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Navigating the shifting landscape of the chemical industry and the global economic climate, Tony Potter and Kurt Barrow from S&P Global join host Victoria Meyer to offer a comprehensive market update for 2025. They delve into the global supply and demand dynamics of feedstocks like oil and NGLs and unpack the impact of geopolitical changes, including the return of Donald Trump to the US presidency. Touching on the Chinese market’s massive capacity expansions and the European chemical industry’s crossroads, this episode provides an insightful analysis of how market forces are reshaping the industry.
Victoria, Tony, and Kurt explore critical topics such as decarbonization and sustainability, emphasizing the ongoing challenges and advancements in circularity, advanced recycling, and the integration of green technologies. They also discuss strategic responses to global market imbalances and the significance of staying prepared for future investments.
Learn more about the following topics this week:
- Navigating the chemical industry's perfect storm: massive overcapacity in China, European plants at a breaking point, and North American resilience
- The tension between sustainability goals and market reality.
- Changes in leadership and trade policies are reshaping the industry and what smart companies are doing to prepare.
- Who's actually paying for sustainability initiatives?
- Looking at Europe's aging chemical infrastructure and how some 50-year-old plants may get a new lease on life due to carbon border adjustments
- Why industry veterans advise looking past current market conditions and political uncertainties to prepare for growth in the 2030s
"Downturns are just good for pruning... it is the opportunity to make your organization a little bit leaner. We all need to shed costs, but becoming lean is also about becoming fit for future growth. The industry does need to invest to grow... it doesn't matter who the President of the United States is. You're going to build a refinery, an energy plant, or whatever to last 40 years, maybe 50 years. It's going to see a few presidents." - Tony Potter, S&P Global
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Creators and Guests
What is The Chemical Show: Where Leaders Talk Business?
Looking to lead, grow, and stay ahead in the trillion-dollar global chemical industry? The Chemical Show - the #1 business podcast for the chemical industry - is your go-to resource for leadership insights, business strategies, and real-world lessons from the executives shaping the future of chemicals. Grow your knowledge, your network, and your impact.
Each week, you'll hear from executives from across the industry - from Fortune 50 to midsize to startups. You’ll hear how they're tacking today's challenges and opportunities, their origin story (what got them here!), how you can take and apply these lessons and insights to your own business and career.
We talk:
- Business Transformation
- Innovation
- Digitization of business
- Strategy
- Supply Chain
- and so much more
Founder and host Victoria King Meyer is an expert interviewer - who brings out the best in each guest. She gained her industry experience at leading companies, including Shell, LyondellBasell and Clariant. Today, she is a high-performance coach and advisor to business leaders in chemicals and energy, as well as the host of The Chemical Show podcast, and founder of The Chemical Summit.
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Websites:
https://www.thechemicalshow.com
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Welcome to The Chemical Show, the
podcast where chemical means business.
I'm your host, Victoria Meyer,
bringing you stories and insights
from leaders, driving innovation and
growth across the chemical industry.
Each week, we explore key trends,
real world challenges, and the
strategies that make an impact.
Let's get started.
Just a quick reminder that if you are
listening to this as an audio podcast
and you are interested in seeing the
charts That were shared and that we're
discussing during today's episode
Head on over to our YouTube channel
so it's YouTube and it's the chemical
show podcast and you can listen to and
watch today's episode there and See the
charts that Kurt and Tony are sharing.
Thanks
Victoria: Okay, we're
going to get things going.
Thank you everyone for joining us today
for the first Chemical Show live of 2025.
I am super excited to have you guys here,
and I'm very happy to have Tony Potter
and Kurt Barrow from S& P Global, with
us today, sharing their insights on
the chemical market outlook for 2025.
So, these guys both bring a wealth of
experience in energy and chemicals and
are here to share that with us today.
So I'm going to stop sharing my screen.
We're going to start conversing
and, we'll make this happen.
Kurt and Tony, thanks for joining me
today and welcome to the chemical show.
Kurt: having us.
Victoria: So I like to start every
episode, with just a little bit about you.
Tell us how you got interested in
energy and chemicals and then how did
you get into this wonderful world of
watching markets and analyzing what's
happening and advising customers?
Kurt, I'm going to start with you.
Kurt: Sure, yeah, well, Victoria, I'd
like to say there was some big grand
plan and I had this big vision that I
was going to be this oil analyst, right?
The reality is when I came out
of university with my engineering
degree, uh, Exxon had the
biggest number on the job offer.
Right?
So I came to Houston
and started with Exxon.
And then, You know, really enjoyed my
time there was really interested in the
business side went got an MBA and then
went out to work for consulting and a
small kind of boutique consulting firm
in the refining down downstream space.
