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SUPPORT SERVICE COVID-19 • NACD PRESIDENT ERIC R BYER REPORTS ON THE IMPACT OF THE CURRENT HEALTH CRISIS ON ITS CHEMICAL DISTRIBUTOR MEMBERS IN NORTH AMERICA
THE UNITED STATES is facing one of the worst threats to our public health and economic growth in our nation’s history due to the continued spread of Covid-19. The response from our various federal, state, and local governments — along with Americans’ continued reticence to resume their ‘normal’ lives — has no doubt had, and continues to have, a significant impact on the economy and the bottom lines of chemical distribution companies. Fortunately, the chemical distribution industry has, by and large, fared much better than other sectors of the US economy due to our essential link in commercial and industrial supply chains and our ability to distribute much-needed products to combat the coronavirus, like sterilisers needed for
medical equipment, cleansers consumers use in their homes, hand sanitiser, and even personal protective equipment for first responders. Nevertheless, like most of the world, the US economy and even the chemical distribution industry has not been immune to the ill effects Covid-19 has flung upon the globe. In terms of the broader US, GDP fell 5 per cent in the first quarter of 2020, and some estimate it fell by as much as 35 per cent in the second quarter. Unless there is a dramatic improvement in growth over the remaining two quarters of the year, it is very likely the US economy will have contracted for the first time since 2009. While the official unemployment rate has fallen from its peak in May of 13.7 per cent, it still stands at 11.1 per cent as of this writing. However, weekly claims for unemployment insurance continue to be twice as high as the peak levels during the Great Recession last decade, indicating that many low-skilled and part-time workers continue to be laid off from their jobs. CHEMICAL MARKET CONTRACTION The US chemical sector has been able to weather the health and economic crisis better, but it still has had its share of troubles. Since February, employment has been down 2.1 per cent — a fraction of what other industries like entertainment and hospitality have faced, but still concerning given the number of highskilled jobs the industry needs to perform well. Chemical production is down 12 per cent from this time last year, but the good news is shipments are up 2.3 per cent in the last five months. And again, since February, prices are down 5.6 per cent. However, wages have
HCB MONTHLY | SEPTEMBER 2020
been holding steady, meaning that profit margins have been absorbing most of the price drop. Most of the major industries that are users of chemicals have seen a large drop-off in demand. Aerospace, automotive and industrial consumer goods have all been very weak. While there has been higher demand for food packaging, personal protective equipment, medical supplies, and cleaning chemicals, it has not been enough to offset losses in other major chemical market sectors. One particularly bright spot for chemical distributors has been the sale of isopropyl alcohol (IPA). Beginning in March, demand surged for IPA both here in the US and globally due its use in hand sanitisers and cleaning agents. Many members of the National Association of Chemical Distributors (NACD) store IPA as a ‘rainy day fund’ of sorts, and have been able to draw upon those reserves to boost their sales when demand for other products has fallen off. Prices for IPA spiked across the globe to historically high levels this spring and, while they remain historically high, they are starting to come down slowly from their peak levels. This increase in demand and prices has been a key lifeline for NACD members that have been able to tap into that product market during the Covid-19 crisis. OPERATIONAL CHALLENGES Beyond the economic and market sector effects of Covid-19, NACD members have also had to shift the way their businesses operate on a day-to-day basis to ensure their employees are kept safe and healthy while they also work to keep their businesses afloat. At what is considered the beginning of the pandemic in the US, the Trump administration deemed the chemical industry ‘essential’, meaning our member companies were exempted from a lot of the early restrictions regarding mandatory business closures, stay-at-home orders, and the transport of cargo across state lines. Even though our members were able to continue doing business, they took (and still
