Consulting case study: Industry Intelligence

Customer brief

A Middle Eastern chemicals producer engaged us to assist in planning its next investment cycle. The focus was global, with an emphasis on proximity to primary consumption markets.

Challenge

How to understand the cost of goods sold and margins in this dynamic market in order to retain a competitive edge. The petrochemical market is highly commoditised, and cost competitiveness is paramount. The competitiveness of individual plants is subject to change over time, making it crucial to maintain an integrated view of the cost of goods sold, margins and market dynamics i.e. supply, demand and projected net trades.

Outcome

We conducted a detailed market study for the chemical value chains considered in this study, focusing on firm/speculative new capacity and demand growth drivers. We also visualised the projected net trade patterns over the investment horizon and estimated the operating rates by region and, in some cases, by country.

Using our proprietary cost curve models, we analysed historical margins and the cost structure for the different chemicals under consideration. We projected the competitiveness of each plant factoring in capacity, estimated operating rate and the technology deployed. We also factored in the level of integration of each plant and assumed feedstock sourcing based on our in-house knowledge of other stakeholders in the chemical value chain.

As a result, the client understood the competitiveness of its investments in different regions and the profile of expected project investment costs based on location. We identified key competitors at regional and global levels while also pinpointing underperforming plants and potential candidates for rationalisation.