Then that company got bought is
as oftentimes happen by the, which
kind of rolled up into to, uh.
It's been it's been a great career,
not not really super plan, but, uh,
you know, enjoy my time kind of in
industry on the technical side, did
a lot of consulting and then now
I run research right for for oil.
And it's just such a dynamic.
Interesting industry, you know, tied into
the economies and geopolitics and there's
just always so much to learn technology
and obviously energy transition.
And so it's just kept my interest
and I've, uh, steady with it.
Victoria: Awesome.
Love it.
Tony, how about you?
Tony: Not dissimilar story.
Um, I love this job.
It's prepared to study.
Um, I grew up with the chemical
industry on my doorstep.
My dad worked for ICI Wilton up in
the northeast of England for 27 years.
And in fact, they built ICI Wilton
in my grandmother's back garden,
literally after World War II.
Is that when you guys made a
Victoria: lot of money as
land barons and stuff, Tony?
Tony: No, no, She was, she didn't, she
didn't own all that land, don't worry.
I did a ChemEng degree.
I started at Exxon as well
at Foley refinery in the UK.
I was nine years into my career.
I was a typical Exxon engineer,
being a plant supervisor and a
project manager and things like that.
When I went to the European head office
in Brussels, for Exxon chemical, and
it was there, I actually found out
that the job I do now even exists.
And I became, uh, on behalf of
Exxon, the clients of consulting
companies like the old.
CMAI, where I eventually became a partner.
And we sold CMAI to IHS in, in 2011.
And then the, the journey with
CMAI, IHS, IHS market, the logo keeps
changing on my business card every
two or three years, but I'm more
or less still doing the same job.
But I've had the privilege of
doing it, not just in Europe,
but I was four years in Dubai.
I was five years in Singapore.
I've had the privilege of sort of talking
to C level clients all over the world.
It's fantastic.
Victoria: That's great.
And I, I think, you talk about
it being a global career.
I think many of us in the industry,
myself included, didn't realize how
global my career would be before I joined.
The industry and certainly
have loved every bit of that.
Kurt: Tony was in spent time in Dubai
station there a while and in Singapore.
I was actually in Singapore as well.
So, yeah, very, very, very much.
So very interconnected getting
more connected all the time.
Victoria: Absolutely.
So let's talk about what's
going on in the market today.
How would you characterize 2024?
And what are you seeing
and expecting in 2025?
And Kurt, let's start with you because
I know the feedstocks is really
the starting point of everything.
Kurt: Yeah, no, no, absolutely.
Maybe I'll share a slide or two here.
Right.
And help kind of talk through this.
So, you know, fundamentally,
the fundamentals right in the
oil, in jail space, maybe to a
lesser degree and natural gas is
the rental over supply, right?
Or or headed into more of an oversupply.
Right?
We're, uh, producing more
oil than than we need.
Right?
So the global oil supply system, you
know, Is, adding more to the market
than, uh, the, the, the new, right?
And there's, there's a
number of reasons on demand.
We could talk about China is not growing
at kind of the rate we'd expected.
Evs are a small part of
the weak demand today.
It actually has more to do with
kind of vehicle fuel efficiencies.
But, you know, in a general sense, right?
We've got oil.
Prices kind of moving, moving downward.
And we can come back and talk about, you
know, Trump and tariffs and some of the
factors that are affecting the oil price,
you know, kind of day to day week to week.
But, but I think the key takeaway is,
is that we are, in our view, at least
in the base case headed on a, on a
general generally downward track for
Brent if you kind of shift over a
little more into the feedstock side, 1
of the big dynamics of the past few
years is, you know, It's just the amount
of NGOs that were coming out of the U.
S.
supply system.
And that's, you know, part of
that was coming as associated, in
jails from the oil production.
And some of it was coming from the,
some of the wet gas plays and the
growth, the natural gas and the,
the LNG, uh, to the, to the, uh.
You know, feed the LNG
plants and so forth, right?
We do think that there's a number
of factors that will start to
slow that, still growth, right?
And still relatively impressive
growth, you know, two or 300, 000
barrels a day, but that is kind
of one of the factors we see.
And it's, it's part of
the longer trend, right?
We'll come back and talk a little bit
about, but, you know, at a high level,
because of some of the fuel economy
standards in, cars and trucks around the
world, because we are starting to see,
some electrification of transport, in
some markets, there's a number of reasons
that we do expect the oil demand globally.
Right, refined products in particular
and transport fuels to start to
plateau and peak, and that's going
to have some real direct implications
for, for feedstocks, right?
