Global Industry Key Themes For 2022

Fitch Solutions / Agribusiness / Global / Mon 13 Dec, 2021

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Six major themes will influence the way industries operate in 2022. The list includes moment-in-time issues related to the post-Covid landscape, supply chain adjustments, inflation, US-China tensions, and the evolution of multi-decade trends around digital transformation and the low-carbon economy.


Theme Description
Post-Covid Industry Normalisation Economic normalisation will see stability returning to industry growth in 2022 and all industries (excluding tourism) exceeding pre-pandemic market size. Consumer facing and healthcare related sectors are likely to see the strongest average growth in the year. 
US-China Industry Tensions Tensions between the US and China are expected to re-escalate over the course of 2022. This will impact several industries. Most prominently we expect growing pressure on countries to choose alignment between the two countries related to technology, telecoms and infrastructure services.
Elevated Input Prices High commodity prices in 2021, owing to supply shortages and disruptions, are for the most part likely to ease in 2022 but will take time to feed through to end users and will remain above 2016-2020 averages. This will especially place pressure on the cost of low carbon technologies in 2022.
Supply Chain Adjustments After years of supply chain disruption we expect companies to make concrete efforts to adjust their supply chains in 2022, including diversifying trade partners and nearshoring. This will especially be the case in autos and pharmaceuticals, the latter supported by government measures. 
ESG Across all industries, ESG related shifts are taking place, especially envrionmental and sustainability drives catalysed by COP26. Sectors that have been under the radar so far are expected to make contrbutions to the low carbon transition in 2022. 
Digital Transformation Investment into the integration of technology into industries is expected to pick up in 2022. This in turn is driving growing scrutiny on data protection and cybersecurity concerns. 
Source: Fitch Solutions

Post-Covid Economic Normalisation: Industries Returning To Stability

Our Global team expects that 2022 will bring almost full economic normalisation. Improved Covid-19 vaccine supply, booster programmes and enhanced therapeutics will allow countries to manage the pandemic while returning economic activity to ‘normal’. We expect this to be primarily driven by developed markets (DMs), which will experience above-trend growth, with emerging markets likely to struggle again in 2022. On an industry basis, we see this broadly across the board. Two industries which in 2021 were still seeing key indicators below pre-pandemic levels – autos production and oil & gas production – should exceed pre-pandemic levels in 2022. One exception is the tourism sector, where we expect personal preferences, Covid-related uncertainty and entry restrictions to see continued weak demand for tourism in 2022. All other industries will remain on an upward trajectory. The strongest growth will be exhibited in consumer-facing industries, including autos; retail; food & drink; and healthcare-related sectors, including pharmaceuticals, medical devices and healthcare spending, reflecting the continued recovery of the consumer as well as sustained investment in healthcare globally – both Covid-related and addressing backlogs built up over the pandemic.

Stability Returning

Global Industry Growth, % Chg y-o-y (Nominal)

e/f=estimate/forecast, Source: National Statistics, Fitch Solutions

US-China Tensions: Usual Industries In Focus

Rising political tensions between the US and China are expected to impact several industries over 2022. Our Global team expects US-China tensions to deteriorate ahead of the US midterms and China’s 20th Party Congress in Q422. This tension will likely manifest through specific industries; in particular, the telecommunications and technology spaces will again be at the forefront. We expect the tension between China and the US to continue to see other countries caught in the middle, forcing them to choose allegiances and demonstrate this through suppliers for goods and services.

Infrastructure will be another touchpoint for this trend. The Belt and Road Initiative (BRI) has gone largely unmatched by other countries and has seen China expand its influence and ties globally. Increasingly non-China-linked alternatives to the BRI are likely to gain traction in an attempt to counter Chinese influence globally. While infrastructure development will be key, the intention is to develop trade links, supply chain logistics and influence to counterbalance China geopolitically. One prominent example is the Build Back Better World initiative proposed by the G7 as an alternative to the BRI to help developing countries close their infrastructure gaps.

Countries Face A Tough Choice Between US And China Infrastructure Support

Map Of Chinese Market Share - Construction Roles By Country, % of total

Source: Fitch Solutions Key Projects Database

Rising Input Prices: Low-Carbon Transition Under Pressure

On the whole, we expect inflation to peak and begin easing in H222. High commodity prices in 2021, owing to supply shortages and disruptions, are for the most part likely to ease in 2022 but will take time to feed through to end users and will remain above 2016-2020 averages. For some industries, the structural nature of input shortages and the delayed feedthrough of supply will mean that high prices persist in 2022. In particular, labour shortages in manual industries, such as agriculture and construction, will remain persistent. Additionally, some commodity prices, including Brent crude, natural gas, coking coal, lithium and tin, as well as other input costs, will increase in 2022 and see some sectors faced with declining profitability or passing along higher costs to consumers.

This trend will be visible in the agribusiness sector, where the rising costs of crude oil, fertiliser, seed and labour will combine with increased global supply to dampen farm profitability and challenge machinery sales.

The construction industry, which has been vulnerable to input shortages since the global financial crisis, will again feel the impact of rising input costs and labour shortages in 2022. With many DMs investing in infrastructure as part of recovery funding, structural labour shortages will emerge, and the rise in commodity prices, owing to supply disruption and rising demand, will place upward pressure on costs.

Across many industries, an area of price increase relates to the low-carbon transition. With rising investment in low-carbon alternatives, the commodities needed to power this technology, such as copper, lithium, steel, aluminium, iron, nickel, fibreglass and polysilicon, have seen shortages due to rising demand and supply disruptions, leading to price rallies. Over recent years we have seen consistent declines in the cost of technology supporting the low-carbon transition, namely batteries and renewable electricity generation technology such as solar panels and wind turbines. This has been essential to presenting them as realistic and cost-effective alternatives to traditional fossil fuel-powered technology. However, with supply challenges in these core commodities, due to high demand and limited flexibility in supply, we expect the cost of ‘green’ technology to begin to increase in 2022. However, we do not expect this to be a long-term reversal in prices and anticipate that once additional supply of key commodities comes onstream and supply chains normalise prices will return to their downward trends.

2022 Price Spike Not A Long Term Trend Reversal

Fitch Solutions Global Industrial Metal Price Indices (2003-2026)

Note: Equal-weighted indices based on Fitch Solutions industrial metal price forecasts. e/f = Fitch Solutions estimate/forecast. Source: Fitch Solutions

Supply Chain Adjustments: Action Gaining Pace

Adjustments to supply chains are likely to take place across several industries in 2022. Events over recent years have played havoc with supply chains and have in turn led to rising prices and shortages (see Rising Prices: Low-Carbon Transition Under Pressure). The 2019 US-China trade war exposed over-reliance on key trade partners, and the Covid-19 pandemic has contributed to the trend of resource nationalism and the security of supply chains (a key theme in 2021). The recovery from the pandemic has seen major disruptions and weaknesses in global supply chains, leading to shortages of basic goods. After years of disruption, we anticipate several sectors to adjust their supply chains in 2022. We anticipate a rise in nearshoring and a drive to diversify resource production bases and the sourcing of raw materials.

Autos has been on the front lines of supply chain disruption due to the complex nature of production supply chains in the industry and the impact of the global semiconductor shortage. Although some easing has been seen in semiconductor supply, ramping up new capacity takes time, and many new plants will not come online in 2022. The rise of electric vehicle (EV) demand, combined with disruptions caused by pandemic-related shortages and price spikes in the commodities used in lithium-ion batteries, has seen rising competition among automakers to secure access to the critical raw materials needed for battery sub-components. Companies will increasingly focus on the resiliency and security of supply and will shift their supply chains accordingly.  

Major Changes Ahead For The Global EV Supply Chain

Electric Vehicle Supply Chain – China’s Share of Production, 2021 (%) & Fitch Solutions Outlook

Source: Benchmark Mineral Intelligence, CNBC, Fitch Solutions

Other industries where this trend is expected to see movement include healthcare-related sectors, where governments are supporting industries in an effort to ensure security of supply. The over-reliance of pharmaceutical companies on China for active pharmaceutical ingredients has seen governments pledge funding and other measures to support developing alternative sources within Asia and nationally. In agribusiness, we expect tightening trade measures related to food security efforts by governments, including export taxes or outright bans as well as import restrictions.

ESG: All Industries Making Moves

The most consistent trend across industries in 2022 is rising momentum behind environmental, social and governance (ESG), particularly environmental and sustainability investment. This is also manifesting in rising regulations, either to regulate new low-carbon solutions or to create transparency and support consumer choice. Growing public awareness and demand for action around green issues, especially in the run-up to COP26, combined with government recovery packages tied to green investment will drive this trend.

While many industries have been evolving towards lower-carbon alternatives and will continue to make progress, industries which have remained under the radar so far are likely to move into focus, including the technology, agribusiness and healthcare-related sectors.  

Energy and autos are already advanced in terms of low-carbon investment and are transitioning to a low-carbon model. In the oil & gas sector, we expect that investment in low-carbon alternatives will begin to eat into investment in traditional upstream projects in 2022. Hydrogen is set to see major growth, with low-carbon hydrogen power generation technology and projects expected to expand. Our Power team expects micro nuclear technology to become more prominent, with several projects being developed and policy guidelines being established.

