Chemical distributors are facing an ever-growing list of challenges and changes that have the potential to impact the industry significantly. From supply chain shortages, surging natural gas prices, increasing labor costs, and ever-changing environment standards, chemical manufacturers and distributors need to adjust their game plans to ensure future success.
While many expect the US chemical industry to remain globally competitive, increasing costs stemming from rising inflation and continued volatility in oil prices make it likely the industry will hit a soft patch in 2023.
So how can chemical distributors succeed in facing all this global uncertainty?
This article will look at the primary factors impacting chemical distributors and the chemical industry today and then provide several strategies to navigate these volatile times.
4 Global Factors Impacting Today’s Chemical Industry
The Global Supply Chain
The events of the past few years have shown us the fragility of our supply chains, especially in the chemical industry. From the COVID global shutdowns, continuing China Shutdowns, the war in Ukraine, Snowmageddon, rail strikes, and the Suez Canal, it's no secret that our supply chain is under immense strain.
A recent US chemical manufacturers survey revealed that 55% of them reported increased port-related delays and congestion since Q3 2021. On top of that, 39% said rail transportation-related delays and challenges have also worsened. These delays have caused some companies to have transit times that are eight days longer and, for some, even more than three weeks.
The chemical industry is highly globalized and relies heavily on fossil fuels, so global trade is a significant concern.
With increasing geopolitical uncertainty and the recent shuttering of plants in Europe, reevaluating supply chain structures is crucial for producers to meet the changes required for the next decade. This includes localization of supply chains to achieve decarbonization goals and further incorporation of ESG-related product portfolio changes, as well as moving towards circularity and alternative feedstocks.
Natural Gas Supply and War with Ukraine
The next global factor impacting today’s chemical industry is the war in Ukraine and its impact on the natural gas supply.
The rising prices of natural gas and crude oil in Europe are causing quite a stir in the chemical industry. As a result, chemical producers are being forced to increase their selling prices, putting them at a disadvantage compared to competitors in other regions such as the US, Asia, and the Middle East. The ongoing war in Ukraine has been a significant contributor to this issue, as it has pushed up feedstock and energy costs for chemical producers.
The increasing fuel costs are not only affecting the chemical industry, but they are also causing inflation and leading to high freight rates. The safety concerns surrounding the war have disrupted land and air transport routes via Ukraine and Russia, making rerouting even more expensive.
While the war in Ukraine continues, the current outlook shows that natural gas prices have leveled off and could begin to fall as interest rates rise in the face of ever-growing inflation.
Ongoing Global Inflation
Rising global inflation is having a significant impact on the cost of chemical production. As the supply of raw materials tightens due to geo-political instability throughout the world, coupled with supply-chain challenges, the chemical industry is seeing unprecedented price increases.
The increased cost of raw materials makes it necessary for chemical manufacturers to propose controlled price increases that have been, for the most part, measured in relation to the downstream industry's ability to absorb them.
However, as prices continue to rise, these increases will likely become more frequent, passing on the cost increases through the value chain.
Sustainability Policy and Environmental Standards
Sustainability in the chemical industry is nothing new. Many chemical companies have set ambitious targets for reducing emissions, with about 70 companies aiming for net zero or carbon neutrality by 2050.
To hit these goals, chemical companies must rely more heavily on emerging technologies that drive value chain improvements and sustainability.
Having a transparent and sustainable supply chain is becoming increasingly important. Many chemical companies are expected to invest in new technology to improve their supply chain management and visibility in 2023. They may use digital technologies to find better and cheaper ways to make their products. Also, using digital tools to improve customer experience can lead to more sales and repeat business.
4 Ways Chemical Distributors Can Succeed in the Face of Global Uncertainty
Maximize Chemical Packaging Efficiency
Regarding the efficiency of chemical packaging, not all bulk containers are equal. The cost of wasted excess chemicals left behind in an IBC can quickly add up. Not only is there the cost of the chemical itself, but distributors must also consider the cost of proper disposal at the time of reconditioning.
While the lighter-duty caged plastic IBCs are primarily sold for one-way or limited reuse shipping applications, Asset IBCs are much thicker, corrosion-proof, and substantially more impact resistant, which makes them ideal for long-term reuse. Although these IBCs are generally a higher upfront investment, they typically pay for themselves in just a few round trips.