It's going to mean that we have
less, NGL growth, you know, of
ethane, propane, to use as feedstocks
when you come back to naphtha.
Uh, and we'll need to essentially
get more, Hydrocarb out of the crude
system out of the refining system, to
supply that, you know, to meet demand
growth and chemicals that we, you
know, Tony, Tony will talk about.
So, that's that's kind
of in a nutshell, right?
Kind of the short and
long term view, Victoria.
Victoria: Yeah, so at one point we talked
about a shortage, right, that we were
running out of cheap feedstock, that
the Middle East wasn't going to have
feedstock anymore, and of course the U.
S.
With its really strong basis in
natural gas, has been a very strong
part of the, the feedstock chain.
Do we still have those conversations?
Are we running out of
petrochemical feedstock?
Kurt: Yeah, I'd say we're not running out.
That's a good context, right?
If you go far enough back, right?
We kind of thought we were
running out or had those concerns.
And then, as you said, the supply
kind of rose a guy to the Middle East.
And then, and then the
US, we found title, right?
Shell gas and title oil.
I would say we're not worried about
availability of these thoughts.
I think it's more about
the costs and economics.
That will ultimately come with that
right because we again we won't
have as much surplus in gls, right?
So the ngl Markets are quite interesting.
They're one of the few markets that that
we view as Not so much demand pull, right?
It's not the demand, like
you have in gasoline, right?
You think about gasoline
demand or or ethylene, right?
You think about, you know, the pull
from the derivative plants, right?
The jail business is much
more of a supply push.
Business, right?
They're a, they're a byproduct of
natural gas and crude oil production.
You're generally not drilling for NGLs.
Um, and then you kind of need to, to
clear the market with those NGLs, right?
And the, the clearing market
is, petrochemicals, right?
It's, it's the marginal
market for, um, oil and gas.
For NGLs and so it becomes
really a price signal, right?
At which point, you would switch
that flex cracker or over long term,
you know, change your investment
profile to to those feedstocks, right?
And so if you.
If you take our view, right, that
we're, we're not going to have as
much in jails, then effectively, you
just need to go back to the refining
system and get more feedstocks now,
but they may cost you a little more.
Right?
So the nap, the crack
may be a little wider.
Ultimately, we may need, you
know, we think we will go into,
deeper conversion, like different
cruel, the chemical technologies,
Victoria: yeah.
So I know this week, I was reading
that Lyondell Bissell is starting
to shut down the Houston refinery.
And of course, that's been something
that's been coming for a long time.
does you see this affecting
the market availability?
Kurt: Yeah, so, so, um,
yeah, essentially, right.
Broader demand trends, it's
on the chart here, right?
We will see rationalization.
We have, we've, we've seen
rationalization, for a long time, right?
We used to have whatever the number
was twice as many refiners in the U.
S.
Actually, in hindsight, the industry
rationalized a little more than
we maybe should have because when
demand came roaring back and, oh,
the Russian invasion of Of
Ukraine and the high natural gas
price kind of exacerbated that.
Victoria: Got it.
All right.
And as you guys might have noticed,
my internet has decided to be
a little unstable, but we are
going to push through with this.
So Tony, let's talk
about chemical markets.
And when you see, you know, when
we talk about this influence,
the feedstock picture, how do we
start taking this into chemicals?
Okay.
Tony: Yes, so I mean, just a
message on feedstocks, you know,
wherever the industry produces,
advantage price, ether, it's
going to get cracked eventually.
The US isn't going to run out
of ethane any, any time soon.
The Saudis have a gas initiative and,
you know, we were hearing numbers that
there'll be sufficient incrementally
then for, you know, another 6, 000, 000
tons of ethylene and that's before they
get on to, all of their crude oil to
chemicals complexes that they they'd like
to build at some point in the future.
but generally, the
industry is oversupplied.
It's built its way into a
problem in most value chains.
What I show here is sort of
incremental capacity in the.
Bars for ethylene globally, the
bars of the incremental capacity,
the gray shaded area in the
background is the incremental demand.
And you can see that period starting in
2020, when the bar, the height of the
bars is much higher than, than the demand.
The height of the shaded
area behind the color coding.
China is is red.
And, you know, you can see
China is accounted for a good 50
percent of incremental capacity
in in the last few years.
And so.
Industry capacity
utilization is quite poor.
You go back 4 or 5 years.
It was up at 90 percent and
that's effectively full on
an employee basis, right?
Every year, the industry, you know, shuts
4 percent down for planned maintenance,
turnarounds, loses another 4 percent to
unplanned outages, when you're talking
about 90 percent capacity utilization,
the industry's full, you know, and you
go back 4 Pre 2020 prices and margins
were very good for the industry.
