2009 Global Chemical Industry Situation Observation

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The American Chemical Industry Association expressed pessimism about the economic situation in the coming year, saying that the global economy will continue to slow down significantly. Both emerging markets and more mature markets such as Europe and the United States will continue to be threatened by the financial crisis. Relevant information shows that there is no hope for the global economy to recover for at least the next six months. After struggling to grow by 3.6% in 2008, global GDP will only have room for growth of 2.9% in 2009. Related reports are expected to recover in 2010, with growth expected to be 3.8%. After the global chemical industry surged by 5.4% in 2004, the growth rate in 2008 was only a pitiful 2.2%. It will continue to fall to 1.5% in 2009, and the increase in recovery in 2010 will only be 3.3%. The Cold Wave Continues As investors seek high returns under high-risk conditions, corporate debt financing costs are still rising even as the federal funds rate continues to fall, which will bring uncertainty to the financial budgets of companies large and small. The continued depreciation of the US dollar will also be a huge obstacle to corporate development in 2009. Many U.S. companies, including specialty chemicals company Sigma-Aldrich, will face threats to corporate earnings from exchange rates. Not all expectations are gray. As relevant people pointed out, lower and lower raw material prices and a series of cold preparations by various industries, including reducing expenditures, will bring a ray of warmth to them as they experience the ongoing economic winter. Large-scale Winter Swimming Action In December 2008, the chemical industry giant Dow Chemical launched a large-scale winter swimming plan, which included 11% layoffs, closing 20 high-cost production workshops, suspending many non-strategic production facilities, etc. Its acquisition of the American company Rohm and Haas for US$15.4 billion will also save it a lot of costs. Also in December 2008, DuPont in the United States announced that it would lay off 2,500 employees and shut down 100 production lines, saving it US$250 million. A month ago, BASF also announced the closure of 80 production lines and reduced operating rates of 100 production lines. Begleiter said, "When the crisis hits, companies use the slogan that cash is king and try to reduce excess production capacity. This is undoubtedly one of the most effective strategies." Silversteyn also pointed out the reason, "Too much is not enough, and it must be moderate." The current sluggish demand has not forced manufacturers to operate at less than 25% capacity, and it is too early to implement ultra-large-scale production adjustment plans."