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 unprecedented slowdown of economic activity due to COVID-19 pandemic and that impacted the overall demand of petrochemicals, as it is tied directly to the GDP.
Oil prices plunged due to supply glut created by price war between Saudi Arabia and Russia, in parallel with unprecedented demand slowdown because of pandemic. Even though OPEC+ have agreed to significant production cuts, these may not be enough to deal with the demand impact. In near term, crude prices will likely remain low combined with high volatility.
Petrochemical industry is seeing similar impacts, with exception of demand related to health, hygiene and 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 in uncertainty about the timing for the start on to 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 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/policy makers 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, needs to be channeled towards the things and issues that are under our control. It goes without saying that we all need to be aware of the developments around the factors beyond our direct control to make adjustments to our plans on as 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 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 direct and indirect impact on core business and success factors, given the competitive landscape in a demand constrained environment. I have talked about turn-down operation or shutdown of some the facilities in previous blog. There is tremendous potential for savings in the decisions related to 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 unprecedented slowdown of economic activity due to COVID-19 pandemic and that impacted the overall demand of petrochemicals, as it is tied directly to the GDP.
Oil prices plunged due to supply glut created by price war between Saudi Arabia and Russia, in parallel with unprecedented demand slowdown because of pandemic. Even though OPEC+ have agreed to significant production cuts, these may not be enough to deal with the demand impact. In near term, crude prices will likely remain low combined with high volatility.
Petrochemical industry is seeing similar impacts, with exception of demand related to health, hygiene and 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 in uncertainty about the timing for the start on to 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 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/policy makers 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, needs to be channeled towards the things and issues that are under our control. It goes without saying that we all need to be aware of the developments around the factors beyond our direct control to make adjustments to our plans on as 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 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 direct and indirect impact on core business and success factors, given the competitive landscape in a demand constrained environment. I have talked about turn-down operation or shutdown of some the facilities in previous blog. There is tremendous potential for savings in the decisions related to 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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