Last year, industry capacity
utilization bottomed out around 80%.
That's the black line on this.
And you can see it's a long, slow
haul up to the sort of, mid to
high 80s where, you know, the
industry, the NAP, the cracking
industry can, can leverage margins,
generally, profitability is poor.
The industry is talking
about rationalization.
That process has started mainly
in Europe, but you know, we'll
get some closures in Japan.
We'll probably get some closures in
Korea this cycle for the first time.
The place that's actually very
disciplined about closing all
small capacity down is China.
Often goes unnoticed, but,
you know, they build 1.
5, 2 million tons of new capacity
and they quietly shut, you know,
150, 200, 000 ton old cracker, which
is exactly what they should do.
But, you know, I've seen a few of
these cycles now, and there's never
enough rationalization to sort
of jumpstart this, into a sort of
profitable area of industry utilization.
you know, I would say in the ideal world
for the producers, they'd shut down 20
million tons of capacity and that black
line would take a step change upwards
and all would be sweetness and light.
And that's not going to happen.
Everyone wants someone else to go first.
We can envisage, you know, 5 or 6
million tons of rationalization this
cycle and, you know, the industries
into that, not all doom and gloom.
So, you know, for your U.
S.
listeners, it's the nap, the
cracking industry that's challenged.
That's the high cost.
And if we maybe go forward a couple
of slides we publish this every week.
So this is a sort of spot variable
cost of production for ethylene for.
From from various feedstocks.
These are generic crackers.
They're not any particular.
So, you know, the lowest cost
production right at the moment,
the bottom left is, you know, U.
S.
ethane cracking.
It's as cheap as Saudi
ethane cracking right now.
The generic NAPTHA crackers prevalent
in Europe and Asia, the two orange
bars on the right hand scale.
You know, it's that right hand end of
the chart that sets the general level
of petrochemical and polymer pricing.
So, you know, all of the things being
equal, the old price moves up and down.
So does NAPTHA.
So does ethylene, polyethylene,
benzene, styrene, you name it.
But what you can see is, you know, U.
S.
Ethan, best producer has got a.
Six, 700 a ton cost of production
advantage relative to a typical,
nap, the cracker right now.
So, you know, if you've got advantage
price feedstock, money is being
made, in some parts of the world.
And then, then there are other little
niches that are doing quite well.
When we talk about an 80 percent
capacity utilization, actually
the high cost end, the industry,
the nap, the cracking industry.
is disproportionately pulled back more,
and that actually creates shortages of
co products, and the obvious one at the
moment is C4s, so there's a shortage
of crude C4 molecules and you know
butadiene margins are doing great as a.
As a result of that, but those are niches.
Victoria: Hey, Tony, when we look at
this slide real quick is, the yellow
orange bars of European nap then Asia
nap that is that to indicate that
that's where the price is being set.
If we think about a traditional supply
demand curves that are price setters.
Tony: It's exactly, it's the
requirement of the high cost producer
to cover their cost of production
more or less sets the price.
If you go over to this one, so this
is, you know, basket of base chemicals.
And this is the industry
nameplate capacity utilization
and the top blue lines, ethylene.
I talked about that.
It went from 90 to down to 80.
The purple lines, paraxylene.
You know, that was also up at 90 percent
a few years ago, and that bottomed out
last year at around 70%, but actually
Parazilin has been doing okay, right?
And so industry capacity
utilization of nameplate capacity
utilization isn't the full story.
You've got to get it where
the effective utilization is,
where the pinch points are.
And in the case of aromatics, the
gasoline industry has been supporting it.
So, you know, high octane values
and all the money has been made
in making the toluene and the
xylene for its octane value.
If you had to buy mixed xylenes
on the market, you know, there was
no extraction margin to produce
para xylene or ortho xylene.
That's maintained some margin
in the aromatics industry.
Kurt's already mentioned gasoline
balance is probably lengthening
as a result of, you know, huge
refineries like the Dangote refinery.
As that premium and
octane comes off, then.
Paraziline will begin to experience the
full impact of that, you know, 70, 75%.
Victoria: Okay.
And how does this play out when we
go further down the value chain?
Obviously, because these are
kind of the big building blocks.
Where do you see it taking into
more differentiated products
or more specialty products?
Tony: We define a specialty as
as something that's sold on the
basis of its performance rather
than its cost of production.
So it can cover a multitude of
things, but what's a specialty
depends where you sit in the.
In the value chain, I talked to some
Middle East producers, and they talk
about specialties and really, they're
going to produce intermediates.
That's a mixed bag, um, depending
on the industry and the overbuild.