At Sherman-Tank, our asset IBCs go even further when it comes to efficient chemical packaging. Our IBCs are designed to minimize chemical residue left behind inside an empty tank, commonly referred to as the heel. While an average 330-gallon asset IBC can leave as much as 4 gallons of leftover chemical inside a used tank, our Sherman IBCs have no heel left behind. This simple design change can amount to tens, even hundreds, of thousands of dollars in savings each year for a typical chemical distributor.
Leverage Tank Level Monitoring Technology
In today's world of supply chain disruptions and global instability, delivery optimization is essential to chemical distributors' profitability. Remote tank level monitoring solutions, such as Anova's Unify systems, increase efficiency and reduces operating costs without sacrificing service levels.
- Reduce Labor Costs: The main expenses that distributors have control over are related to vehicles and personnel. You can reduce labor costs and eliminate unnecessary trips by adequately scheduling drivers and technicians. This way, you can ensure they are in the right place at the right time, maximizing efficiency and reducing expenses.
- Better Capacity Utilization: Knowing exactly when your customer's tanks are running low optimizes your delivery schedule, significantly decreasing the number of trips made per year and making limited trucks and drivers as efficient as possible.
- Reduced Capital Costs: Spending less time on the road can result in longer vehicle lifetimes and reduce the need for worn-out equipment repairs and replacements.
Implement Block-Chain Billing and Smart Contracts
Smart contracts are a set of predetermined parameters that are coded, stored, and executed on blockchain networks. They operate automatically, triggered when specific conditions are met, eliminating the need for intermediaries. When implemented in conjunction with tank-level monitoring software, the entire billing process can be automated based on accurate usage data each month.
This blockchain technology records, tracks, and executes contracts – and can even identify fraudulent transactions.
The adoption of smart contracts increases transaction speed, accuracy, and security. Furthermore, sensor-enabled invoicing requires fewer resources, letting your employees devote themselves to more value-added activities.
Responsibly Dispose of End-of-Life Tanks
Responsible disposal of intermediate bulk containers (IBCs) and chemical totes that reach their end-of-life is essential in achieving sustainability. An IBC sustainability program is aimed at promoting the use of IBCs in a sustainable manner, reducing waste and environmental impacts.
The goals of an IBC sustainability program may include the following:
- Reducing the use of single-use containers
- Promoting the reuse of IBCs
- Improving the recyclability of IBCs
- Reducing the environmental impact of IBC manufacturing and disposal
The program may also aim to educate and raise awareness among IBC users about the benefits of sustainability and the best practices for using IBCs in an environmentally responsible manner.
The ultimate goal of an IBC sustainability program is to reduce the environmental impact of IBCs and promote sustainable practices in using these containers.
Innovative Chemical Packaging Solutions
At Sherman Roto Tank, we understand that your competitive advantage is driven by your ability to adapt to our industry and marketplace changes quickly. That is why we are committed to rapidly delivering innovative chemical packaging solutions allowing you to focus on growing your bottom line.
Environmental, Social, &Governance (ESG)
Sustainability & Reconditioning Programs
Smart Contracts & Block-Chain Billing Solutions
Closed Loops Systems
Asset Tracking & Traceability
Accurate Proof of Delivery & Usage Data
Improve Chemical Efficacy with Our Barrier Enhanced Tanks™
Our Barrier Enhanced Tanks™ offer a more chemically inert product, while at the same time continuing to provide the cost and deployment advantages of standard poly tanks.
BARRIER ENHANCED TANKS™ IMPROVE CHEMICAL EFFICACY BY CLOSING THE ENVIRONMENT
BARRIER ENHANCED™ TANK WALL MITIGATES PRODUCT LOSS BY MINIMIZING VAPOR PERMEATION
BARRIER ENHANCED™ TANK WALL MINIMIZED CHEMICAL PERMEATION AND DEGRADATION
Closed Tank Systems
Sherman's Closed Tank Systems provide a controlled and managed approach to chemical packaging and transfer that increases delivery efficiencies, maximizes product integrity and yield, while reducing risk and liability.
IBC Reconditioning Program
The Sherman Roto Tank, LLC Reconditioning Program provides an IBC reconditioning service to its customers giving your IBCs more life, while lightening your impact on the environment and maximizing the longevity of your IBCs.
Our Sustainability Program allows you to safely, cost-effectively, and legally dispose of your end-of-life chemical tanks and IBCs that are currently taking up valuable space while ensuring they don't end up in a landfill.