Process Industries

The Process Industries sector involves transforming bulk raw materials into other products through continuous or semi-continuous flow processes, often involving chemical or thermal conversion. Unlike discrete manufacturing, it deals with non-assembled products using formulas and recipes, forming a substantial part of the broader manufacturing industry.

The performance of the Process Industries sector is significantly influenced by economic indicators like GDP and IPI, consumer demand, and global economic conditions. Technological developments such as automation, AI, and IoT are transforming the sector by streamlining production and enhancing efficiency. Growing demand for durable and eco-friendly products drives innovation, while regulatory changes push for sustainability and environmental compliance. Geopolitical tensions and trade restrictions lead to commodity price volatility and supply chain disruptions.

The Process Industries sector includes chemicals and petrochemicals, mining and metals, mineral and materials, pulp and paper, food and beverages, generic pharmaceuticals, and steel. Notable companies include Linde, Air Liquide, Shin-Etsu Chemical, BASF, and Dow in chemicals; BHP Group, China Shenhua Energy, Rio Tinto, Southern Copper, and Glencore Plc in mining and metals; and Packaging Corporation of America, International Paper Company, Ball Corporation, Amcor plc, and WestRock Company in paper and packaging.

The manufacturing industry, which overlaps with process industries, experienced slowed growth in 2023 and 2024. As of May 2025, the Manufacturing PMI was at 48.5%, and Industrial Production – Manufacturing was at 100.0 (projected). GDP for Q1 2025 showed a slight contraction of -0.2%. The outlook for 2025 is generally muted, with some forecasts indicating a weaker recovery than previously expected. However, a resurgence is expected between 2026 and 2030, driven by innovation and digital transformation, with the Asia Pacific region anticipated to witness the most forceful expansion.

The Process Industries sector is cyclical, closely tied to the overall economic cycle and sensitive to fluctuations in demand and commodity prices. Investment is often procyclical, requiring significant capital expenditures. Short-to-intermediate-term stock prices and operating results can be volatile, although many companies have historically demonstrated consistent dividend growth. Valuation norms vary, with investors often looking at metrics like P/E ratios and debt-to-capital levels. These stocks tend to outperform during economic expansion and underperform during downturns.