But if you look at the, financial
performances, you know, of the Clarions
and, you know, the big specialty chemicals
producers, they've suffered as well.
But we expect that to start picking up.
Victoria: How about the wonderful
world of plastics, right?
Cause obviously a big part of the
ethylene value chain goes into
polyethylene and then, you know.
Polypropylene and all the other polys.
Tony: Most of it, most of this ends up
in plastic one way or another, ethylene
into polyethylene, PVC, propylene,
polypropylene, PET from parazylene,
benzene into, you know, the styrenics, so
most of it actually ends up in polymers,
one way or another, and the polymer
plants get built on the same cycle
as the monomer plants, so, you know,
you build a, you build an ethylene
plant, you build the polyethylene
and the polypropylene with it.
So the curves look more or less the same
and, you know, are equally as challenged.
Yeah, it can be a bit misleading to talk
about ethylene profitability, you know, on
its own, because you've got to look at the
integrated economics into the derivative,
but I should say the polyethylene curve
looks the same as the ethylene curve.
Victoria: So global chemical markets are
imbalanced, in a way that I've never seen
and, and we've gone through a few cycles.
You've already referenced
how overbuilt it is.
But, if we think about just
the, the regional dynamics are
shifting quite a bit, right?
Suffolk's director general, Marco
men sink recently warned that the
chemical and the European chemical
industry is at a breaking point.
With over 11 million tons of capacity
being Shut down over the past couple
of years or at least announced.
We're seeing significant overbuilds
in china As well as pretty low
demand growth and then uh, we've got
North america seems fairly strong.
But how do you see companies,
both global companies and regional
chemical companies navigating this.
Because I'm certain this is a conversation
you're having with leaders all the time.
Tony: Yeah.
I mean, if you look at let's take Europe
as an example, I'm sat in Germany, where
I live and You know, you Europe's got
probably the oldest cracker stock in the
world right plants are 1450 years old.
Some of them are even
slightly older than that.
They're old and they're small.
There are A dozen at least old
small crackers that have got a
capacity of 400, 000 tons or less.
When a world scale cracker, you
know, people are building 1.
5, 2 million ton crackers these days.
And the thing is, they dotted
around the coast of Europe.
They're not connected to anything
other than their own derivative plants.
And so if you want to take a cracker
shutdown decision, you have to
take a site shutdown decision.
And over the cycle, they've tended
to be cash positive, right?
These things are fully depreciated.
As long as they don't need a big capital
injection, there's cash to be made.
What's different in this cycle is that
as Players are faced with the choice to
inject capital to de carbonize, right?
That's probably going to tip some
of them into shutdown decisions.
And it's, you know, it's probably
right that all small capacity shuts
down in favor of, you know, newer,
bigger, more efficient capacity.
That's the way markets work.
But the exit costs are high in Europe.
Site remediation costs.
You've got the whole political factor.
No EU politician worth their salt
wants to shut a, um, a chemical
complex down on their soil.
You know, France, I'm thinking
France, Spain, Italy, where some
of these small crackers are.
And the politics is
always about employment.
And that's the issue.
And so it's a slow process.
Ironically, as Europe talks about
decarbonization and about, things like
CBAM, Carbon Border Adjustment Mechanisms,
that actually could create effectively
a tariff around Europe that Prolongs
the life of all small crackers, you
know, a lot of unintended circumstances.
So we'll see how that pans out,
but Europe certainly started
that, that journey of shutdowns.
We talked about the players
regionally, many of the players
in Europe are global players.
I mean, Exxon is shutting
down a cracker in France.
Sabic is shutting down a cracker in
the Netherlands you know, so they have
global supply strategies anywhere.
I'm not expecting Exxon to sell less
polymer in Europe as a result of
shutting down the gravel machine cracker.
Um, the issue is where it comes from.
Victoria: Fair enough.
We started talking and Kurt referenced
a little bit, um, You know, politics and
geopolitics and the influence, right?
So the U.
S.
has just brought in a new president,
Donald Trump and administration in the U.
S.,
who's already making a lot of bold
statements, about trade and tariffs.
We've seen presidential changes in
a lot of other countries, leadership
changes, across the globe, both,
uh, Latin America, Europe, right?
I mean, France had two or
three snap elections last year.
We're starting to see it in Asia as well.
So, you know, I know you guys are tracking
and monitoring, these political shifts.
What influence do you see this having
on the chemical industry, either,
you know, this year or next year?
I know nothing is immediate, but
how do you see this playing out?
Kurt: Yeah, so you're right.
Everybody's trying to monitor and see,
you know, what exactly this means.
Right?
I think you laid it out.
Well, right.
I think the Trump administration's the one
that everybody's looking at, but there's
been a number of shifts of different
administrations, around the globe.
Right?
And I think, you know, what
does this mean for energy?
What does it mean for policy?
What's this mean for trade and tariffs
when they weren't a very, you know,
globally interconnected market or,
you know, for oil and for chemicals.
Right?
And I think the other thing, right?
That we're
thinking about right is okay.
You know, what are not just the actions,
but what are the reactions, right?
Because, Trump puts
tariffs on Columbia, right?
What's, what's Columbia
do, how do they react?
And then, you know, you've got some
of the bigger players, that are kind
of in the middle, like India, Brazil
the, the one to keep good relations with
the West and with, uh, with, uh, With
China and with Russia, perhaps, and so,
how does all that, uh, all that, I think,
if you get down into kind of some of the.
Energy policies that Trump is, you
know, has announced on the campaign
trail, signed some executive orders on.
some of those are quite
impactful, uh, in the media.
Things like reduction of subsidies
of electric vehicles, right?
That's going to slow, the sale
of electric vehicles in the us.
Particularly for some of the, some of
the big three automotive manufacturers,
maybe a bit less for Tesla, and so forth.
But things like oil production,
the executive in the, in the White
House doesn't really have much to
do with oil production in the us.
They will relax some of the
regulations, some of the environmental
rules, shelve the methane Rule.
Um, but most of the drilling and most
of the growth of oil production is on
state and private lands, and most of
the decisions that the executives are
making on how much to drill is really
being informed more by their shareholders
desire and the price of oil, right?
And so that in some ways.
You know, the administration could
actually lower the price of oil
and actually reduce some of the
drilling activity potentially.
Tony: And I think for chemicals,
again, it depends on the responses
from, the other countries, right?
So, I mean, the U.
S.
exports a lot of polymers to China,
if he slaps tariffs on plastic, right,
if China were to do the same, what
tends to happen with tariffs is the
world rebalances, it just reshapes.
So a lot of plastic goes from the U.
S.
Gulf coast to China.
And then it comes back to the U.
S.
as finished goods, semi
finished goods, right?
Maybe via Mexico, maybe
via Vietnam, right?
All sorts of games can be played.
But, but let's say, let's
pretend, you know, China slaps
a 25 percent tariff on U.
S.
plastics.
All that would happen is
we'd probably see more U.
S.
exports to places like Europe.
And then the slack into China would
be taken up by the Middle East,
so that the world would reshape.
To tariffs, right?
The bigger concern is, you know, what does
inflation do to demand, and does that
depress the industry tariffs are going
to lead to inflation, which potentially
could lead to low growth, right?
I mean, tariffs.
The U.
S.
could be shooting
themselves in the foot here.
And you know, the U.
S.
is a big component of, of global demand.
That becomes an issue as well.
Victoria: I will tell.
So let's talk about sustainability
and decarbonization.
Any conversation in chemicals,
we would be remiss without that.
And that certainly also ties in
politically because we're seeing a bit of
a waning of Interest or support for some
of the commitments that were placed, at
the beginning of the decade or even prior
to then, and I think in certain places,
you know, we say, well, we're here, right?
So there's significant
investments in carbon capture.
There's been a lot of ongoing
efficiency and carbon management.
There's a lot of green
chemicals, circularity at play.
And yet, in many ways, we are still.
In our infancy, as it relates to
sustainability and decarbonization,
and we've got this whole big question
of who's going to pay for it?
Because sometimes it seems to only make
sense when there's subsidies, right?
If we think about electric vehicles,
for instance, and the knock on effect
it has, but we're, I feel like we're
in a bit of a the pendulum is swinging.
How's that?
Um, how do you guys see this
playing out, when you talk about
sustainability, decarbonization
across energy and chemicals?
Tony: Yeah.
Um, I think there's a lot of very
worthy projects out there that
together do not add up to enough.
Countries will miss targets.
I'm sort of more interested in whether
individual company pledges meet targets.
And I think we're seeing evidence that.
2030 milestones are slipping to 2035.
Of course, the big thing in
the chemical industry is the
circularity of polymers, right?
If you could perfectly recycle, every
pound of polymer, you wouldn't
need to make much virgin polymer.
Um, at the moment, we estimate, you
know, probably about 8 percent of
polyolefins are mechanically recycled.
Um, Globally, even if you assume
a doubling and almost tripling
over the next years in those
volumes is what we sort of expect.
It's not enough to blunt the underlying
growth demand for virgin pollen.
Right.
So it takes the edge off it a little
bit, but virgin demand keeps growing.
And that, that's an important
message for the chemical industry.
