Implications of COVID-19 for the Chemical Industry

The chemical industry may feel the impact of the pandemic of covid-19 in all aspects. Just as supply chains in major regions are interrupted by outbreaks, demand may also decline due to uncertainty in the global economy and capital markets. The labor force is at risk of infection and the government is beginning to limit mobility – both adding unpredictable factors to the crisis.

The popularity of covid-19 is causing widespread attention and economic difficulties to consumers, businesses and communities around the world. The situation has changed rapidly and has a wide range of influences. We have prepared some novel coronavirus pneumonia guidelines: what the US business leaders should know: crisis management and response, labor, operation and supply chain, financial reporting, taxation and trade.

In the current environment, there is no way to be anywhere – and of course, it’s not a general business model. Most companies already have business continuity plans, but they may not be able to address unknown variables that rapidly change during outbreaks such as covid-19.

Typical emergency plans can help to improve the efficiency of operations after natural disasters, network events and power outages. They usually do not take into account the wide range of isolation, extended school closures and increased travel restrictions, which are currently being implemented in countries around the world. Each company’s response to these forces should be carefully adjusted to the dynamics of its industry.

The crisis began to bring some unique challenges. In the first pwc-19 CFO pulse survey, financial leaders in the United States and Mexico shared their most concerns.

Possible problems in the chemical industry:

The novel coronavirus pneumonia epidemic may cause serious impact on the industry in many ways: reduced demand and productivity, disruptions in operation and supply chains, tight credit markets and health of the workforce.

The industry may be particularly vulnerable, as most of its production workforce is on-site and cannot be completed remotely. In addition, given the nature of the industry, companies may need to consider how to establish social distances in employee intensive workplaces.

In addition, many companies should be prepared for global supply chain and other distribution disruptions. They should also expect supply chain partners to face challenges during the crisis, may not be able to complete orders on time, or even complete them at all.

Finally, demand for products is expected to slow in some of the affected industries, including automotive and industrial products. However, we may also see the continuing needs of other end users, such as personal health and household product manufacturers.

According to the Bureau of labor statistics, chemical companies employ about 850000 people in the United States. A large part of these positions are directly involved in production and cannot be performed remotely. If the covid-19 infection spreads throughout the workforce, unless adequate precautions are taken, the capacity of the plant may be reduced. And if, like the automotive industry, production facilities must be shut down, then production may be severely limited.

If a widespread outbreak of covid-19 affects its employees, the enterprise should consider that outsourcing some corporate functions may be needed (for example, transferring it to the cloud or transferring internal non core operational functions to contractors).

The supply chain of chemical industry has always been highly dependent on China, which is seriously affected by the popularity of covid-19, and has taken extensive countermeasures.

In addition to potential challenges in obtaining the necessary raw materials, disruption of the global supply chain may also jeopardize the ability of chemical producers to deliver finished products to customers.

As in the previous downturn, the industry may act quickly to reduce discretionary and capital expenditure to support operations. A key problem for chemical companies will be: do you have enough money to survive the storm – and even possibly take advantage of the industry’s turmoil?

The industry’s turmoil could lead to a large number of financial information disclosure implications. Companies in areas affected by the epidemic may face challenges in completing financial statements because their operations are disrupted.

Due to uncertainty about the severity of economic turmoil, some companies may face the prospect of goodwill and long-term asset impairment, as well as growing concerns about the recoverability of receivables, restructuring actions and / or liquidity issues.

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