Entering the Eye of the Storm
Vertical industries such as the process and oil and gas industries rely heavily on demand forecasts to plan production and manage inventory. But the emergence of the novel coronavirus – among ongoing trade tensions in Europe, China, the US, and Middle East – has negatively affected both supply and demand. LNG imports are down, petrol consumption is experiencing a sudden drop, and the demand for crude oil is dropping dramatically – despite the pandemic. This new environment will likely continue to present major challenges for oil, gas, and chemical companies.
In its different-than-usual quarterly report, the ARC Advisory Group summarizes the following key findings:
- Process industries are doing well but flattening
- Hybrid markets are up by low, single-digit figures
- Automotive-focused markets are in the middle of a downturn. Low point is expected to be reached in Q2 or Q3
- The impact of the pandemic will be limited to 2020 with a catch-up in 2021
But what effect this will have long-term are yet to be determined.
Managing Market Meltdown
Companies will need to address cash-management challenges and create detailed plans to maintain financial health and safeguard the supply chain. If they haven’t already done so, they need to adapt quickly. But oilfields and plants can’t just stop and start production with the flick of a switch and the cost and the risk of impromptu closure could be high.
A number of leading offshore companies have instead announced cuts to capital expenditure. Operators could also consider renegotiating agreements with suppliers and customers for added security.
COVID-19 the Catalyst
In the worst case, COVID-19 could have long-term impact that destroys supply chains and puts many companies out of business. But every cloud has a silver lining. In this instance, it could come in the form of an automation boom. Workforces are depleted due to lack of funds and social distancing but investing wisely in robot process automation and remote monitoring can help teams to manage critical processes without the need to send staff onsite.
It can be easy to lose sight of what is required for the future – for life after COVID-19. Following these three steps can help companies to prepare for the future:
- Monitor developing markets.
- Secure financial assistance (where necessary)
- Prepare both technical systems and workforces for a quick restart.
However, taking the necessary steps to ensure the welfare of the workforce should always take highest priority.
The ARC Advisory Group is a leading institution for market research in industrial fields. The company uses publicly available data to analyze current operational and engineering technologies, business trends, and industrial market developments.