Cyclicality investment timing

The acute cyclicality of the commodity petrochemical industry s profitability makes it a difficult business for investors to evaluate the lack of steady earnings means that investors tend to undervalue commodity chemical companies at the trough and overvalue them at the peak (see also Chapter 2). It is also a difficult business for chemical companies to manage, in that timing of investments is both of critical importance to profitability and extremely difficult to get right. 

Fig. 16.4 Cyclicality generated by a business dynamics model in which the ability to invest at the right time is constrained by lack of finance Source McKinsey analysis...

Fig. 16.4). When the financing constraint was removed, and investment allowed at any time in the cycle, cyclicality disappeared. 

In the transfer technology, filling and fusion of the molded part is done in a hot mold. Afterwards, the uncooled molded part is transferred to the cold mold and is then cooled to demolding temperature. This procedure also reduces the energy consumption because the mold is not cyclically heated and cooled. The disadvantage is that two molds are used at the same time, so higher investment costs occur. The quality of the molded part is also lower than in conventional processes. 

Another factor affecting the cost of premiums is the underwriting cycle. This is a factor that employers have little control over. It is a cyclic period of time showing a predictable pattern of profit and loss for insurance companies. Competition drives insurers to repeat the pattern during phases of the cycle. Insurance rates are adjusted based on this cycle, the most recent premiums, investment income, and losses reported by the insurance companies. 

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