The European chemical industry is under considerable stress. Falling sales, fluctuating energy costs, a diminishing workforce pool, rising raw material prices, an exodus of research talent, and pressure to lower carbon emissions are all taking their toll on profitability.

However, a recent study of chemical industry leaders has revealed some surprising results on what is truly impacting chemical companies’ bottom line with research showing how supply chain challenges and the cost of logistics are having a greater impact on chemical businesses.

The 2024 Supply Chain and Logistics Chemical Study, conducted by the chemical industry consultancy Solventure, Aimms and Miebach, also found that chemical industry chiefs were looking for a more professional approach to feedstock supply management. The study also found that many chemical companies were hoping to resolve their logistics issues by investing in AI and digital solutions as a way to lower running costs.

However, the study also noted that in a time of weak economic growth and struggling sales, chemical companies were more likely to be cutting costs than investing for the future.

Most notable from the study’s responses was that the cost pressures which rated as most important by chemical company leaders were in the field of “warehousing and transportation,” with only a third of those asked believing that they were ready for increased costs in this area.

A similar issue which ranked highly for cost pressures was “Diversification of supply chains in order to be able to operate flexibly with all modes of transport.” Although perhaps the most surprising response was that the “Industry ambitions to become carbon neutral” rated poorly and was considered by many as of low significance.

As the report’s authors state, “Contrary to all public statements, this is considered to be the least important trend.”

The good news from the survey is that on the topic of “Transparency through enhanced communication and close dialogue” around half of all respondents believed that their chemical businesses were either well or very well prepared.

According to one of the study’s authors, Klaus-Peter Jung, Partner and Head of Industry for the Chemical Industry, Beverages and Logistics Service Providers at the German-based Miebach Group, “the study shows a significant demand to develop a more professional approach in supply chain & logistics planning and using digitalization and AI in the chemical industry.” However, he continues to acknowledge that, “… the industry has currently to deal with limited resources and budget constraints.”

The European chemical industry is facing a multitude of complex challenges that threaten its long-term viability and competitiveness. Chief among these is the green transition which will require significant capital investment into new technologies, infrastructure, and R&D. Additionally, the industry is contending with rising energy and raw material costs, and fierce global competition, particularly from emerging markets with lower operating costs.

Compounding these issues is a shortage of skilled chemical engineers and other technical talent, making it difficult for European firms to innovate and keep pace with industry advances. Navigating this perfect storm of obstacles will require the chemical sector to demonstrate agility, innovation, and a steadfast commitment to sustainability.

However, if the European chemical industry is to prosper, then the evidence of this survey shows that it must also set the stage for recovery by prioritising investment in streamlined logistics and into developing a more professional, digitalised approach to supply chains and the sourcing of industrial feedstocks.

Photo credit: Maksym Kaharlytskyi, Hannes Egler, Frank McKenna, & Antol Rurac on Unsplash