This segment covers production activities such as oil and gas, mining, agriculture and chemical and pulp manufacturing. It is our second largest segment, being 24 percent of revenue. We supply key chemicals for industrial processes and coatings.
Many industrial markets are fairly cyclical, with some exceptions, such as pulp production. Most have recovered since the recession, partly because the downturn was muted by high growth market demand. For example the chemicals industry in Western Europe returned to peak levels in 2010 and has since grown at modest rates, a trend we expect to continue. We also expect higher growth levels in North America, due partly to the impact of shale gas. China remains important, due to both production and demand growth, but these rates are moderating somewhat. Production growth in other high growth regions is forecast to be much lower, except in select markets such as bleached pulp production, where South America is key and growing rapidly. Growth in oil and gas should remain high due to high oil prices.
Future sustainability developments
Sustainability continues to be a key driver. A major increase is expected in the eco-efficiency of resources and materials (four to ten times improvement by 2050 according to the WBCSD). Increasingly, “closed loop” processes will lead to reductions in waste that goes to landfill.
Implications for strategy and actions
Globally, we need to continue improving productivity and innovation rates to remain competitive. We must also continue to optimize our manufacturing footprint in Europe (where growth is limited), capitalize on opportunities created by shale gas in North America and continue developing marketing and selling capabilities in China and other high growth markets to take advantage of higher growth rates.
Chemical production 1
$ billion, value added
Bleached chemical pulp production 1
$ billion, output
Brent crude oil price 3
1 Source: Oxford Economics, January 2014.
2 BRI: Brazil, Russia, India.
3 Source: RISI, January 2014.
Where some of our products are used: