My previous article took a look at the performances of the 10 main economic sectors prior to and since the Covid-19 pandemic began. It also assessed some of the economic data that has been released, detailing the sectoral impacts that have been documented so far and the path that lies ahead for UK industry.

This article will examine the Basic Materials sector and its industry groups in some more detail, assessing how the industries have performed so far. It will also investigate current valuations of the industry groups and focus on how some of the top-ranking stocks in the sector are preparing for the future.

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The Basic Materials sector, which consists of the Chemicals, Forestry & Paper, Industrial Metals and Mining industries slightly underperformed the market in 2019 and has continued this trend since the pandemic erupted.Nevertheless, resurgent commodity prices and burgeoning demand for specialist chemical products and sophisticated packaging solutions point to a brighter future for the industries within the Basic Materials sector.

Performance of the Industry Groups

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The Chemicals industry has withstood the impact of the pandemic better than any of the other industries in the Basic Materials sector, falling by -21.5%. A large part of this has been due to the uptake in the demand for chemical products in the healthcare industry, for medical equipment, sanitation products and personal protective equipment.

Despite this, chemical manufacturers face an uncertain road ahead, particularly with potentially reduced demand from the automotive, transportation and consumer products markets. For example, the chemicals required for tyre manufacturing such as sulphur, silica, polybutadiene and various antioxidants, are no longer needed in the same quantities. With automotive industry production coming to a halt and consumers more reluctant to make big purchases on items such as automobiles, demand is not expected to return to previous levels of production for quite some time.

Within the Chemicals industry benchmark, there was one standout performer, which defied the trend and saw its share price appreciate by 9.7% since the start of this year. The company in question was Treatt, an ingredients manufacturer for the beverage, flavour, fragrance and consumer products industries. In its most recent interim statement, the company confirmed that “COVID-19 has had no adverse impact on trading performance”.

This is in contrast to a different kind…

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