business strategy. This month the report was updated with and add-on analysis on impact of COVID-19 on this complex market. Request more information about this study HERE.
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