WEBVTT NOTE This file was generated by Descript 00:00:01.170 --> 00:00:05.370 Welcome to The Chemical Show, the podcast where Chemical means business. 00:00:05.910 --> 00:00:09.720 I'm your host, Victoria Meyer, bringing you stories and insights 00:00:09.720 --> 00:00:13.590 from leaders driving innovation and growth across the chemical industry. 00:00:14.520 --> 00:00:18.840 Each week we explore key trends, real world challenges, and the 00:00:18.840 --> 00:00:20.700 strategies that make an impact. 00:00:20.910 --> 00:00:21.750 Let's get started. 00:00:23.379 --> 00:00:26.499 Victoria: Welcome back to The Chemical Show Where Chemical Means business. 00:00:26.589 --> 00:00:29.139 Today we are focusing on tariffs. 00:00:29.239 --> 00:00:32.179 Talking about the current state of play and what chemical 00:00:32.179 --> 00:00:33.409 leaders should be expecting. 00:00:33.499 --> 00:00:37.219 So as you guys already know, 2025 has been a roller coaster. 00:00:37.559 --> 00:00:41.669 I think we thought maybe that it was gonna be a little bit better than prior years. 00:00:41.789 --> 00:00:42.599 Who knows? 00:00:42.679 --> 00:00:43.159 However, I. 00:00:43.884 --> 00:00:47.994 There's been a lot of movement both at the administrative levels and we've 00:00:47.994 --> 00:00:52.594 looked at what's going on in the US but also globally, with executive orders, 00:00:52.594 --> 00:00:58.594 shifting, agency positions, continued geopolitical movement and shifts. 00:00:58.634 --> 00:01:02.774 And currently we seem to be in a state of tariffs on. 00:01:03.699 --> 00:01:04.449 Everything. 00:01:04.869 --> 00:01:08.959 Although at the time that we're recording this here at the end of April, we're 00:01:08.959 --> 00:01:12.289 in a 90 day stay on most of the tariffs. 00:01:12.289 --> 00:01:15.049 And and my guests today are gonna talk a little bit more 00:01:15.049 --> 00:01:16.889 about that, and what that means. 00:01:16.889 --> 00:01:20.699 Obviously as chemical leaders, you know that we're living in a global market. 00:01:20.749 --> 00:01:22.219 There's a lot of influence, tariffs. 00:01:22.744 --> 00:01:26.164 And shipping and supply chains all have significant influences on the market. 00:01:26.164 --> 00:01:28.294 So we're gonna talk about that and more. 00:01:28.634 --> 00:01:33.104 Today I've got Joseph Chang, who is the global editor of ICIS, 00:01:33.104 --> 00:01:37.064 chemical Business and Al Greenwood, who's the Deputy News Editor. 00:01:37.394 --> 00:01:42.179 So these guys report on the trends in the chemical industry analyzing drivers 00:01:42.239 --> 00:01:43.784 of the chemical prices worldwide. 00:01:44.364 --> 00:01:47.604 Looking at feedstocks and price development, supply demand, 00:01:47.724 --> 00:01:49.974 project activity m and a and more. 00:01:50.064 --> 00:01:51.564 Oh, and the and more. 00:01:51.564 --> 00:01:53.574 Today is tariffs. 00:01:53.874 --> 00:01:56.274 So Joe and Al, welcome to the Chemical Show. 00:01:57.234 --> 00:01:57.654 Joe: Thank you. 00:01:57.659 --> 00:01:57.859 Thank. 00:01:58.364 --> 00:01:59.204 Thank you Victoria. 00:01:59.624 --> 00:02:02.354 Victoria: Yeah, so let's just start with your origin stories. 00:02:02.354 --> 00:02:06.644 'cause how did you get engaged and start writing on chemical 00:02:06.644 --> 00:02:08.264 news and chemical markets? 00:02:08.547 --> 00:02:09.567 Joe, I'm gonna start with you. 00:02:09.931 --> 00:02:13.891 Joe: I started, um, with a, a publication called Chemical Market Reporter. 00:02:14.156 --> 00:02:17.306 That was eventually bought out by Rex Rex, our current company. 00:02:17.306 --> 00:02:21.326 Uh, it was re Elsevier at the time, but yeah, I started in 1997, I believe. 00:02:21.326 --> 00:02:25.076 So 28 years ago I saw an ad in the paper it said financial editor 00:02:25.076 --> 00:02:28.344 wanted, and that's, I graduated with a finance degree from NYU and I. 00:02:28.774 --> 00:02:30.274 And I was like, oh, I can always write. 00:02:30.274 --> 00:02:31.744 So this seemed very intriguing. 00:02:31.894 --> 00:02:33.724 I had no idea it was a chemical publication. 00:02:33.941 --> 00:02:34.961 They gave me the job on the spot. 00:02:34.961 --> 00:02:36.161 They said you could start right away. 00:02:36.221 --> 00:02:37.841 I said, alright, let's, let's, let's give it a shot. 00:02:37.841 --> 00:02:39.281 And you really learned on the job. 00:02:39.281 --> 00:02:40.841 But that was, uh, 28 years ago. 00:02:40.841 --> 00:02:44.111 And, uh, yeah, we've been through so many cycles and, and developments. 00:02:44.111 --> 00:02:45.881 It's, it's been an exciting ride so far. 00:02:46.361 --> 00:02:46.541 Victoria: Yeah. 00:02:46.541 --> 00:02:46.961 That's wild. 00:02:46.961 --> 00:02:51.941 And did you think that you would use your finance degree to report on this? 00:02:51.941 --> 00:02:53.681 Is this where you anticipated going? 00:02:53.986 --> 00:02:57.016 Joe: Oh, I don't think anyone thought that they would end up in a chemical magazine. 00:02:57.016 --> 00:02:57.346 Yeah. 00:02:57.591 --> 00:03:00.382 But, it did prove very useful, especially going through earnings 00:03:00.382 --> 00:03:04.412 reports, talking to executives about m and a, financial strategy. 00:03:04.417 --> 00:03:05.702 It, it is, uh, yeah. 00:03:05.702 --> 00:03:09.452 So it's been very, very, uh, very useful and I'm glad I could put it 00:03:09.452 --> 00:03:13.166 to use and actually be able to, use that part, uh, to, to, to bring 00:03:13.166 --> 00:03:15.981 readers, a better picture of what's going on in the financial markets. 00:03:15.981 --> 00:03:16.131 Got it. 00:03:16.341 --> 00:03:16.461 Al: I 00:03:16.461 --> 00:03:16.791 Victoria: love it. 00:03:17.206 --> 00:03:17.646 Al: Al, how about you? 00:03:18.586 --> 00:03:22.606 Well, I actually started, uh, with a, uh, chemistry background in college. 00:03:22.606 --> 00:03:27.579 I, uh, initially majored in biochemistry, loved reading about chemistry, 00:03:27.579 --> 00:03:29.379 but I kept dropping glassware. 00:03:29.679 --> 00:03:34.839 So I thought, you know, if I like reading about chemistry, switched to journalism, 00:03:35.079 --> 00:03:40.912 become a, uh, reporter or an edit, you know, science, journals, go back route. 00:03:41.277 --> 00:03:44.877 But got ink in my blood, became a newspaper reporter. 00:03:44.877 --> 00:03:47.217 So that stuck for about 10 years. 00:03:47.217 --> 00:03:52.917 Then in 2007 the opportunity opened at ICIS, so was finally 00:03:52.917 --> 00:03:54.417 able to put the two together. 00:03:54.417 --> 00:03:55.827 So that's what I've been doing since. 00:03:55.827 --> 00:03:56.152 That's very cool. 00:03:56.487 --> 00:03:57.237 Victoria: Very, very cool. 00:03:57.567 --> 00:04:01.729 And let's talk really briefly about ICIS, chemical business. 00:04:01.864 --> 00:04:05.014 So I'm, people may not be fully aware of that, so can you guys just talk about 00:04:05.014 --> 00:04:07.174 what you do and what the publication is? 00:04:07.539 --> 00:04:07.809 Joe: Sure. 00:04:07.809 --> 00:04:11.649 So ICIS chemical business, so weekly, it's a weekly magazine, digital 00:04:11.649 --> 00:04:15.289 magazine, gets published every Friday at the end of the week, and it covers 00:04:15.289 --> 00:04:18.529 all the major developments that, that are happening in the chemical sector. 00:04:18.579 --> 00:04:21.999 And it's part of ICIS news, so the broader news offering. 00:04:21.999 --> 00:04:25.042 so we kind of, uh, aggregate, the important development. 00:04:25.042 --> 00:04:26.847 So I'm also part of the new team and we, we. 00:04:26.962 --> 00:04:28.512 Report regularly, online. 00:04:29.052 --> 00:04:29.292 Victoria: Awesome. 00:04:29.532 --> 00:04:29.802 Cool. 00:04:29.832 --> 00:04:33.582 And I know, uh, you guys, you and some of your other colleagues, not 00:04:33.582 --> 00:04:38.402 necessarily in the news business, provide a lot of, content both on LinkedIn 00:04:38.402 --> 00:04:39.932 and on your website and elsewhere. 00:04:40.022 --> 00:04:43.122 I think people, can see you and in fact, Joe and Al, I, you know, 00:04:43.122 --> 00:04:46.542 when we got introduced I was like, I didn't know you, but I'm like, 00:04:46.542 --> 00:04:48.552 but I've seen your name everywhere. 00:04:48.552 --> 00:04:52.932 So it's nice to, to get names and faces and voices all put together. 00:04:53.137 --> 00:04:55.537 so let's just talk tariffs. 00:04:55.807 --> 00:04:59.197 What the heck is the current state and how did we get here? 00:04:59.554 --> 00:05:03.364 Al: Trump has been talking about, uh, tariffs throughout his, campaign. 00:05:03.494 --> 00:05:09.424 It's been a, key part of his economic policy to, bring back manufacturing. 00:05:09.426 --> 00:05:13.104 Spring to the United States, reduced the, goods deficit. 00:05:13.104 --> 00:05:16.704 So during his campaign, he talked about reciprocal tariffs. 00:05:17.004 --> 00:05:19.644 He talked about, uh, baseline tariffs. 00:05:19.884 --> 00:05:22.284 So that's what he com campaigned on. 00:05:22.344 --> 00:05:23.394 That's what we're getting. 00:05:23.574 --> 00:05:25.584 Uh, so there's. 00:05:25.824 --> 00:05:29.124 If you followed his campaign, there's no surprises. 00:05:29.124 --> 00:05:34.264 I guess it's just how quickly and the magnitude, we weren't expecting 00:05:34.414 --> 00:05:36.964 145% tariffs on Chinese imports. 00:05:36.964 --> 00:05:37.024 Yeah. 00:05:37.354 --> 00:05:40.054 Victoria: And, and these are, and when we look at what's going on, these are 00:05:40.054 --> 00:05:42.664 re quote unquote reciprocal tariffs. 00:05:42.764 --> 00:05:46.424 Which, you know, I've seen a bit about how they were calculated. 00:05:46.514 --> 00:05:49.004 You know, was it a scientific calculation? 00:05:49.004 --> 00:05:49.724 I don't know. 00:05:50.024 --> 00:05:51.674 I mean, what are you guys seeing and hearing? 00:05:51.674 --> 00:05:51.719 So, 00:05:51.915 --> 00:05:52.095 Joe: yeah. 00:05:52.095 --> 00:05:55.095 It's, it's called the reciprocal tariffs, but in no way, you know, 00:05:55.155 --> 00:05:57.985 if you look at this, in no way are these reciprocal at all. 00:05:58.015 --> 00:06:02.345 They're not based on, on the tariff levels of other countries or even the, 00:06:02.345 --> 00:06:06.045 the non tariff, barriers that the US Trade representative was analyzing. 00:06:06.316 --> 00:06:09.466 yeah, it is a US trade deficit divided by the uS imports 00:06:09.466 --> 00:06:10.546 from that particular country. 00:06:10.846 --> 00:06:13.756 You took that, that percentage and you just divided it by half. 00:06:13.756 --> 00:06:17.111 And you, that's how you came up with customized levels on the country, 00:06:17.171 --> 00:06:18.881 uh, with the baseline of 10%. 00:06:18.881 --> 00:06:19.931 So 10% is the minimum. 00:06:20.351 --> 00:06:22.751 And as you mentioned, Victoria, we do have this, 98 pause 00:06:22.751 --> 00:06:24.731 that started, uh, in early. 00:06:25.127 --> 00:06:28.651 that brings everyone to the baseline of 10%, with the exception 00:06:28.726 --> 00:06:31.246 of China, which is at 145%. 00:06:31.516 --> 00:06:34.876 And also there are some exemptions for, uh, Mexico and Canada. 00:06:35.266 --> 00:06:35.596 Victoria: Yeah. 00:06:36.196 --> 00:06:43.126 So everybody's at 10% chi except for China at one 145%, which feels a little crazy. 00:06:43.446 --> 00:06:46.146 What have you guys been seeing as the response to this? 00:06:46.146 --> 00:06:50.526 Both, I guess, inside the chemical industry, but when we look more broadly, 00:06:50.619 --> 00:06:51.939 at what's going on around the globe? 00:06:52.237 --> 00:06:52.567 Al: right. 00:06:52.567 --> 00:06:55.647 Well, we've seen, uh, globally, prices fall. 00:06:55.677 --> 00:06:58.857 Uh, part of that is because of the decline in oil prices. 00:06:58.857 --> 00:07:01.617 Chemical prices tend to rise and fall with oil. 00:07:01.667 --> 00:07:05.627 We've seen oil decline on the one hand, expectations of OPEC 00:07:05.627 --> 00:07:07.757 plus increasing production. 00:07:08.212 --> 00:07:12.772 Two oil prices are declining because there are concerns about demand. 00:07:13.042 --> 00:07:17.212 Uh, so when you, whatever the reasons for oil prices declining 00:07:17.422 --> 00:07:19.952 when they fall, chemical prices fall. 00:07:20.252 --> 00:07:25.942 But in addition, uh, these, massive tariffs that the US and China have imposed 00:07:25.942 --> 00:07:28.522 on each other, they act as embargoes. 00:07:28.582 --> 00:07:31.102 So all of the, uh, chemicals. 00:07:31.582 --> 00:07:36.682 More importantly, the end products, that the US and China once exported to each 00:07:36.682 --> 00:07:38.992 other, those have to be redirected. 00:07:39.042 --> 00:07:44.202 So especially in Asia, we're seeing, uh, Asian, producers, 00:07:44.252 --> 00:07:46.352 being flooded with supply. 00:07:46.382 --> 00:07:49.942 So that's, contributing to, price declines. 00:07:50.032 --> 00:07:54.952 And we're also seeing that in Europe, in the United States, we've seen some. 00:07:55.547 --> 00:07:59.937 Initial, declines for our, building block chemicals, but 00:07:59.937 --> 00:08:05.157 we're waiting to see if we're going to start seeing price increases. 00:08:05.207 --> 00:08:10.657 RPM International held its, earnings call right after, April 2nd. 00:08:10.657 --> 00:08:14.807 The tariff announcements, it's preparing for price increases. 00:08:15.077 --> 00:08:17.867 In addition, polyethylene terif phthalate. 00:08:17.867 --> 00:08:23.627 PET producers have been pushing for price increases because their, catalyst 00:08:23.957 --> 00:08:27.117 antimony, China is restricting shipments. 00:08:27.147 --> 00:08:30.207 , so that's caused antimony prices to increase. 00:08:30.447 --> 00:08:36.927 So the producers are pushing for higher prices to offset those cost increases. 