Skip to Content
Stock Strategist Industry Reports

Chemical Industry's 2010 Outlook Mixed

Recovering demand will likely be overshadowed by new capacity coming on line.

Mentioned: , , , , , , , ,

Chemical producers have had a wild ride in 2009. The year started off with companies facing abysmal demand and sorry prospects for profitability. However, meaningful cost-cutting, inexpensive North American natural gas, and relatively strong demand in emerging markets--particularly in Asia--have improved the picture during the course of the year. Going forward, improved cost structures should help to improve profitability, but companies will still need to deal with relatively weak near-term demand in developed countries and a wave of new supply coming on line in the Eastern Hemisphere.

Chemical makers' significant cost reductions have lowered break-even sales levels. In response to weak demand for chemicals in late 2008 and through 2009, many producers got busy mothballing and closing plants and laying off and temporarily furloughing employees. During the third quarter, chemical firms began to see the benefits of these cost-cutting measures.  BASF (BASFY),  Dow Chemical (DOW), and  PPG Industries (PPG) all saw meaningful sequential improvements in operating income. Structurally lower costs will be an important earnings driver going forward given that demand is still relatively weak--while emerging market demand has certainly been strong, developed market demand seems to be merely stabilizing at depressed levels.

Elizabeth Collins does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.

Transparency is how we protect the integrity of our work and keep empowering investors to achieve their goals and dreams. And we have unwavering standards for how we keep that integrity intact, from our research and data to our policies on content and your personal data.

We’d like to share more about how we work and what drives our day-to-day business.

We sell different types of products and services to both investment professionals and individual investors. These products and services are usually sold through license agreements or subscriptions. Our investment management business generates asset-based fees, which are calculated as a percentage of assets under management. We also sell both admissions and sponsorship packages for our investment conferences and advertising on our websites and newsletters.

How we use your information depends on the product and service that you use and your relationship with us. We may use it to:

  • Verify your identity, personalize the content you receive, or create and administer your account.
  • Provide specific products and services to you, such as portfolio management or data aggregation.
  • Develop and improve features of our offerings.
  • Gear advertisements and other marketing efforts towards your interests.

To learn more about how we handle and protect your data, visit our privacy center.

Maintaining independence and editorial freedom is essential to our mission of empowering investor success. We provide a platform for our authors to report on investments fairly, accurately, and from the investor’s point of view. We also respect individual opinions––they represent the unvarnished thinking of our people and exacting analysis of our research processes. Our authors can publish views that we may or may not agree with, but they show their work, distinguish facts from opinions, and make sure their analysis is clear and in no way misleading or deceptive.

To further protect the integrity of our editorial content, we keep a strict separation between our sales teams and authors to remove any pressure or influence on our analyses and research.

Read our editorial policy to learn more about our process.