Chemicals industry cycling down

The chemicals business is well into a classic down-cycle with profitability falling fast, Martin Quinlan writes

PROFITABILITY of the worldwide chemicals industry, as measured by the financial results of the largest chemicals companies and the chemicals subsidiaries of the major oil companies, declined sharply last year. The return-on-assets for the sector averaged 4.3% in 2008, down from 9.7% in the previous year and – the top of the latest cycle – 11.4% in 2006, Martin Quinlan writes. Figure 1 shows that profitability soared for three years after 2003, the trough of the last down-cycle. There was a dip in 2007, before profitability plunged last year as the new down-cycle developed. On the basis of previous cycles, the decline has some way further to run before the next up-cycle can start. Classically