BLOG: If You Think This Is A Typical Down Cycle Of Chemicals, Think Again

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SINGAPORE (ICIS)–Click here to see the latest blog post on Asian Chemical Connections by John Richardson. This is not a typical downward cycle of chemicals. Rather, we must accept that China’s new economic growth model, its zero-COVID policies, its growing self-sufficiency in chemicals, a new era of hostile geopolitics, potential stagflation, climate change and the plastic waste crisis are all happening. at the same time. These new drivers of what must be a new growth model for chemicals will hardly go away.

So how are companies moving forward? Chemical companies need to focus more on being service providers and less on volume growth for the sake of volume growth (volume growth won’t be there anyway).

In the meantime, here are some things to think about – what a service-based theoretical model might look like:

A producer of styrene butadiene rubber (SBR) is working with a tire manufacturer to ensure that SBR granules are suitable for extending tire life, with the tire manufacturer also rethinking its processes.

The car rental company is innovating to reduce the volume of new tires it needs by using big data.

Customer driver behavior is monitored to determine the extent of unnecessary acceleration and braking and its impact on tire life. Customers are financially incentivized to drive in ways that extend tire life.

None of this can work unless all parties share the same goals. Thus, at the start of a 20-year service contract, the SBR producer, the tire manufacturer and the car rental company agree on a set of common objectives to minimize the consumption of new tyres. Targets are agreed with investors and monitored by regulators.

The economics of this service-based agreement rely on carbon, plastic waste and other taxes and/or credits. In other words, all three parties have strong financial incentives to minimize their use of unsustainable resources.

Editor’s Note: This blog post is an opinion piece. The opinions expressed are those of the author and do not necessarily represent those of CIHI.

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