COVID 19 Impact Analysis: Renewable Chemicals Market
The chemical industry has been noticing the adverse effects of the COVID-19 outbreak. The chemical industry plays an important role in the production of wide range of products such as plastic, fertilizers, medicines, packaging products, and others. With the widespread of the coronavirus, many production facilities of several end-user industries have been halted resulting in decreased demand for chemicals.
According to BASF SE, the global chemical production will fall to about 1.2%. The key factors driving the renewable chemicals market include the increasing environmental concerns as well as fluctuations in crude oil prices. However, the outbreak of COVID-19 resulted in oil price drop on account of reduced global demand for oil by about 29 million barrels a day from about 100 million a year ago. An ample supply of crude oil in the market will help synthetic chemicals manufacturers secure raw materials at a lower cost, which would negatively impact the production of renewable chemicals.
Moreover, global eating habits have changed dramatically in the wake of the widening COVID-19 pandemic. The demand for basic staples and canned foods has increased with restaurants been shut down, thereby resulting in stockpiling of long-lasting foods such as wheat, rice, sugar, and others. The world’s retailers have been scrambling to meet surging demand at the supermarket or via delivery apps. COVID-19 is also impacting supply chain, raw materials availability, farmworkers, and logistics suppliers.
Raw materials for renewable chemicals include agricultural raw materials such as sugar cane, corn, and potatoes, which supply sugar and starch. Fibre plants like flax, hemp and jute can be used for the production of cellulose, while soy, rapeseed, and linseed produce oils. With the rising demand for agricultural products, including wheat, rice, potatoes, as well as edible oils, the use of agricultural raw materials for production of renewable chemicals is expected to decline.
The pandemic has resulted in disruption in the supply chain as a result of shutting factories and businesses, cancelled air transport routes, and lockdowns. In response to COVID-19, major players in this market have started production of PPE products such as masks, hand sanitizers, hospital gowns, and others. The focus of key players towards the manufacturing of important and needful stuff during this pandemic is also expected to decline the production of renewable chemicals
For instance, in March 2020, BASF SE initiated the production of hand sanitisers at its Ludwigshafen site due to the Covid-19 outbreak reducing regular supplies. The company has reallocated several metric tonnes of raw materials, especially isopropanol, for making the sanitisers. In another instance, more than 40 employees at Braskem America stayed back at the facility for 28 days in April 2020 to make polypropylene, a raw material used to make N95 masks, hospital gowns and sanitary wipes.
Post COVID-19 scenario would bring back in line the production and demand for renewable chemicals, in line with the increased oil prices coupled with the availability of agricultural raw materials.