Petrochemicals Manufacturing Strategies for the New Normal
Last week I attended the excellent Petchem Arabia conference, organised by the World Refining Association. The conference was very interesting and most valuable, giving an insight into the major issues affecting the future of the industry in the region.
My own presentation was 'Manufacturing Challenges for the New Normal'. Over the course of this week, I'd like to share some of my key themes.
The term ‘new normal’ was coined back in march 2009 by Bill Gross, founder of PIMCO, the California – based investment solutions provider. PIMCO was one of the few organisations that warned of the risks associated with the sub-prime housing bubble that drove economic boom years.
In terms of the economic recovery, PIMCO discredited the idea of a sharp rebound from recession and a rapid return to the activity levels of the boom years. Instead, they referred to a ‘New Normal’ which would bring lowered living standards, higher unemployment, stagnant company profits, heavy government intervention in the economy and disappointing equity returns.
So the key issues for petrochemicals manufacturers are
• End consumers are shifting from ‘needs’ to ‘wants’ significantly changing spending behaviour
• Financial crises, fears of ‘double-dip’ recession and fear of unemployment are driving these behaviours
• Temporary factors such as government stimulus packages have distorted demand but have not necessarily given a sustainable boost to the economies
So the net effect is increasing volatility and highly variable demand levels. And this is creating a major headache for manufacturers.
How to deal with this headache will be the theme of blog posts this week.