It says that the chemical industry
still needs to invest to grow.
So you've heard Kurt talk about, you
know, the oil complex peaking, and then
in 2050, there's 12 and a half million
barrels a day of, less of, of oil demand.
The chemical industry keeps growing.
And even if you assume them absolute
massive increase in, in mechanical
recycling, the world's still gonna need
to build another a hundred million tons of
ethylene between 2030 and 2050 at least.
And that's a very positive
message for the industry in
terms of, you know, the need to.
And decarbonized.
The other thing that's going on is the,
the advanced or the chemical recycling
where you turn plastic into, something
that looks like chemical feedstock that
doesn't get rid of the need to build
the cracker to process that, right?
So it, it, it impacts
the feedstock balance.
It's a very slow process.
And there are some parts of the world
where it's hardly developed at all.
The only chemical, the only plastic.
That with substantially higher
recycle rates is PET bottle resin.
And, and that's, that's fairly obvious.
The average consumer can identify it.
They can separate it.
You know, So you can collect
it very, very easily.
And by the way, a lot of it gets down
cycled into polyester fiber, right?
Only about 12 percent of
bottles end up as new bottles.
But the total numbers, when you look
at what gets reused as polyester,
that's that's more like 60%.
And then you look at how
the chemicals made, right?
The decarbonization of
the plants themselves.
That is a very slow process.
There are tests.
E furnaces, electric furnaces.
But no one's built a new cracker
yet with E furnaces, right?
All these new crackers in China have
conventional furnaces, when you add
it all up, you can't conceive of the
chemical industry getting to net zero
without substantial carbon capture,
you know, at the end of the pipe.
Kurt: I think on the energy side, right?
Very similar, right?
I think, policy matters,
but so do economics, right?
And I think, uh, I think we're at
that point where, companies, right?
Or try to try and figure
out where the economics are.
I mean, there's been cost inflation
in the supply chain, right?
So some of this, uh, kit is
going to cost more than maybe
we thought a few years ago.
And then, we go back to Trump, right?
I mean the IRA, right?
The Inflation Reduction Act was the 800
pound gorilla and where a lot of companies
were putting a lot of attention, right?
Because there were some really
big tax credits there that
looked quite, quite attractive.
But now that's all been put on hold
in know, our own view is that a good
portion of that will continue on.
Maybe it gets suggested and relabeled
a bit by the new administration, but,
but that uncertainty, right, is really.
It's something that companies have
to have to struggle with that.
The economics aren't there, you know,
what to what degree do you rely on policy?
And how much do you want
to put that risk out there?
I just say 1 other quick thing
on the at a 50, 000 foot level.
If you kind of step back and look at
the energy, we have not done a lot of
decarbonization kind of Tony's point.
We've done a lot of electrification.
PV, solar and wind is economic,
and we see a lot of growth in that.
Um, you know, in the West, in China,
a lot of other markets in the Middle
East, as well, EVs also we're, you know,
becoming somewhat successful, different
markets, but the actual decarbonization
of the molecules of carbon, uh, still,
still in its, early, early stages, right?
Tony: Yeah.
And you asked about who pays.
I mean, ultimately the consumer.
Right.
What's interesting is the pull
from the brand owners, uh, for
recycled plastics is, you know, is
more than the availability of right
quality recyclers at the moment.
And that's why, you recycle
pellets, you know, are trading
at a premium to Virgin pellets.
It's, it's got nothing to do with the cost
of production of those, those recycled
pellets, it's the Dan owners and the
Nestle's, you know, they want to be able
to print on their yogurt pot that that
yogurt pot is 40 or 50 percent recycled,
uh, material and will the consumer pay?
Well, rich consumers in Europe.
We'll pay an extra penny, to go green.
Um, I think the evidence from the
U S is even the green consumers.
No, I still want it as, as, as cheap
as the Virgin plastic yogurt plus.
So, yeah,
Victoria: I want it to be
good, but not expensive.
That's the message.
Well, this is.
This has been great, and I know
we've covered a lot, and Tony and
Kurt, I really appreciate that.
Of course, we can only cover so
much in our 40 minutes together,
and then we're leaving some time
for questions, which I want to do.
And I know that you guys are going
to be covering this in depth.
One, you do it all the time with
clients, but then World Petrochemical
Conference is coming up, and I would
imagine that we're going to see some
of these things in greater detail.
And, and more topics at WPC.
So can one of you guys talk
about that a little bit?
What should we be expecting
from WPC this year?
Uh, and, and who should be,
Tony: Anyone who is remotely connected
with the chemical industry, right?