00:08:37.167 --> 00:08:38.757 What remains to be seen is. 00:08:39.440 --> 00:08:43.850 Whether us producers, pricing power to raise price, uh, we're gonna have 00:08:43.850 --> 00:08:46.880 to look, but there's talks about that in the United States and the 00:08:46.880 --> 00:08:49.017 rest of the world falling prices. 00:08:49.580 --> 00:08:53.420 Joe: If I can just add, yeah, the US is pretty self-sufficient in olefins and 00:08:53.420 --> 00:08:57.080 derivatives, so you know, there's not gonna be that much of an impact there. 00:08:57.080 --> 00:09:00.860 And if you look at the, the China trade, it's mostly outbound in terms of us, uh, 00:09:00.890 --> 00:09:02.480 ethylene and derivatives in particular. 00:09:02.720 --> 00:09:06.600 But, , on the import side, you, the US imports a lot of aromatics. 00:09:06.725 --> 00:09:11.315 Uh, specifically from South Korea, again, you have that 10%, tariff there, uh, 00:09:11.315 --> 00:09:16.055 universal tariff, but, uh, the initial tariff level on South Korea was 25%. 00:09:16.115 --> 00:09:20.945 Uh, the US also imports aromatics from the eu and they, which had a 20% 00:09:20.945 --> 00:09:25.105 tariff before that was, lower during the pause and specifically one big 00:09:25.105 --> 00:09:28.165 impact on the US market, uh, is on MDI. 00:09:28.165 --> 00:09:31.285 So MDI is, that goes into polyurethane. 00:09:31.285 --> 00:09:36.715 So the US imported more than 50% of its imports of MDI were from China, but I. 00:09:37.260 --> 00:09:41.220 Obviously with 145% tariff, tho those shipments have been cut to zero. 00:09:41.640 --> 00:09:45.350 So that, that is certainly gonna impact, the MDI market in particular. 00:09:45.350 --> 00:09:48.620 But, uh, the real risk to the US chemical industry is for 00:09:48.620 --> 00:09:50.600 exports, exports of chemicals. 00:09:50.810 --> 00:09:55.100 The US chemical sector is, uh, has a trade surplus of over $30 00:09:55.100 --> 00:09:56.770 billion, with the rest of the world. 00:09:57.070 --> 00:09:57.430 And. 00:09:57.635 --> 00:10:00.125 Very exposed to retaliatory tariffs. 00:10:00.125 --> 00:10:03.575 So we're, we're seeing that, uh, from China, US exports quite a 00:10:03.575 --> 00:10:05.435 bit of polyethylene to China. 00:10:05.675 --> 00:10:08.705 That is under, under 125%, tariffs. 00:10:08.705 --> 00:10:10.715 So this is gonna be, uh, very difficult. 00:10:10.805 --> 00:10:13.625 All these trade flows, as Al mentioned, they're gonna have to shift. 00:10:13.955 --> 00:10:17.225 And you do see product being redirected to Southeast Asia. 00:10:17.351 --> 00:10:18.551 Victoria: I think a couple points on that. 00:10:18.551 --> 00:10:19.301 Number one, I. 00:10:19.551 --> 00:10:23.661 Uh, you know, I think it's hard to, given the, the amount of construction, 00:10:23.711 --> 00:10:27.321 that China has had, certainly in some of the polymer products, it's 00:10:27.321 --> 00:10:30.111 hard to imagine that they're still importing that much polyethylene. 00:10:30.141 --> 00:10:34.221 On the other hand, we also know that the US built a lot of its most recent 00:10:34.221 --> 00:10:36.681 developments for and export market. 00:10:37.041 --> 00:10:40.911 Do you guys see, I, you know, I think we saw earlier in the 2020s 00:10:40.911 --> 00:10:43.581 a bit of a shimmying and shifting. 00:10:43.581 --> 00:10:47.611 So instead of, you know, when tariffs come, instead of product going, 00:10:47.611 --> 00:10:50.761 let's just use China, for example, going back and forth directly between 00:10:50.761 --> 00:10:55.001 China, it'll get redirected to another route and then eventually making 00:10:55.001 --> 00:10:56.381 its way into the US or elsewhere. 00:10:56.591 --> 00:10:58.121 Do you see that happening again? 00:10:58.121 --> 00:11:03.625 Are we, Gearing up for a redirecting where trade routes just simply start 00:11:03.625 --> 00:11:07.795 shifting in order to avoid tariffs, is that, is that what's gonna happen? 00:11:07.795 --> 00:11:08.455 Is that doable? 00:11:08.748 --> 00:11:10.668 Al: Which for me short answer is yes. 00:11:11.178 --> 00:11:16.148 We're already, uh, seeing it because we're seeing China redirecting, especially 00:11:16.148 --> 00:11:18.828 the end products, to Southeast Asia. 00:11:18.858 --> 00:11:24.058 We've had, auto producers, tell our, pricing editors in Asia that. 00:11:24.073 --> 00:11:27.603 They're, seeing an influx of Chinese exports that would, 00:11:27.663 --> 00:11:31.503 normally go to the United States, now going to Southeast Asia. 00:11:31.503 --> 00:11:35.963 So we are, uh, seeing supply chains, being rearranged. 00:11:36.323 --> 00:11:41.153 And of course, US producers are going to have to look at their own supply chains. 00:11:41.463 --> 00:11:44.813 To see, if they could find another supplier. 00:11:45.113 --> 00:11:48.853 Again, think about that antimony, what other, products could 00:11:48.853 --> 00:11:50.973 become, susceptible to tariffs? 00:11:51.183 --> 00:11:53.673 And also can they find substitutes? 00:11:53.703 --> 00:11:57.943 So we're going to see, supply chains, rearrange, we're gonna see, 00:11:57.993 --> 00:12:03.933 product substitution when possible and if those fail, if they have 00:12:03.933 --> 00:12:06.073 the pricing power, higher prices. 00:12:06.073 --> 00:12:09.620 But yes, we're going to definitely see, supply chains rearrange. 00:12:09.620 --> 00:12:11.300 We're already seeing it have, yeah. 00:12:11.450 --> 00:12:13.100 Victoria: What effect does this have on Europe? 00:12:13.130 --> 00:12:14.720 You know, so I think about Europe. 00:12:15.170 --> 00:12:18.830 Over the past few years and, and just let's take the last, you know, 00:12:18.830 --> 00:12:24.503 12 to 18 months, we're seeing, lots of reports of assets shutting down. 00:12:24.593 --> 00:12:28.943 They're of course, under a certain amount of, or have been under some distress 00:12:29.333 --> 00:12:32.603 because of this compression between both their sustainability policies. 00:12:33.008 --> 00:12:38.258 And carbon reduction goals and policies that have been put in place as well 00:12:38.288 --> 00:12:41.178 as, just sheer economics, right? 00:12:41.178 --> 00:12:44.148 Older assets, perhaps less economical energies. 00:12:44.148 --> 00:12:47.328 Had a, had a role to play, in the economics there. 00:12:47.508 --> 00:12:50.538 And, you know, what do you, how does this tariff situation, how 00:12:50.538 --> 00:12:54.318 does this reshuffling affect that? 00:12:54.378 --> 00:12:56.868 Or maybe what some of those other decisions that have already been made. 00:12:57.140 --> 00:12:58.790 Joe: Yeah, Victoria, it's really interesting. 00:12:58.790 --> 00:13:01.640 I mean, Europe is undergoing a massive restructuring and we, you 00:13:01.640 --> 00:13:05.030 know, as you mentioned, we have seen a massive amount of shutdowns. 00:13:05.030 --> 00:13:06.290 Yeah, shutdowns announced. 00:13:06.290 --> 00:13:10.550 Shutdowns, even product reviews, asset reviews, this is, uh, due to competitive 00:13:10.550 --> 00:13:14.180 pressures that are coming, not just from the US but the Middle East and China. 00:13:14.180 --> 00:13:17.050 A lot of, uh, a lot of cheap capacity and product coming on. 00:13:17.290 --> 00:13:20.890 But, uh, yeah, the tariffs do make things more difficult and much 00:13:20.890 --> 00:13:24.270 more difficult because, especially for the end products that, Europe 00:13:24.270 --> 00:13:28.210 manufacturers and sends over to the us, and including some chemicals as well. 00:13:28.210 --> 00:13:32.042 This, this will pressure, European industry even more, and also, 00:13:32.042 --> 00:13:35.312 yeah, the, the same for the trade flows from the US to, to Europe, 00:13:35.312 --> 00:13:37.022 if those are put under tariff. 00:13:37.022 --> 00:13:40.645 And the, the EU has already already rolled out, a number of potential tariffs. 00:13:40.645 --> 00:13:44.845 So they put that on a ni 90 day pause as the US brought down their, 00:13:44.955 --> 00:13:46.695 tariff levels to that 10% baseline. 00:13:46.695 --> 00:13:50.445 So we'll have to see what happens, but this can only make things more difficult 00:13:50.445 --> 00:13:54.675 Overall, you're seeing an impact on economic growth, lower economic growth. 00:13:54.930 --> 00:13:58.410 Expected, not just in the us but you're gonna see this all over 00:13:58.410 --> 00:14:01.290 the world, most likely with this, uh, with this kind of trade war. 00:14:02.070 --> 00:14:02.160 Yeah. 00:14:02.160 --> 00:14:02.940 That's developing. 00:14:02.940 --> 00:14:06.180 And that's only gonna pressure the European chemical industry more. 00:14:06.240 --> 00:14:09.350 I guess the only positive side is that, governments are 00:14:09.350 --> 00:14:11.000 spending more on infrastructure. 00:14:11.000 --> 00:14:14.060 They're, they've, uh, committed to spend more on infrastructure and defense 00:14:14.150 --> 00:14:18.900 because, they're really not looking to the us, uh, to, to provide that, uh, 00:14:18.900 --> 00:14:22.470 the defense level, and they have to be more resilient and self-sufficient. 00:14:22.710 --> 00:14:23.430 So that's one. 00:14:23.725 --> 00:14:25.615 Kind of positive thing on the growth side for Europe. 00:14:25.975 --> 00:14:26.965 Victoria: Yeah, absolutely. 00:14:27.060 --> 00:14:30.630 Part of the tariff story, certainly in the US is this idea that we bring 00:14:30.630 --> 00:14:32.910 more manufacturing into the us, which. 00:14:33.880 --> 00:14:37.960 You know, you and I both know it is not that easy, right? 00:14:37.970 --> 00:14:41.180 Expanding a plant can be simple, but it still takes a year or two, or 00:14:41.240 --> 00:14:42.920 perhaps more depending on what it is. 00:14:43.160 --> 00:14:45.710 Building a new site, um, is much more expensive. 00:14:46.040 --> 00:14:50.330 But I, I think about this investment, whether it's in, as you mentioned, 00:14:50.330 --> 00:14:54.740 Joe Europe on, some of their infrastructure investment, us and 00:14:54.740 --> 00:14:57.980 elsewhere on manufacturing investment. 00:14:58.180 --> 00:15:02.313 Realistically, how long does that take before we start really 00:15:02.313 --> 00:15:03.813 seeing that spend take place? 00:15:03.843 --> 00:15:06.393 'cause policy as easy spend is more difficult. 00:15:06.603 --> 00:15:06.933 Joe: Yeah. 00:15:06.933 --> 00:15:09.693 And I think spending is even more difficult when you don't know where 00:15:09.693 --> 00:15:13.563 policy is gonna end up or you, you have such uncertainty even on those, 00:15:13.833 --> 00:15:17.613 the, the tariffs and the 90 day pause and you know, hey, you know, do I 00:15:17.613 --> 00:15:19.473 decide to build a plant in the us? 00:15:19.563 --> 00:15:21.543 Uh, which, you know, I'm gonna assume there's gonna be. 00:15:21.672 --> 00:15:24.402 Major protective barriers are the, the tariffs in place. 00:15:24.402 --> 00:15:26.052 And then, oh, what if policies change? 00:15:26.082 --> 00:15:30.058 What if, okay, maybe they strike a deal with some of these countries and, uh, 00:15:30.088 --> 00:15:32.008 yeah, it's, the tariff is no longer there. 00:15:32.008 --> 00:15:36.328 Is it still worth to build in the, you know, in this kind of, uh, environment, 00:15:36.388 --> 00:15:39.298 uh, we're seeing companies kind of pull back, pull back on investments, 00:15:39.448 --> 00:15:41.363 on decisions in terms of m and a. 00:15:41.803 --> 00:15:43.663 Hiring across all businesses. 00:15:43.813 --> 00:15:46.243 This is very, very difficult purchasing decisions. 00:15:46.243 --> 00:15:49.303 It's really impacting everything and really, um, yeah. 00:15:49.303 --> 00:15:50.738 It's hard to make these, these big. 00:15:50.988 --> 00:15:51.618 Investments. 00:15:51.648 --> 00:15:51.948 Yeah. 00:15:51.948 --> 00:15:56.358 And decisions when, uh, the environment is so uncertain in terms of trade policy 00:15:56.478 --> 00:16:00.378 and, even the macroeconomic picture, which is related to tariffs as well. 00:16:00.859 --> 00:16:01.149 Al: Yeah. 00:16:01.224 --> 00:16:05.994 I needed to throw in, uh, in regards to, chemical production moving to the 00:16:05.994 --> 00:16:08.184 United States specifically, benzene. 00:16:08.274 --> 00:16:09.504 Benzene is a byproduct. 00:16:09.624 --> 00:16:11.934 It's a byproduct of cracking nafta. 00:16:11.934 --> 00:16:14.124 It's a byproduct of refining. 00:16:14.429 --> 00:16:19.439 Nobody is going to increase, refining capacity just to make more benzene. 00:16:19.619 --> 00:16:22.949 Nobody in the United States is gonna start cracking more nafta. 00:16:23.229 --> 00:16:26.699 Ethane propane is just too, cost competitive. 00:16:26.939 --> 00:16:30.209 So no matter how high the tariffs get, nobody's building more 00:16:30.209 --> 00:16:31.829 benzene in the United States. 00:16:31.829 --> 00:16:33.179 So it's not going to happen. 00:16:33.869 --> 00:16:38.909 If the tariffs stay high, it's, you know, producers are gonna have to eat the cost. 00:16:39.168 --> 00:16:42.038 Victoria: Well, and, and we talked, previously about 00:16:42.398 --> 00:16:44.198 just the effect of energy. 00:16:44.248 --> 00:16:48.448 So energy and kind of feedstock components as it relates to, 00:16:48.508 --> 00:16:50.008 uh, to the chemical industry. 00:16:50.008 --> 00:16:50.248 Right? 00:16:50.248 --> 00:16:52.738 So propane and LPG, right? 00:16:52.738 --> 00:16:57.598 So US is a huge exporter of that to China and elsewhere, right? 00:16:57.958 --> 00:17:00.718 Ethane, those things are starting to shift. 00:17:00.718 --> 00:17:01.888 Can you talk more about that al? 00:17:02.373 --> 00:17:03.093 Al: Uh, yes. 00:17:03.093 --> 00:17:06.193 I mean, we're already, the ethane that the United States, 00:17:06.449 --> 00:17:08.159 produces and exports to China. 00:17:08.199 --> 00:17:13.419 China is not going to, be able to competitively crack ethane with 00:17:13.419 --> 00:17:17.289 these tariffs that ethane can't move to another part of the world. 00:17:17.349 --> 00:17:19.329 It has to stay in the United States. 00:17:19.579 --> 00:17:20.839 So what we're going to see on. 00:17:20.854 --> 00:17:25.104 The ethane side is, the US is gonna have to either put it in 00:17:25.104 --> 00:17:27.744 storage, increase ethane rejection. 00:17:28.268 --> 00:17:29.378 That's about it. 00:17:29.438 --> 00:17:34.418 Uh, so we're going to see, we could see ethane prices reach a fuel 00:17:34.418 --> 00:17:36.348 level, fuel value, excuse me. 00:17:36.348 --> 00:17:40.758 In other words, ethane will cost about as much as how much, what 00:17:40.758 --> 00:17:42.288 its fuel value would be to burn it. 00:17:43.293 --> 00:17:45.063 Uh, L PT is a little bit, is that good for chemical 00:17:45.077 --> 00:17:45.693 Victoria: producer? 00:17:45.693 --> 00:17:47.553 Sorry, I'm gonna go, I'm gonna jump back on that. 00:17:47.553 --> 00:17:47.793 Al. 00:17:47.843 --> 00:17:51.143 Is it gonna be a good news, bad news that Ethane's gonna be so cheap? 00:17:51.623 --> 00:17:56.243 Al: Well, it would be, that would be one good thing for chemical 00:17:56.243 --> 00:18:01.103 producers, because when ethane is cheap, that's gonna help their margins. 00:18:01.103 --> 00:18:02.573 But I think they would much rather. 00:18:02.708 --> 00:18:08.168 See the demand equation increase instead of the, uh, cost equation. 00:18:08.228 --> 00:18:10.838 If they could one or the other, but yeah, exactly. 00:18:10.838 --> 00:18:15.608 You are going to see that would be allowed chemical producers at ethylene 00:18:15.608 --> 00:18:17.888 producers, to increase their margins. 00:18:18.076 --> 00:18:22.216 Uh, OPG is a little bit different because we're not the only exporter. 00:18:22.646 --> 00:18:24.356 So there could be some. 00:18:24.853 --> 00:18:29.483 Rearrangements, in other words, us to China perhaps. 00:18:29.583 --> 00:18:35.763 Would see, uh, qar, uh, I believe big LLPG exporter will see a QAR 00:18:35.763 --> 00:18:41.113 replace the United States, US replace some of the, uh, Qatari, customers. 00:18:41.203 --> 00:18:46.093 So there'll be some rearrangements, but nonetheless, um, we are going 00:18:46.093 --> 00:18:50.113 to see, utilization rates fall for the PDH plants in China. 00:18:50.443 --> 00:18:54.233 We're gonna see, OPG prices fall with the United States. 00:18:54.283 --> 00:18:57.343 Our dock space for our terminals is already filled. 00:18:57.343 --> 00:18:59.653 We've gotta get rid of this LPG. 00:18:59.783 --> 00:19:02.980 We're expecting, LPG prices, to also fall. 00:19:02.980 --> 00:19:07.500 But, certainly what that thing, we're going to see a, price drop 00:19:07.500 --> 00:19:13.520 unless, there one, the, uh, Chinese crackers can get an exemption. 00:19:14.510 --> 00:19:18.980 Two, there's some things, they can do with some swaps. 00:19:19.070 --> 00:19:25.620 Um, I think if they, import the ethane export, uh, Joe's more familiar with 00:19:25.620 --> 00:19:30.900 this, uh, export the, derivatives, they might be able to avoid the tariffs, but. 00:19:32.190 --> 00:19:36.060 That's about all they have to move around this. 00:19:36.249 --> 00:19:40.839 bottom line is NGL prices are going to fall because of these tariffs. 00:19:40.929 --> 00:19:43.389 Joe: Yeah, and, and I'll just add that it's not just in the 00:19:43.389 --> 00:19:46.659 US but already we're seeing the impact in South Korea and Japan. 00:19:46.719 --> 00:19:49.149 So some of these US LPG cargoes that we're. 00:19:49.149 --> 00:19:52.474 Going to China, they've been redirected and that has had, quite 00:19:52.474 --> 00:19:55.624 a bit of an impact on the markets in, in South Korea, Japan, with 00:19:55.624 --> 00:19:57.597 those prices, falling pretty sharply. 00:19:57.777 --> 00:19:59.794 So we've seen that already in the past, uh, week or so. 00:20:00.310 --> 00:20:03.500 Victoria: here's a question, do you think individual consumers are really 00:20:03.740 --> 00:20:05.345 starting to see the effect of tariffs. 00:20:05.725 --> 00:20:08.485 Yet, or how and when. 00:20:08.485 --> 00:20:11.125 And I guess I would say both from a US perspective, but also 00:20:11.125 --> 00:20:14.725 a global perspective, what do you guys see from where you sit? 00:20:14.895 --> 00:20:18.345 Joe: I think it may take a bit of time for, for that impact to, to 00:20:18.345 --> 00:20:21.525 be seen because, uh, you've seen a front running of purchases. 00:20:21.525 --> 00:20:25.702 So, so a number of companies, they've already, built up inventory, anticipation 00:20:25.702 --> 00:20:29.002 of tariffs and even consumers have gone out and bought certain goods. 00:20:29.002 --> 00:20:31.462 And you see that in the automotive sector where I think 00:20:31.462 --> 00:20:32.542 the light vehicle sales have. 00:20:32.575 --> 00:20:36.145 gone up shot up to about over 17 million, units on an annualized 00:20:36.145 --> 00:20:37.585 basis for the, for the last month. 00:20:37.585 --> 00:20:40.645 So, you know, yeah, the, these purchases are happening by 00:20:40.645 --> 00:20:44.085 companies, by, individuals already front loading purchases. 00:20:44.085 --> 00:20:47.765 I think by the summertime you could see a real, uh, impact, on that 00:20:47.765 --> 00:20:49.325 and potentially on prices as well. 00:20:49.325 --> 00:20:52.950 But it's, it's, it's also kind of a push and pull where, of course, tariffs do, 00:20:53.075 --> 00:20:56.375 do raise costs, and these importers, they'll try to pass along the cost to. 00:20:57.205 --> 00:21:00.745 But at the same time, if you get a real slowdown in economic activity, a 00:21:00.745 --> 00:21:03.805 real decline in consumer confidence, it's gonna be very difficult to 00:21:03.805 --> 00:21:06.175 push through major price increases. 00:21:06.175 --> 00:21:10.365 And, and you know, so far we've seen a deflationary impact, again, it, 00:21:10.545 --> 00:21:14.145 yeah, you may, it may take time to, for consumers to really feel the, 00:21:14.290 --> 00:21:16.035 feel the pinch, uh, of the tariffs. 00:21:16.335 --> 00:21:16.725 Victoria: Yeah. 00:21:16.845 --> 00:21:18.645 And it also depends, and, and I've had this. 00:21:18.645 --> 00:21:23.210 Conversation just on a, personally with some, some folks around, how deep 00:21:23.210 --> 00:21:24.860 the margins are on certain products. 00:21:24.860 --> 00:21:28.210 Like, you know, when, the tariffs got announced on Vietnam, were at. 00:21:28.635 --> 00:21:29.115 I don't know. 00:21:29.115 --> 00:21:31.245 I wanna, let's just pick the number a hundred percent. 00:21:31.245 --> 00:21:32.702 I know that's not the right number, but it was, oh, it was 00:21:32.707 --> 00:21:33.405 Joe: 47%. 00:21:33.405 --> 00:21:33.495 Yeah. 00:21:33.495 --> 00:21:33.855 There we go. 00:21:33.855 --> 00:21:34.575 Victoria: 47%. 00:21:34.575 --> 00:21:34.935 Thank you. 00:21:34.935 --> 00:21:35.955 Somebody knows the number. 00:21:36.345 --> 00:21:39.195 And you know, Hey, is this gonna affect my shoes? 00:21:39.195 --> 00:21:42.015 Because, you know, Nike, others get a lot of shoes from there. 00:21:42.015 --> 00:21:46.185 I'm like, there is so much stinking margin on those shoes. 00:21:46.185 --> 00:21:48.555 It shouldn't affect your shoe price. 00:21:48.555 --> 00:21:52.175 Now that doesn't mean retailers won't try to pass it on, but. 00:21:52.212 --> 00:21:53.922 I think there's this whole disconnect. 00:21:53.962 --> 00:21:57.742 The margins obviously across the chemical value chain are thinner because 00:21:57.742 --> 00:22:01.702 those are raw materials getting used into production for other things. 00:22:01.702 --> 00:22:07.702 But, um, I guess that's just one of the complicating factors is where in 00:22:07.702 --> 00:22:09.532 the system these products come and go. 00:22:10.442 --> 00:22:13.322 Joe: Yeah, and you can almost think of it as, okay, it's gonna be a shared 00:22:13.322 --> 00:22:16.842 cost between the, even the producer that sends it over there, there's 00:22:16.842 --> 00:22:20.502 gonna be some negotiation, the importer itself and the consumer. 00:22:20.502 --> 00:22:23.652 So it's almost a, if you think about a third, a third, a third, uh, there's 00:22:23.652 --> 00:22:25.452 gonna be some shared, shared pain there. 00:22:25.452 --> 00:22:29.112 But say, because the product comes from Vietnam, it's a under. 00:22:29.187 --> 00:22:32.517 A 47% tariff that if that particular number is reinstated, 00:22:32.697 --> 00:22:37.120 does the product actually go up by 47%, uh, at the retail level? 00:22:37.120 --> 00:22:38.020 Uh, absolutely not, 00:22:38.260 --> 00:22:38.440 Victoria: right? 00:22:38.440 --> 00:22:38.590 Joe: No. 00:22:38.590 --> 00:22:39.040 No. 00:22:39.160 --> 00:22:40.991 you have to eat some of that margin or a lot of it. 00:22:42.117 --> 00:22:45.827 Victoria: so we're sitting here in this waiting period, 90 days now down 00:22:45.827 --> 00:22:47.897 to, I don't know, 70 days or whatever. 00:22:47.897 --> 00:22:49.577 I'm not sure what our timeline is. 00:22:49.697 --> 00:22:50.927 Well, actually, so two things. 00:22:50.927 --> 00:22:53.207 Number one, what is the end of that 90 day period? 00:22:53.207 --> 00:22:55.097 So what do you guys probably know is the answer? 00:22:55.337 --> 00:22:56.357 Al: Uh, 90 days, I think. 00:22:56.417 --> 00:22:58.247 Uh, April, may, sometime in 00:22:58.637 --> 00:22:59.597 Victoria: end of June, right? 00:22:59.837 --> 00:23:00.377 Summertime. 00:23:00.900 --> 00:23:04.666 we know who we're asking to do our calendar math from here on out, so. 00:23:04.756 --> 00:23:10.966 So I guess while we're in this waiting period, what can and should chemical 00:23:10.966 --> 00:23:13.456 companies and others be doing to prepare? 00:23:13.868 --> 00:23:15.338 Al: Well, I'll, uh, jump in. 00:23:15.388 --> 00:23:19.228 One they've got, uh, I guess covid all over again. 00:23:19.318 --> 00:23:21.118 Look at your supply chains. 00:23:21.118 --> 00:23:25.263 In other words, which products are you, getting from Vietnam? 00:23:25.263 --> 00:23:29.723 Which products are you getting from, lower tariffs, countries. 00:23:30.358 --> 00:23:36.868 And, see where is the, most advantageous, supplier with the tariffs. 00:23:37.258 --> 00:23:40.548 Uh, and also look at, product substitution. 00:23:40.668 --> 00:23:45.918 Uh, perhaps, one product that you got from, one supplier is. 00:23:46.603 --> 00:23:48.223 No longer competitive. 00:23:48.223 --> 00:23:53.713 Is there a way to substitute it and, also look at your, supply 00:23:53.713 --> 00:23:57.603 chains for your end products, because those are a little murkier. 00:23:58.063 --> 00:24:03.953 So just like what we saw in, Vietnam with these, uh, influx of, Chinese 00:24:03.953 --> 00:24:09.253 material, coming in and products that normally would go to the United States. 00:24:09.568 --> 00:24:13.078 All of a sudden, you're getting those end products into Vietnam, and 00:24:13.078 --> 00:24:18.208 that's affecting, the, uh, domestic producers of those end products. 00:24:18.248 --> 00:24:22.088 They're purchasing, fewer chemicals from Vietnamese producers. 00:24:22.088 --> 00:24:28.598 So you have to be, cognizant not just of your, supplies, but also your products. 00:24:28.648 --> 00:24:33.238 Which products could be affected by, uh, influx. 00:24:33.298 --> 00:24:35.508 Of, displaced, uh, shipments. 00:24:35.508 --> 00:24:35.598 Yeah. 00:24:35.878 --> 00:24:42.108 And then, , finally look at some of arcane feedstocks, catalysts, additives. 00:24:42.458 --> 00:24:46.588 Things you don't really notice are missing until they're gone, because 00:24:46.588 --> 00:24:48.778 that's what happened with antimony. 00:24:49.318 --> 00:24:53.728 And we've seen this over the years with natural disasters. 00:24:53.778 --> 00:24:58.748 When, for example, I think there was a, plant that blew up in 00:24:58.748 --> 00:25:03.238 Germany that, produced a, uh, feedstock for like a nylon 12. 00:25:03.238 --> 00:25:08.360 I think it was like one of the very few plants in the world So this one chemical 00:25:08.810 --> 00:25:11.630 caused outsized effects on supply chain. 00:25:11.630 --> 00:25:14.080 So that's something else to be, cognizant of. 00:25:14.170 --> 00:25:18.730 And then finally, the self-help that companies have been doing the past 18 00:25:18.730 --> 00:25:20.920 months in this manufacturing downturn. 00:25:20.920 --> 00:25:25.204 So optimization, cost cutting, efficiency, et cetera. 00:25:25.470 --> 00:25:27.270 Victoria: Joe, from your perspective, what do you see? 00:25:27.270 --> 00:25:29.580 What are you seeing that companies can and should be doing? 00:25:29.580 --> 00:25:29.610 I. 00:25:30.375 --> 00:25:33.975 Joe: Well, I think, yeah, as Al mentioned before, uh, I think companies will 00:25:33.975 --> 00:25:37.215 look at all their sources of supply and which countries, they come from. 00:25:37.215 --> 00:25:38.985 So I'll just give an example for benzene. 00:25:38.985 --> 00:25:40.635 Benzene is a big US import. 00:25:41.055 --> 00:25:44.295 Uh, the US uses it to, for all sorts of, purposes, but also 00:25:44.295 --> 00:25:45.885 to make, tying to, to export. 00:25:46.075 --> 00:25:49.435 But US gets a lot as mentioned from South Korea, South Korea. 00:25:49.495 --> 00:25:53.175 And again, if that 25% tariff, , goes into place currently it's 10%, 00:25:53.365 --> 00:25:54.295 that's gonna be a problem. 00:25:54.295 --> 00:25:55.885 So, where else can the. 00:25:56.420 --> 00:25:58.040 The US get their benzene. 00:25:58.070 --> 00:26:01.700 Uh, well from the eu, EU I think is another big source, but that could be 00:26:01.700 --> 00:26:04.040 under a 24, 20% tariff as initially. 00:26:04.393 --> 00:26:04.798 put in. 00:26:05.098 --> 00:26:07.048 So you look at some of the other sources. 00:26:07.048 --> 00:26:11.038 So if you look at the other regions, India, Saudi Arabia, Brazil, 00:26:11.038 --> 00:26:12.478 there are also sources there. 00:26:12.688 --> 00:26:16.588 Uh, and, and that was originally under a 10% tariff, not, you know, now 00:26:16.588 --> 00:26:20.308 everyone is at that universal level, but they were under much lower tariffs. 00:26:20.308 --> 00:26:21.058 So you would go. 00:26:21.283 --> 00:26:25.063 Potentially to see if there's additional supply from those, uh, from producers 00:26:25.063 --> 00:26:28.683 in the, in, in those areas, to try to get, but yeah, I mean, companies have 00:26:28.683 --> 00:26:32.713 been scenario planning, before tariffs for, for quite some time, quite some time 00:26:32.713 --> 00:26:34.463 since the Trump, presidency and since. 00:26:34.613 --> 00:26:35.513 Since he was elected. 00:26:35.753 --> 00:26:39.773 But I think in this, it's just gotten so much more complicated with 00:26:39.773 --> 00:26:43.283 the different levels of reciprocal tariffs, with the pauses, the sectoral, 00:26:43.283 --> 00:26:44.903 tariffs, all sorts of things. 00:26:44.903 --> 00:26:48.233 So, uh, yeah, it's becoming much more complicated, but companies just have to 00:26:48.233 --> 00:26:52.733 go through all their scenarios in terms of supply chain, sources of supply, and, uh, 00:26:52.733 --> 00:26:54.543 as well as, other end markets as well. 00:26:55.153 --> 00:26:56.203 Victoria: Yeah, I think it's a great point. 00:26:56.203 --> 00:26:58.753 And I think you say, you know, companies have been doing scenario planning 00:26:58.753 --> 00:27:01.873 and when I talk to some leaders, they're like, oh, I planned for this. 00:27:01.933 --> 00:27:04.453 I just didn't plan for this order of magnitude. 00:27:04.753 --> 00:27:04.813 Yeah. 00:27:04.813 --> 00:27:08.573 And so that there's a new level of complexity, , as a result. 00:27:08.813 --> 00:27:11.153 Joe, I'm gonna, you know, one of the things you talked about is, you know, 00:27:11.153 --> 00:27:14.123 as you call it, the arcane products or the products you don't think about. 00:27:14.523 --> 00:27:15.933 Part of this is this whole. 00:27:16.518 --> 00:27:21.778 Supply chain mapping and understanding, you know, in every product, chemical 00:27:21.778 --> 00:27:26.188 products elsewhere, you think that your supply chain is diversified. 00:27:26.188 --> 00:27:27.658 Oh, I've got three suppliers. 00:27:27.688 --> 00:27:27.808 Oh. 00:27:27.808 --> 00:27:31.738 But they're all going to the same original supplier. 00:27:31.798 --> 00:27:34.828 And that's where companies get burned a little bit because they think 00:27:34.828 --> 00:27:38.588 that they've, created security supply because they're buying 00:27:38.588 --> 00:27:39.848 from three different companies. 00:27:39.848 --> 00:27:41.048 But as it turns out. 00:27:41.458 --> 00:27:45.028 Those three different companies may be relying on a single, uh, source point. 00:27:45.028 --> 00:27:50.818 So that whole aspect of knowing your value chain, understanding where 00:27:50.818 --> 00:27:54.388 the implications really are, and working your way around it is critical 00:27:54.523 --> 00:27:59.443 So what have I not asked you guys that we should be talking about as it relates 00:27:59.443 --> 00:28:04.659 to tariffs, craziness going on in our current chemical markets and more? 00:28:05.106 --> 00:28:07.476 Joe: another part of this is the impact on the end markets. 00:28:07.506 --> 00:28:10.236 And in particular, you look at housing, housing and automotive. 00:28:10.236 --> 00:28:14.316 Those are two key end markets for the, for the chemical sector and both, uh, 00:28:14.346 --> 00:28:16.866 yeah, very much impacted by, by tariffs. 00:28:16.986 --> 00:28:18.456 And the impact on interest rates as well. 00:28:18.516 --> 00:28:21.006 So if you look at the housing center sector, you are going 00:28:21.006 --> 00:28:22.416 to see a lease signaled by the. 00:28:22.526 --> 00:28:25.296 Administration, uh, sectoral, tariffs on lumber. 00:28:25.356 --> 00:28:26.766 Lumber is one of the components there. 00:28:26.916 --> 00:28:29.856 You already have 25% tariffs on steel and aluminum. 00:28:30.126 --> 00:28:32.546 That's bringing up, uh, housing costs, already. 00:28:32.546 --> 00:28:36.806 And affordability is, is is very much an issue here with 00:28:36.806 --> 00:28:37.826 the, and the interest rates. 00:28:37.826 --> 00:28:39.206 Interest rates have actually gone up. 00:28:39.206 --> 00:28:42.336 They, they've gone up in the past, uh, several weeks, quite rapidly. 00:28:42.336 --> 00:28:46.086 So this is, uh, putting additional pressure on home buyers and, and just 00:28:46.086 --> 00:28:48.063 overall the, this, that sector will. 00:28:48.433 --> 00:28:51.523 Likely continue to be under pressure, and that's gonna, that's gonna 00:28:51.523 --> 00:28:53.143 pressure chemical demand in turn. 00:28:53.203 --> 00:28:54.523 And, and same for automotive. 00:28:54.523 --> 00:28:57.793 Automotive, you have a series of, uh, tariffs as well on, 00:28:57.853 --> 00:28:59.083 on foreign made vehicles. 00:28:59.406 --> 00:29:02.116 as well as some of the components, automotive parts as well as 00:29:02.116 --> 00:29:03.136 of course, steel and aluminum. 00:29:03.166 --> 00:29:04.246 Big input costs. 00:29:04.506 --> 00:29:05.736 Yeah, if you increase the. 00:29:05.961 --> 00:29:07.191 The price of a vehicle. 00:29:07.191 --> 00:29:11.631 If automakers have to increase prices, uh, that's gonna automatically reduce demand. 00:29:11.691 --> 00:29:12.501 Reduces demand. 00:29:12.501 --> 00:29:15.321 You're gonna have a, uh, another knock on effect for chemicals. 00:29:15.321 --> 00:29:19.401 So those two key end markets are very, very much affected by, by tariffs. 00:29:19.401 --> 00:29:22.221 And they were already struggling before all of this. 00:29:22.221 --> 00:29:25.761 And just, you know, for two years, over two years, we've had kind of an 00:29:25.761 --> 00:29:27.771 industrial or manufacturing recession. 00:29:27.771 --> 00:29:30.231 And you know, part of that is the weak housing market. 00:29:30.281 --> 00:29:32.831 And automotive has been, uh, kind of lackluster, but. 00:29:33.491 --> 00:29:36.851 This could potentially get exacerbated with, with the tariffs. 00:29:36.851 --> 00:29:39.601 And again, we'll have to see what happens after this, 90 or now it's 00:29:39.601 --> 00:29:41.461 a, yeah, less than 80 day pause. 00:29:41.761 --> 00:29:44.071 But, uh, those are two key sectors to watch. 00:29:44.298 --> 00:29:45.978 Victoria: you know, we already talked about people starting to. 00:29:46.033 --> 00:29:49.903 I dunno, stocking up maybe is a strong word, but certainly, um, moving 00:29:49.903 --> 00:29:54.193 some purchase or purchase orders ahead to try to moderate with this. 00:29:54.523 --> 00:29:59.773 Do you anticipate this whipsaw that we saw in, was it 2022 and 2023? 00:29:59.773 --> 00:30:02.683 Right, so there was major stocking and then destocking. 00:30:02.683 --> 00:30:05.383 Have we gotten smarter about that? 00:30:05.383 --> 00:30:06.103 Do you think 00:30:06.381 --> 00:30:06.681 Joe: Yeah. 00:30:06.681 --> 00:30:10.731 You know, Al was mentioning the Covid, the Covid factor before, and how companies 00:30:10.731 --> 00:30:14.721 really, you know, they, they started double ordering, triple ordering, and you 00:30:14.721 --> 00:30:16.971 saw the retail inventories really go up. 00:30:16.971 --> 00:30:17.181 Yeah. 00:30:17.181 --> 00:30:21.291 As 2022, I think the second quarter of 2022, you saw extremely high levels 00:30:21.291 --> 00:30:23.181 of inventories at the retail levels. 00:30:23.181 --> 00:30:26.541 So the big box retailers, the Walmarts, the Home Depots, the targets, yeah. 00:30:26.541 --> 00:30:27.591 Tremendous increases. 00:30:27.591 --> 00:30:27.951 And then. 00:30:28.231 --> 00:30:30.121 You knew this was gonna re unwind. 00:30:30.121 --> 00:30:33.331 This is gonna, you know, unwind and it was gonna go all the way back to chemicals. 00:30:33.331 --> 00:30:34.921 Chemicals and manufacturing and that. 00:30:35.131 --> 00:30:38.641 And certainly we saw a massive destocking, not just in, in retail 00:30:38.641 --> 00:30:43.121 inventories, but that went all the way down to chemicals, throughout 2023, 00:30:43.181 --> 00:30:46.241 all of 2023, even some effects in 2024. 00:30:46.481 --> 00:30:49.811 Uh, a really difficult period that was exacerbated by Destocking. 00:30:49.811 --> 00:30:51.821 So, you know what, what's gonna happen this time? 00:30:52.211 --> 00:30:55.031 You're seeing the same type of effects where the inventory builds. 00:30:55.311 --> 00:30:57.531 Ahead of the tariffs, ahead of the tariffs. 00:30:57.591 --> 00:31:01.201 Um, you know, companies are trying to make the best calculation of 00:31:01.226 --> 00:31:03.686 what future demand is gonna be, but, you know, how do you do that? 00:31:03.686 --> 00:31:04.706 In this type of scenario? 00:31:04.706 --> 00:31:05.966 It's, I think it's very difficult. 00:31:05.966 --> 00:31:09.116 You're gonna have some level of higher inventory, some level 00:31:09.116 --> 00:31:10.886 of risk associated with that. 00:31:11.216 --> 00:31:13.196 You'd like to think, oh, they learned their lesson from the 00:31:13.196 --> 00:31:14.546 last time, you know, during covid. 00:31:14.576 --> 00:31:18.686 But yeah, you'll have a similar but a different circumstance here and, uh. 00:31:19.316 --> 00:31:20.066 Yeah, we'll, we'll see. 00:31:20.066 --> 00:31:22.616 We'll, we'll see what happens, but I don't, I don't think you can completely 00:31:22.616 --> 00:31:26.306 mitigate that risk just because, oh, this is what happened during, during Covid. 00:31:26.576 --> 00:31:29.786 So yeah, you run the risk of, again, a demand slowdown 00:31:29.786 --> 00:31:31.526 potentially emerging in the summer. 00:31:31.526 --> 00:31:34.716 If, these inventories have been built up, if consumers have done 00:31:34.716 --> 00:31:37.806 some of their pre-buying, uh, yeah, it could get a real malaise by 00:31:37.806 --> 00:31:39.096 the time summertime rolls around. 00:31:40.351 --> 00:31:41.491 Victoria: Good times guys. 00:31:41.491 --> 00:31:42.091 Good times. 00:31:42.091 --> 00:31:44.221 You guys are the bears of good tidings today. 00:31:44.221 --> 00:31:46.051 It sounds like the messenger. 00:31:47.296 --> 00:31:48.156 So messengers. 00:31:48.391 --> 00:31:51.121 So, you know, as we, as we wrap, this has been a great conversation. 00:31:51.121 --> 00:31:51.991 I really appreciate it. 00:31:51.991 --> 00:31:55.731 Is, is there anything that we should be watching, any key indicators, 00:31:55.731 --> 00:31:59.331 anything you would say to people like, you know, keep your eyes focused on 00:31:59.331 --> 00:32:03.441 this as we go forward over the next three months, six months and beyond. 00:32:04.523 --> 00:32:09.443 Al: I've been looking at the, uh, yield on the, tenure treasury note, because 00:32:09.443 --> 00:32:16.093 that is, you know, we were expecting it, to fall as the, tariffs are introduced 00:32:16.093 --> 00:32:17.953 and we're seeing the opposite effect. 00:32:18.003 --> 00:32:19.083 So that is going to. 00:32:20.273 --> 00:32:24.353 Extend, some of the paint that we've seen with the, slowdown and durable 00:32:24.353 --> 00:32:28.573 goods, slowdown in automobiles, slowdown in the housing market, 00:32:28.673 --> 00:32:31.143 because, at least for, mortgages, 00:32:31.193 --> 00:32:34.643 if those rise and fall with those, uh, longer term, debt. 00:32:34.643 --> 00:32:39.203 So the fact that it's going up is not good for the chemical industry 00:32:39.203 --> 00:32:44.033 because that played a big role in the, uh, in that, manufacturing 00:32:44.033 --> 00:32:46.013 recession, uh, that Joe mentioned. 00:32:46.443 --> 00:32:47.963 So that's, one thing. 00:32:47.963 --> 00:32:50.623 The other thing is of course, what we talked about. 00:32:51.063 --> 00:32:52.143 Restocking. 00:32:52.143 --> 00:32:56.483 We saw automobile sales pick up, right before the, tariffs. 00:32:56.853 --> 00:33:02.783 So that's something else to look out for is, how big of a pre-buy splurge 00:33:02.783 --> 00:33:05.693 did we see and how will that play out? 00:33:06.083 --> 00:33:11.003 And then finally, looking at some of the forward looking, statistics. 00:33:11.003 --> 00:33:11.153 The p. 00:33:11.478 --> 00:33:18.842 I to see going to, see weaker demand offset the ability for companies to 00:33:18.902 --> 00:33:22.742 raise prices to offset the higher costs caused by the, uh, tariffs. 00:33:22.772 --> 00:33:27.052 Because at the end of the day, buyers, consumers, customers really 00:33:27.052 --> 00:33:28.492 don't care what your costs are. 00:33:28.492 --> 00:33:31.077 If there's no demand, they're not gonna buy what you're trying to sell. 00:33:31.860 --> 00:33:32.670 Victoria: Well, that's helpful. 00:33:33.090 --> 00:33:36.150 Well, Joe and Al, thank you so much for joining me today. 00:33:36.150 --> 00:33:37.770 This has been a great conversation. 00:33:39.240 --> 00:33:40.200 Joe: Thank you so much, Victoria. 00:33:40.200 --> 00:33:40.350 Hey, well 00:33:41.250 --> 00:33:41.700 Victoria: thank you. 00:33:41.700 --> 00:33:41.702 Thank you. 00:33:41.707 --> 00:33:43.650 And thank you everyone for joining us today. 00:33:43.650 --> 00:33:46.560 Keep listening, keep following, keep sharing, and we will 00:33:46.560 --> 00:33:48.270 talk with you again soon. 00:33:49.482 --> 00:33:51.702 Thanks for joining us today on The Chemical Show. 00:33:52.032 --> 00:33:56.532 If you enjoyed this episode, be sure to subscribe, leave a review, 00:33:56.772 --> 00:34:00.162 and most importantly, share it with your friends and colleagues. 00:34:01.152 --> 00:34:04.482 For more insights, visit the Chemical show.com 00:34:04.962 --> 00:34:06.447 and connect with us on LinkedIn. 00:34:07.212 --> 00:34:11.172 You can find me at Victoria King Meyer on LinkedIn, and you can also 00:34:11.172 --> 00:34:13.332 find us at The Chemical Show Podcast. 00:34:13.512 --> 00:34:16.692 Join us next time for more conversations and strategies 00:34:16.992 --> 00:34:18.762 shaping the future of the industry. 00:34:19.152 --> 00:34:19.872 We'll see you soon.