We support companies and investors in the wider chemicals industry community to manage today’s crisis and build a robust and sustainable future for their business in tomorrow’s Net Zero world.
Outlook
First there was the pandemic and associated supply chain chaos. Then there was the rise of ‘Putinflation’ as Russia’s invasion of Ukraine creates a growing risk of energy, food and financial crises.
“We are facing the biggest crisis the post-war Federal Republic has ever had. We have to be honest and say: First of all, we will lose the prosperity that we have had for years.”
German Employers Association President, Rainer Dulger, 13 July 2022
“We can no longer rely exclusively on the (inflation) projections provided by our models – they have repeatedly had to be revised upwards over these past two years. There are things that the models don’t capture. Sometimes the unexpected happens. So we have to pay attention to traditional indicators while also monitoring empirical data and what we expect to happen in terms of geopolitics, energy price developments and demographics.”
European Central Bank President, Christine Lagarde, 25 August 2022
“You can’t run the most reckless monetary and fiscal experiment in history without the bill eventually coming due. The first invoice arrived as inflation. The second has come as a financial panic, with economic damage that may not end with Silicon Valley Bank.”
Wall Street Journal editorial, 12 March 2023
Risk management is key to survival, and future success
Scenario planning, based on a wide range of potential outcomes, will be key to success given today’s levels of volatility. We can no longer simply tweak a base case to reflect whether we are feeling marginally more optimistic or pessimistic.
Recession till 2025. We need to be realistic about the outlook and not assume the current recession will be over by Christmas. The issues we face are more likely to take years to resolve as they involve deep-seated problems
China is changing. It has bankrolled global growth since 2009, but now its model is shifting to self-sufficiency, alongside a major move into recycling to meet Net Zero targets. Its real estate market has been ‘subprime on steroids’ and its bursting will have far-reaching consequences for the global economy
Food shortages. As Sri Lanka’s suffering has shown, social unrest is rising around the world as food shortages increase along with prices for other essential goods. In turn, this will inevitably destroy the myth that demand growth in developing countries can somehow balance the downturn in developed markets
Invest for the future. Recession will accelerate the transition to a Net Zero economy. The invasion is already reducing fossil fuel demand. And demand patterns are changing very quickly as people refocus on ‘needs’ rather than ‘wants’.

Paradigm Shifts
Some of these changes are already becoming obvious, such as rising levels of debt and the threat of inflation. Others are still to appear. These relate to the way behaviour is changing in response to the Covid pandemic and the Ukraine war in 5 key areas where major paradigm shifts are underway:
RESHORING SUPPLY CHAINS

Global supply chains have proved very fragile during the pandemic. They have collapsed…
RENEWABLE ENERGY

Energy markets are seeing a major paradigm shift, with the pandemic and the Ukraine war accelerating the shift to renewables…
CIRCULAR ECONOMY

The need to reshore supply chains in a world of potential energy abundance suggests that moves towards a circular economy will accelerate…
ADVANCED MANUFACTURING

Many manufacturing operations still operate as they would have done 500 years ago, or even 50 years ago…
FINANCIAL MARKETS

Governments are refocusing on fiscal policy instead of monetary policy as the debt bubbles created by central bank stimulus begin to burst.
Paul Hodges | Real Vision Finance (24 Mar 2023)
Paul Hodges | Blockworks (1 Dec 2022)
Paul Hodges | Blockworks (4 Nov 2022)

RealVision (3 Aug 2022)

RealVision (7 Jun 2022)
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