2023 Outlook

What to expect from the chemical industry next year

Read time: 6 minutes


Over the last two years, the chemical industry faced unprecedented challenge after challenge. In 2021, the industry dealt with the backlash of COVID-19 and ongoing supply chain challenges. In 2022, we saw more of the same, plus inflation spikes, a drop in demand, and price increases. Then, just as things seemed to be normalizing, Russia waged war against Ukraine, creating global instability in resources such as energy and gas.

But amidst these challenges, the chemical industry has been resilient. Read on to uncover what we expect from sustainability agendas, formulations, the supply chain, and demand in 2023.

Significant movement on sustainability agendas

As of this year, nearly 90 percent of emissions are targeted for reduction under net-zero commitments. To support this, the European Unionannounced a carbon dioxide tariffon goods, such as steel or cement, that will go into effect as soon as October 2023. All of this, combined with limited resources, supply chain challenges, and the war in Ukraine, serves as an accelerator for sustainability progress, pushing companies to evolve in order to meet regulations, their goals, and consumer demand.

One company paving the way is ArcelorMittal;last year they announced that they will invest 1 billion into replacing their old-fashioned blast furnace with a DRI+EAF steel plant that works with hydrogen as its main fuel. When its production begins in 2025, ArcelorMittal will be the first full-scale steel plant to achieve zero carbon emissions in the world.


In 2023, we expect more and more companies to announce similar plansthat help to reach 2030 net-zero commitments, especially in the energy-intensive industries like steel manufacturing, where 75 percent of steel is still made from high-emission plants, and cement manufacturing, where 90 percent of energy use comes from kilns alone.

Formulations for energy reduction

Analysts referred to this year's energy crisis as the perfect storm. Challenges like lower-than-normal gas reserves and the Russia-Ukraine war turned heads around the globe and made the chemical industry painfully aware that affordable energy is not always readily available. 


High-temperature products, for example,require massive amounts of energy, and with rising prices, ceramic, refractory, and foundry production took a hard hit. Before the crisis, energy represented 30 percent of the costs in ceramic production. During the summer spike, it was upwards of 70 percent. Additionally, refractories reported increases in their energy bills, one referencing an increase of 700% in one month alone.


This is pushing the industry to rethink how to approach energy use, not only from a sustainability standpoint but to also be less dependent on fossil fuels. New formulationswill be prioritized to help offset the rising costs of energy, including trends in refractories that consider durability, insulation, green bricks, castables, and easier-to-install materials.  



Between the energy crisis and net-zero commitments, we expect more companies to commit to the switch to using green hydrogen. Whenthis happens,entire formulations will need to be reshaped to accommodate hydrogen and its varying capabilities, everything from the approach and process to the technology and facilities. 

Prioritizing renewable and bio-based alternatives

With chemical intermediates being at the start of science, there are significant opportunities to drive sustainable change. In the last year, more formulations have tested renewable and bio-based alternatives to petro-based chemicals and showed promising results.


For example, one sustainable alternative is to use bio-succinic acid as an alternative to petro-based diacids; a 100% bio-based succinic acid that enables the production of polyester polyols and polyurethane products with a lower environmental footprint, commonly used in polyurethanes, resins, and plasticizers. Another is the switch from petro-based products, such as acrylic acid, to itaconic acid; a dicarboxylic acid that’s used typically in medical, polymers, resin production and water treatment. Such replacements can only happen if the products can be competitive with fossil-based products.


With developments and successes like these, formulations that use renewable or bio-based alternatives will be prioritized next year to support sustainable agendas. 

Supply chain regionalisation

Supply chain disruptions over the last two years have proved many vulnerabilities in the global efficiency approach. In a short period of time, the chemical industry experienced volume shortages, price volatility, geographical sourcing dependency, long-lead times, and quality concerns. And although a recent surge in industrial production gave the industry hope for normalcy, the war in Ukraine has again created urgency for an approach that is more resilient.


In the coming year, there will be a shift toward prioritizing sustainable, resilient, and increasingly regional production pathways. The recently announced carbon dioxide tariffs will only support this, pushing companies in the EU to source more domestically. Companies in Australia, for example, are already committing to domestic supplierto avoid future risks with the supply chain. The switch to prioritizing more regional sources will increase availability, decrease delays, and create a more agile market for chemicals. 


The key challenge in regionalisation will be balancing costs and carbon footprint, as locally sourced materials can be more expensive. But for many,the easier-to-access materials investment might be the safer choicewhen weighing the alternative of delaysstopping production that could cost millions.

More unpredictability in demand

In the second half of 2022, demand slowly dropped off, and now, with talks of recessions around the globe, 2023 is a bit unpredictable. When considering specifically the chemical industry, markets like construction will experience more volatility, due to high material costs coupled with rising interest rates.

Already, experts are expecting 
global economic growth to slow to 2.7 percent, down from 3.2 percent in 2022. With this in mind, a rise in demand is not anticipated in the first half of the year, and it's still too early to predict what is to come in the second half.


While we don’t have a crystal ball, there is no doubt that 2023 will bring new challenges and opportunities to the chemical industry when it comes to sustainability, formulations, and sourcing. We are watching the market and demand closely to keep a pulse on how global trends can impact our customers and partners. Subscribe to our Industrial Solutions newsletter to get updated on the latest news, trends and challenges impacting the industry.

Dr. Fikri Alemdaroglu

Business Group Director,

Industrial Solutions


About the author

Dr. Fikri Alemdaroglu is the Business Group Director for Industrial Solutions. With a PHD in chemistry, Fikri has worked for more than 15 years in a variety of chemical positions, including chemical producers like BASF and Daikin in technical and commercial roles. At IMCD, he wears many hats, supporting the team in Germany as the Business Unit Manager of Industrial Solutions & Lubricants, as well as an International Product Manager.
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