So whether it's, product managers,
analysts, financial analysts,
producer, analysts, strategic
planners, anyone involved in the
buying and selling of, of chemicals,
you want to know what the industry
is going to look like going forth.
Come and talk to us.
It's the week of the 17th of March.
It's the 40th anniversary.
So we got some special guests who, you
know, from the industry, scan the QR
If you want to send Kurt or I an email,
we can probably wangle you a discount.
Uh, or I think, uh, I think actually,
I think, yeah, we do have a discount.
Victoria: I will, uh, I'll send it out.
We've got a, discount it's I will, uh,
in fact, it's long, so I can't remember,
but we've got a 5 percent discount.
So, uh, use it.
Save some money and let people
know that you heard it from me.
Tony: Format is, we have
an executive conference.
That's a plenary with, CEO level speakers
and panelists, you know, on that first
day, you'll get, uh, you get the basics of
our economic outlook, our oil forecast.
We've got people like Dan Juergen, uh,
speaking, uh, uh, but it's then in days
two and three, there's a multitude of
breakout streams, some of them value
chain specific and all of Fin's ammonia
stream, uh, refining and feedstock
stream, but some of them also as a whole
day, dedicated to, circularity and.
The, and the developments there, so,
you know, whether it's mechanical
recycling, advanced recycling, looking
at the technologies involved, looking
at alternate feedstocks, you mentioned
green chemicals, there's lots of green
chemicals, but they are very niche in
relatively small volume and a very tiny
sliver of the supply pie right now.
But, you know, come and learn.
You know, the prospects for for all
those areas of the industry, especially
the chemical stream as well, actually.
Victoria: Yeah, I will say one of
the things I've always loved about
attending WPC, and I've been able to
attend on and off through the years
is, um, it is one spot to get a lot of.
in-depth information.
And frankly, I'm not sure if I should
admit this to you guys or not, but
as a, you know, as a small business
owner, or sometimes even in a big
business, we couldn't necessarily
afford to pay for the big programs that
you guys produce in terms of all the
analytics and the data and subscribing.
And so, uh, attending WPC is great value.
Because the amount of information
that is shared, that you can take and
directly apply to your business and
look like the smartest person in the
room, because you know, what's going on.
Tony: Awesome.
What better endorsement?
Thank you.
Victoria: Absolutely.
Tony: But it's great,
great networking as well.
You know, you come and you meet
your industry peers, very social,
uh, events in terms of receptions
and, and things like that as well.
But, but people from all over the
world, it is a, it is a world.
Victoria: So, so I'm going to wrap up the
formal part of this interview and then
we're going to move to questions, but I
want to ask, Kurt and Tony, you know,
if there was one thing that you would
advise a chemical leader, a strategist,
a business leader to be monitoring
in 2025 to be ready to take action
in their business, what would it be?
Tony: I think, I think for chemicals,
look, Dan, Dan turns are just brilliant.
Good for ruining, as you
said earlier on, right?
You know, it's it is the
opportunity to make your
organization that little bit leaner.
We all need to shed cost.
It doesn't matter what
the industry is, but.
Becoming lean is also about
becoming fit for future growth.
And, you know, this is a long downturn.
We had a long upturn in
the, you know, 2010 to 2020.
We had, you know, people were
talking about a super cycle.
We had a long period of profitability
that's soon forgotten, right?
We're struggling now and
it's a long downturn, but it
will come to an end, right?
And then the industry does need to invest.
To grow.
So it's about getting your organization
fit for that growth and you need to be
studying your investment options now.
To start up in the early 2030s, and
it doesn't matter who the president
of the United States is, right?
You're gonna build, a refinery,
an energy plant or whatever, to
last 40 years, maybe 50 years, it's
gonna see a few presidents, right?
So don't worry about who's in power.
Love
Victoria: it.
Thank you.
Current,
Kurt: keep that long view, right?
Uh, you know, I think, yeah, we
are oil demand will be plateau.
And I think, you know, there's, we could
all debate kind of win and how quickly.
So I think the whole feedstock, keeping
that feedstock you over the long
term, and I think the coal climate
sustainability will continue as well.
Different bases, different markets.
Right?
So don't get too balled up.
Don't, um.
Okay, too frozen right in, you know,
we're going into a period of high
uncertainty like we talked about,
but that doesn't mean, you shouldn't
be making business decisions and
keeping kind of that long view across,
political systems will will ship, right?
And we'll be here 5, 10 years
ago talking about a shift of
that pendulum back the other way.
Victoria: Awesome.
All right.
Well, Tony and Kurt,
this has been excellent.
Thank you.
I really appreciate your time today
and I appreciate everyone joining us.
Thanks for joining us
today on The Chemical Show.
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