Increase In Hydrogen Project Development Expected In 2022

Global Top 10 Markets - Green Hydrogen Projects By Capacity, MW

Source: Fitch Solutions Key Projects Database

In the autos sector, where EVs have been gaining prominence for many years, we are seeing ESG considerations moving along the value chain to batteries and the materials used to create them as well as growing regulations surrounding lithium-ion batteries. We expect that regulation will provide policies on the quantity and types of metals included in battery chemistries, alongside safety labelling and testing requirements. We expect some countries to introduce ESG regulations that require the metals included in EV batteries to be sourced sustainably. 

Consumer-focused industries, including retail and food & drink, remain the areas where public opinion and preferences are having the greatest impact on strategy shifts. One new frontier is the focus on removing plastic from products such as clothes, toys and homeware, with companies committing to reduction pledge timelines and redesigning their products in order to use more recycled plastic and alternative sustainable materials. Food & drink is experiencing the same consumer-led pressures, with companies making advances in carbon labelling. One area that has seen a boom is alternative meat; however in 2022, we expect growing regulation on the industry and the traditional dairy and meat industries to fight this by spotlighting their own eco credentials.

Agribusiness, telecommunications and pharmaceuticals have made less progress than some sectors, but we expect them to begin to move in ESG-related areas in 2022. Many pharmaceutical and medical device companies announced commitments towards sustainability in time with COP26.

The telecommunications and technology industries are also moving into the spotlight as the scale of energy use continues to increase alongside the surge in demand for data and digital infrastructure. Most companies are aligned with the GSM Association’s goal of overall sector carbon net neutrality by 2050. The pandemic has also highlighted social inequalities, spurring telecoms operators to allocate additional resources to address the digital divide between populations.

We are seeing greater emphasis on the role of agriculture in global climate emissions, with governments and companies increasingly enacting climate change policies addressing this. The global commitment to end deforestation announced at COP26 is one example, with agriculture accounting for a large portion of deforestation. Although we are sceptical about the full impact of the pledge, it illustrates a growing focus on the ESG credentials of agricultural commodities. Measures that are likely to make a more meaningful impact include import restrictions, financing mandates and growing consumer backlash.

Also underpinning the low-carbon economy is the mining sector, which produces the key commodities powering and enabling the green transition. We expect the mining industry’s role in the green transition to become more visible in 2022, as the entire value chain of a green solution is considered. The mining sector’s social licence to operate is increasingly being eroded amid rising public opposition. This will add major momentum to alternative extraction projects that are less polluting (for example, lower-emission lithium extraction) and to recycling technology for metals and battery components. 

Digital Transformation: All Systems Go

The digital transformation will continue in 2022. While the Covid-19 pandemic accelerated digital transformation in some industries, in others the pandemic set it back as companies focused on cost cutting. As economic normalisation takes place, investment in technology will pick up. Additional impetus is being driven by the COP26 summit, with technology key to meeting climate pledges.

In conjunction with the greater application of technology in industries, we see rising regulations surrounding connected devices, with growing concern around cyberrisks and greater investment in cybersecurity as well as increasing government oversight of cybersecurity regarding critical infrastructure. The potential for cyberrisks to increase due to rising tensions between China and the West will drive companies to invest in cybersecurity. Our Telecommunications team expects this to result in rising investment by companies in cybersecurity solutions as well as greater merger and acquisition activity as companies seek to build expertise and products in this area.

Underprepared Industries Present Opportunities For Cybersecurity Companies

Fitch Solutions Megatrends Survey: How Well Is Your Industry Prepared To Deal With Cybersecurity Concerns

Source: Fitch Solutions Megatrends Survey

Healthcare-related sectors have seen rapid advancement in the integration of technology, catalysed by the pandemic, and we expect progress in these sectors, moving beyond purely pandemic-related applications. Connected medical devices will advance, with greater integration of artificial intelligence. This will see growing regulation in the space due to the sensitivity of user data and the historically poor healthcare IT infrastructure.

Industries such as consumer & retail are already ahead of the curve in this space, and 2022 will see further advances in three key areas: online retailers providing ultra-fast delivery (delivery in under two hours), bioweareables (such as continuous glucose monitoring) and virtual malls.

In the autos sector, while alternative fuel technology has been on the rise, automated vehicles have been less of a priority. We expect advances in this field to accelerate in 2022. In agribusiness, we expect innovation in agtech to increase, with the emphasis on addressing rising pressure from environmental considerations, price pressures and food security concerns. We expect a focus on agricultural biotechnology and novel farming systems.



This report from Fitch Solutions Country Risk & Industry Research is a product of Fitch Solutions Group Ltd, UK Company registration number 08789939 ('FSG'). FSG is an affiliate of Fitch Ratings Inc. ('Fitch Ratings'). FSG is solely responsible for the content of this report, without any input from Fitch Ratings. Copyright © 2021 Fitch Solutions Group Limited. © Fitch Solutions Group Limited All rights reserved. 30 North Colonnade, London E14 5GN, UK.

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