MOSCOW (MRC) -- Peter Huntsman, CEO of Huntsman, is more bearish on the global economy than at the outset of the COVID-19 pandemic. Resurgent growth in China shows light at the end of the tunnel, but lockdowns and uncertainty continue to hinder recovery in the US and Europe, reported Chemweek.
"Demand probably has come back a bit slower than I had anticipated," he says. "Frankly, I've been rather disappointed with the prolonged nature of these lockdowns. This is just my personal opinion. I think that this entire lockdown situation has become politicized in many parts of the world, particularly in the United States."
Huntsman shared his views this morning with Lyn Tattum, publisher of Chemical Week, during a webcast of IHS Markit's Chemical Executive Conversations.
"When we look at the overall supply chain, and … the number of retail outlets that are still closed globally, I think that rather than a V- or a U-shaped recovery, we're probably going to see a W-shaped recovery," he says. "So I think you're going to see a W. You're going to see some good news and some positive results, and then you're probably going to see the continuation of some bad news."
Demand has been fairly resilient in the DIY and home construction segments, but there has been very little improvement in the aerospace and textiles segments, he says.
"Areas that we thought wouldn't have been that badly affected like textiles and clothing and so forth actually have been absolutely devastated," Huntsman notes. "And the entire United States and Western European economy—for the first time in industrial history, in the month of March and going to April, for a prolonged period of time, the United States (and) Europe did not assemble a single car, did not build a single airplane."
Export-oriented demand in China also remains severely depressed. "If you're doing business in China dependent on export, which is about 15–20% of our business in China, you're going to see about a 60–70% drop in business," says Huntsman.
However, demand driven by China's domestic market is snapping back. "We're seeing that business tracking about 95 to 100, 101% of where it was a year ago," Huntsman reports. "In total, our business in China is probably down 5–10% from a year ago. That's mostly because of the … export-oriented piece, but the Chinese-oriented business, where you're investing in domestic automobiles, construction, infrastructure projects, and so forth, those are going to remain. China is going to continue to be a very strong market for us."
The economic chaos surrounding the COVID-19 pandemic has not only depressed demand, it has also thrown up hurdles to recovery. Although Huntsman entered the crisis with its strongest balance sheet ever, many of its customers were not so fortunate, the CEO points out. "A lot of them are going to start looking to us to be their bank, [will] want us to start financing their receivables," he says. "But we're not a bank, so we're going to have to work through those. We have to make sure that credit and sales are working hand in glove better than they ever have, perhaps."
As MRC reported previously, in April 2020, to further aid in the fight against the COVID-19 pandemic, LyondellBasell (LBI) donated a key ingredient to Huntsman Corporation to produce hand sanitizer for US first responders.
We remind that, in January 2020, Indorama Ventures Public Company Limited (IVL), a global chemical producer, completed its acquisition of Huntsman’s world-class integrated oxides and derivative businesses, including a large flagship site on the US Gulf Coast (USGC) at Port Neches, as well as Chocolate Bayou and Dayton in Texas, Ankleshwar in India, and Botany in Australia, as per IVL's press release.
The acquisition is a profitable and growing end applications business along with unique products and geographical profile among the crowded olefins space. It has a well-integrated assets base with an extensive infrastructure and future expansion possibilities. The area is adjacent to many USGC feedstock suppliers. The cash value of USD2.0 billion makes it the largest acquisition by Indorama Ventures ever and now our capital employed is nicely spread over plastic, chemicals and fibers. The transaction value translates to an EV/EBITDA of ~5.7x and is expected to add substantial synergies to Indorama’s existing 450kta Ethane/Propane Cracker and our 550kta EO/EG. IVL will now be integrated from Ethane to PET as well as the high-margin EO and PO derivative businesses.
Ethylene and propylene are feedstocks for producing polyethylene (PE) and polypropylene (PP).
According to MRC's ScanPlast report,
Huntsman Corporation is a publicly traded global manufacturer and marketer of differentiated and specialty chemicals with 2017 revenues of more than USD8 billion. Its chemical products number in the thousands and are sold worldwide to manufacturers serving a broad and diverse range of consumer and industrial end markets. The company operate more than 75 manufacturing, R&D and operations facilities in approximately 30 countries and employ approximately 10,000 associates within its four distinct business divisions.