I hope that everyone is staying healthy and safe while coping with many changes impacting our working and social lives.
These are the times of uncertainty and at times seem like lacking hopefulness. We are faced with an unprecedented slowdown of economic activity due to the COVID-19 pandemic and that impacted the overall demand for petrochemicals, as it is tied directly to the GDP.
Oil prices plunged due to a supply glut created by a price war between Saudi Arabia and Russia, in parallel with an unprecedented demand slowdown because of the pandemic. Even though OPEC+ has agreed to significant production cuts, these may not be enough to deal with the demand impact. In the near term, crude prices will likely remain low combined with high volatility.
The petrochemical industry is seeing similar impacts, with exception of demand related to health, hygiene, and the food/grocery industry (and maybe to some extent for digital technologies-related activity). Even with demand increase in niche segments, overall demand has slowed down significantly. At this point there is uncertainty about the timing for the start on the road to recovery and how long will it take to reach the pre-pandemic levels. The pundits and economists have a large divergence in their estimates, starting from 3 months to 2 plus years (with some estimates of recovery very similar to the trend seen after the last financial crisis). I will leave these discussions to experts (pandemic experts and institutions to determine the timing for opening the economic activity and to economists/policymakers to find a path to help the individuals to participate in a productive recovery). These factors are not under our direct control.
Our focus and energy, as individuals and companies, need to be channeled toward the things and issues that are under our control. It goes without saying that we all need to be aware of the developments around factors beyond our direct control to make adjustments to our plans on a needed basis.
We must bring the financial discipline to conserve and manage cash in times of uncertainty. This translates to savings in operating expenses as well as managing capital spending in the right places to position the companies to come out stronger on the other end. Each idea and item on the savings list need to consider the direct and indirect impact on core business and success factors, given the competitive landscape in a demand-constrained environment. I have talked about the turn-down operation or shutdown of some of the facilities in the previous blog. There is tremendous potential for savings in the decisions related to the operation of these facilities. Keeping the needs of employees, customers, suppliers, and other stakeholders; during these hard times; in the overall decision-making process pays out many folds over. I am available to discuss (pro bono phone consultation) to brainstorm ideas that can help this analysis. Please feel free to send me a message to reach me.
These are the times of uncertainty and at times seem like lacking hopefulness. We are faced with an unprecedented slowdown of economic activity due to the COVID-19 pandemic and that impacted the overall demand for petrochemicals, as it is tied directly to the GDP.
Oil prices plunged due to a supply glut created by a price war between Saudi Arabia and Russia, in parallel with an unprecedented demand slowdown because of the pandemic. Even though OPEC+ has agreed to significant production cuts, these may not be enough to deal with the demand impact. In the near term, crude prices will likely remain low combined with high volatility.
The petrochemical industry is seeing similar impacts, with exception of demand related to health, hygiene, and the food/grocery industry (and maybe to some extent for digital technologies-related activity). Even with demand increase in niche segments, overall demand has slowed down significantly. At this point there is uncertainty about the timing for the start on the road to recovery and how long will it take to reach the pre-pandemic levels. The pundits and economists have a large divergence in their estimates, starting from 3 months to 2 plus years (with some estimates of recovery very similar to the trend seen after the last financial crisis). I will leave these discussions to experts (pandemic experts and institutions to determine the timing for opening the economic activity and to economists/policymakers to find a path to help the individuals to participate in a productive recovery). These factors are not under our direct control.
Our focus and energy, as individuals and companies, need to be channeled toward the things and issues that are under our control. It goes without saying that we all need to be aware of the developments around factors beyond our direct control to make adjustments to our plans on a needed basis.
We must bring the financial discipline to conserve and manage cash in times of uncertainty. This translates to savings in operating expenses as well as managing capital spending in the right places to position the companies to come out stronger on the other end. Each idea and item on the savings list need to consider the direct and indirect impact on core business and success factors, given the competitive landscape in a demand-constrained environment. I have talked about the turn-down operation or shutdown of some of the facilities in the previous blog. There is tremendous potential for savings in the decisions related to the operation of these facilities. Keeping the needs of employees, customers, suppliers, and other stakeholders; during these hard times; in the overall decision-making process pays out many folds over. I am available to discuss (pro bono phone consultation) to brainstorm ideas that can help this analysis. Please feel free to send me a message to reach me.
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