Industrial investment cycles

The short term industrial investment cycles, it will be assumed, come about through dynamic interaction between industrial investors, or between two interrelated components of investment behaviour a) the decision behaviour of managers and entrepreneurs who are making strategic choices about the kind of... 

Life cycle cost calculations are an application of investment calculations that have been used in planning and design in industry for several decades. ... 

ICI Acrylics believes that greater cooperation between companies and a revised approach to life cycle analysis are the keys to the industry s future environmental sustainability. The company has invested over 2m pounds sterling in an on-going monomer recovery project, which encompasses a joint research programme with Mitsubishi Rayon. The project focuses on increasing the efficiency of acrylic depolymerisation and overcoming technical issues such as its use in recycling flame retardant acrylics. ICI ACRYLICS... 

Innovation process The development of biosolnble fibres for use in silencers was a difficult task from a technical aspect. On the one hand, the materials had to be soluble in the lung environment, on the other hand, they had to guarantee durability in the acidic environment of the exhaust flow. The change-over period until the release of new materials in the automotive industry is no shorter than 2-3 years depending on production conditions (investment and test cycles). Since the start of 1999 biosolnble fibres have been produced in series for use in silencers. 

Winter 1991). Consumer groups, such as the National Insurance Consumer Organization, charge that industry collusion and greed for investment income created this boom-and-bust cycle. 

Second, our research also confirmed the idea that the timing of capital investments, rather than strong fluctuations in demand, is to blame for the industry s volatile cycles. An industry-wide herd instinct for capital investment decisions has created large supply-and-demand swings (see Nattermann, P.). Since companies make most of their capital investments during the cycle s upswings (Fig. 3.4), prices fall quickly as new supply floods the market about two years later. 

They also have to contend with factors internal to the industry -the commodity chemical industry s own cycles of investment. 

Similarly to players in many other commodity industries, petrochemical makers have for decades fumbled the challenge of how to keep up with steady growth in world demand for chemicals, yet not outstrip that demand and see prices sink and their profits evaporate due to oversupply. Industry players tend to simultaneously invest in new capacity in the wake of product shortages that trigger dramatic price and profit increases - referred to in the industry as fly-ups - ultimately resulting in the next price slump. Investment is then starved until demand overtakes supply, and the cycle repeats. Profitability tends to closely track the capacity addition cycle profits fall after capacity additions. 

Our research has shown that attempts to successfully time investment decisions to the cycle - not only the chemical industry s but broader economic cycles - are extremely difficult (Butler, P. et al.), and that other tactics such as maintaining advantages in cost and operational excellence across all functions provide a surer return. 

The chemical industry has the potential for substantial further consolidation over the next few years. The precise timing will be influenced by the equity market cycles and general M A activity. However, as in the past and in other industry sectors, consolidation will provide investment opportunities for financial sponsors. 

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