A Changing World Means Changes for Chemical Distributors
Chemical distributors stand at a crossroads – those who understand the new rules of global trade will lead the way.
In April, I attended the American Fuels and Petroleum Manufacturers (AFPM) meeting. I enjoyed hearing a talk from Rana Foroohar of the Financial Times. She examined some of the reasons behind the rise in tariffs and the trend towards regionalization.
The year 2024 was historically significant due to the unprecedented number of national elections held worldwide, making it the largest election year in history. More than 70 countries, encompassing over half of the global population – approximately 3.7 billion people – conducted national elections.
Some of the notable trends and outcomes: Numerous losses in vote share for incumbent governments and established parties, voter dissatisfaction amid economic indicators, and the impact of polarization and misinformation. The dissatisfaction with global economies is interesting because there were many positive indicators like GDP growth and low unemployment. Still, there was a clear disconnect between these figures and public sentiment.
The 2024 election cycle suggests we are at a global inflection point – a time of major change. Many argue the last time such a change took place was during the Reagan-Thatcher era in the period after the collapse of the USSR and the Berlin Wall. Since that time, the value of the stock market has soared and consumer prices have dropped, but real wages have stagnated, and income inequality has increased.
Rana argues our system has favored “Wall Street” over “Main Street” and feels that we are about to enter a period where these priorities will flip. This change in priorities can be seen, for example, in the tariff policies of the Trump administration and the trend toward regional trade and localized supply chains.
Energy, Oil, Gas and Chemicals represent one of the most global industries. Oil production and refining are scattered worldwide, energy markets are globally interconnected, and chemicals are produced regionally but used globally. The extent of change to our industry will be largely determined by the length and magnitude of regional trade policies like tariffs. If it becomes clear, for example, US tariffs on chemicals, oil and gas will stay high for a long period of time, there will be fundamental changes in how refineries are operated and the slate of products they produce.
The US chemical industry is likely to need hundreds of millions (if not billions) of dollars invested in new plants and refineries, but companies will be slow to make these investments followed by years before they come online. Many products needed by US formulators will continue to be imported for the foreseeable future so it seems our industry will need to reset expectations with respect to raw material and manufacturing costs.
The US economy is strong, and our market is resilient. US chemical producers, formulators, and distributors will continue to thrive, but we need to embrace and adjust to the significant changes we will see in the remainder of this decade. At Teckrez, we are committed to staying ahead of these shifts – and we invite our partners to engage with us in shaping what’s next.
by Marc Jackson, Teckrez President and CEO