Chemical sector faces environmental and technological challenges - Report

The chemical manufacturing sector is under increasing pressure with environmental concerns expected to shape the future of the sector.

An industry report by Westpac New Zealand says the industry was also challenged by labour and material shortages, as well as changing technologies, which it had been slow to adopt to.

The report says digital technologies were being used to improve operations and supply chain management in overseas markets.

"Slowness on the technology front reflects the fact that many firms operating in New Zealand are importers," it says.

The sector imported much of what it needed from global suppliers and onsold products into every New Zealand industry, including construction, manufacturing, agricultural and consumer sectors.

The sector accounted for just over 18 percent of total manufacturing sales, valued about $20 billion, with refined petroleum products accounting for just under half of sales.

Sales of basic chemicals and chemicals products added another $5.3b.

The manufacture of polymer products contributed a further $4.7b, with just over half of that coming from plastics.

The report says the outlook for the sector was uncertain with prices for basic chemical and basic chemical product prices to remain soft.

"A key risk for importers/distributors relates to whether they can pass on the cost of imported product to downstream consumers in a competitive market."

Companies that produced recycled plastic products were also facing a number of challenges with a shift to a circular economy, which was focused on recycling and reusing products.

"But it is an opportunity to others that invest in new products, new materials, new machinery and new ways of doing business."

It says smaller firms had become more responsive to changing consumer sentiment towards plastics and were actively looking at developing new products with additives that make them less harmful to the environment.