Since this year, changes in the global macroeconomic situation have also touched chemical distributors. The uncertainty caused by the slowdown of economic growth and trade disputes challenges the operation of chemical distributors. At the same time, the M & A activities among chemical distributors have accelerated, resulting in a constantly changing competition pattern. Chemical distributors have to adapt to the new rules of the game.
Face up to the macroeconomic slowdown
Chemical distributors are feeling the impact of the slowdown in economic growth, but the slowdown is not fake, and economic growth is still sustained. IHS Markit forecasts that after the US GDP growth of 2.0% in the second quarter, the growth rate in the third quarter will slow down to 1.6%; global GDP is expected to grow by 2.6% this year and 2.5% next year. Since the global economy is still growing, distributors are still optimistic about the fundamentals of economic growth.
In the chemical distribution industry, as long as the growth of economic fundamentals still exists, upstream chemical manufacturers will continue to outsource more business to distribution partners, so that the growth rate of the distribution industry exceeds that of the entire chemical industry. As a result, the growth of the chemical distribution industry will continue. "Downstream demand growth is more moderate, but still growing according to industry forecasts," said Frank middot belgonz, CEO of azelis Americas. &The macro-economic situation of the chemical distribution industry is still optimistic.
The impact of trade disputes is diverse
Although the industry is still optimistic about the macro-economic situation, the global trade friction and the resulting fluctuating tariffs still disturb the global trade flow. As an important participant in trade flows, chemical distributors are not immune. On the one hand, the cost of the distribution industry itself is increasing; on the other hand, the downstream industry is also challenging the distribution industry to find alternative products.
Eric middot Bair, President of the American Association of chemical distributors, said industry uncertainty did increase due to high tariffs caused by trade frictions. "Trade is at the heart of the distribution industry, and fluctuating tariffs raise the real cost of the industry," Mr Bair said. &At present, the American Association of chemical distributors is lobbying relevant departments in the United States to reduce the cost impact of tariff fluctuations.
On the other hand, in the face of tariff fluctuations, downstream buyers in the distribution industry are choosing alternative products to avoid tariff impact as much as possible. Terry & middot; hill, CEO of maroon group, said the industry was making various efforts to avoid the impact of tariffs, but because of the rapid changes in tariffs, buyers were unable to budget or plan.
Mr Hill said the maroon group was in the process of sourcing products or products with the same functions from the US or Europe, and was working with some customers to reset the product formula. In this process, some customers are lost when looking for alternative products, and some new customers are attracted by the professionalism of maroon group.
M & A brings opportunities and challenges
For a long time, M & A has been an important feature of the chemical distribution industry, and this trend shows no sign of abating. Azelis announced five acquisitions in 2019 alone, according to data. The maroon group has completed 10 acquisitions since 2014, Hill said. Recently, brentag and IMCD, the Dutch distributor of specialty chemicals, are among the most active acquirers in the industry.
In the chemical distribution industry, smaller transactions dominate. But recently, large-scale M & A transactions are also frequent. In March, UNIVAR solutions completed a $2 billion acquisition of nexeo solutions, bringing together two of the highest revenue chemical distributors in North America. Mark & middot; Fisher, head of UNIVAR solutions' US operations, said: & ldquo; as a result of the merger, we were able to set up a new professional end market business team focused on lubricants and metal processing, as well as home care and industrial cleaning businesses. &In addition, Fisher pointed out that UNIVAR solutions has also increased its technical sales personnel, marketing personnel, product managers, customers and suppliers through M & A transactions, which is expected to bring us $10 million in synergies.
Distribution is not the only integrated link in the chemical supply chain. In the past few years, the wave of large-scale merger has swept the entire chemical industry, which has a huge impact on distributors. "Mergers and acquisitions between large chemical producers will definitely have an impact on the distribution of chemicals," Mr belgonz said. The merger and acquisition between manufacturers will eventually lead to the re integration of distribution channels. This usually leads to a reduction in distribution partners. Large M & A itself means that manufacturers will re-examine their distribution networks, with the ultimate goal of doing business with fewer distributors. ”
However, integration among suppliers also presents opportunities, as larger companies need to move more business to distribution channels. New consolidated suppliers may also outsource more activities, such as supply chain management, logistics or technical services, to distribution partners.