WEBVTT NOTE This file was generated by Descript 00:00:01.170 --> 00:00:05.560 Welcome to The Chemical Show, the podcast where chemical means business. 00:00:05.930 --> 00:00:09.710 I'm your host, Victoria Meyer, bringing you stories and insights 00:00:09.710 --> 00:00:13.620 from leaders, driving innovation and growth across the chemical industry. 00:00:14.529 --> 00:00:18.830 Each week, we explore key trends, real world challenges, and the 00:00:18.830 --> 00:00:20.580 strategies that make an impact. 00:00:20.879 --> 00:00:21.959 Let's get started. 00:00:22.409 --> 00:00:26.559 Just a quick reminder that if you are listening to this as an audio podcast 00:00:26.599 --> 00:00:30.649 and you are interested in seeing the charts That were shared and that we're 00:00:30.649 --> 00:00:34.719 discussing during today's episode Head on over to our YouTube channel 00:00:34.739 --> 00:00:39.039 so it's YouTube and it's the chemical show podcast and you can listen to and 00:00:39.039 --> 00:00:44.359 watch today's episode there and See the charts that Kurt and Tony are sharing. 00:00:44.689 --> 00:00:45.129 Thanks 00:00:46.089 --> 00:00:47.759 Victoria: Okay, we're going to get things going. 00:00:47.769 --> 00:00:54.169 Thank you everyone for joining us today for the first Chemical Show live of 2025. 00:00:54.569 --> 00:00:59.369 I am super excited to have you guys here, and I'm very happy to have Tony Potter 00:00:59.369 --> 00:01:04.579 and Kurt Barrow from S& P Global, with us today, sharing their insights on 00:01:04.579 --> 00:01:06.899 the chemical market outlook for 2025. 00:01:07.229 --> 00:01:12.899 So, these guys both bring a wealth of experience in energy and chemicals and 00:01:12.909 --> 00:01:15.159 are here to share that with us today. 00:01:15.169 --> 00:01:17.469 So I'm going to stop sharing my screen. 00:01:17.479 --> 00:01:20.989 We're going to start conversing and, we'll make this happen. 00:01:21.029 --> 00:01:24.189 Kurt and Tony, thanks for joining me today and welcome to the chemical show. 00:01:24.317 --> 00:01:25.254 Kurt: having us. 00:01:26.014 --> 00:01:30.714 Victoria: So I like to start every episode, with just a little bit about you. 00:01:30.784 --> 00:01:34.894 Tell us how you got interested in energy and chemicals and then how did 00:01:34.894 --> 00:01:40.554 you get into this wonderful world of watching markets and analyzing what's 00:01:40.554 --> 00:01:42.474 happening and advising customers? 00:01:42.764 --> 00:01:43.734 Kurt, I'm going to start with you. 00:01:44.444 --> 00:01:47.984 Kurt: Sure, yeah, well, Victoria, I'd like to say there was some big grand 00:01:47.984 --> 00:01:51.694 plan and I had this big vision that I was going to be this oil analyst, right? 00:01:51.734 --> 00:01:55.384 The reality is when I came out of university with my engineering 00:01:55.384 --> 00:01:58.894 degree, uh, Exxon had the biggest number on the job offer. 00:01:58.894 --> 00:01:59.154 Right? 00:01:59.154 --> 00:02:01.884 So I came to Houston and started with Exxon. 00:02:01.894 --> 00:02:05.439 And then, You know, really enjoyed my time there was really interested in the 00:02:05.439 --> 00:02:10.279 business side went got an MBA and then went out to work for consulting and a 00:02:10.279 --> 00:02:14.779 small kind of boutique consulting firm in the refining down downstream space. 00:02:14.799 --> 00:02:20.079 Then that company got bought is as oftentimes happen by the, which 00:02:20.099 --> 00:02:22.349 kind of rolled up into to, uh. 00:02:22.349 --> 00:02:27.389 It's been it's been a great career, not not really super plan, but, uh, 00:02:27.789 --> 00:02:31.459 you know, enjoy my time kind of in industry on the technical side, did 00:02:31.459 --> 00:02:36.009 a lot of consulting and then now I run research right for for oil. 00:02:36.009 --> 00:02:37.729 And it's just such a dynamic. 00:02:38.114 --> 00:02:43.914 Interesting industry, you know, tied into the economies and geopolitics and there's 00:02:43.914 --> 00:02:47.724 just always so much to learn technology and obviously energy transition. 00:02:47.734 --> 00:02:51.894 And so it's just kept my interest and I've, uh, steady with it. 00:02:52.544 --> 00:02:52.864 Victoria: Awesome. 00:02:53.104 --> 00:02:53.214 Love it. 00:02:53.514 --> 00:02:54.434 Tony, how about you? 00:02:55.369 --> 00:02:56.529 Tony: Not dissimilar story. 00:02:57.399 --> 00:02:58.559 Um, I love this job. 00:02:58.559 --> 00:03:00.589 It's prepared to study. 00:03:00.609 --> 00:03:03.859 Um, I grew up with the chemical industry on my doorstep. 00:03:03.949 --> 00:03:08.589 My dad worked for ICI Wilton up in the northeast of England for 27 years. 00:03:08.589 --> 00:03:11.569 And in fact, they built ICI Wilton in my grandmother's back garden, 00:03:11.569 --> 00:03:14.082 literally after World War II. 00:03:14.082 --> 00:03:15.379 Is that when you guys made a 00:03:15.379 --> 00:03:18.189 Victoria: lot of money as land barons and stuff, Tony? 00:03:18.299 --> 00:03:21.449 Tony: No, no, She was, she didn't, she didn't own all that land, don't worry. 00:03:22.514 --> 00:03:24.584 I did a ChemEng degree. 00:03:24.584 --> 00:03:27.844 I started at Exxon as well at Foley refinery in the UK. 00:03:28.134 --> 00:03:29.584 I was nine years into my career. 00:03:29.584 --> 00:03:32.894 I was a typical Exxon engineer, being a plant supervisor and a 00:03:32.894 --> 00:03:34.524 project manager and things like that. 00:03:34.824 --> 00:03:38.504 When I went to the European head office in Brussels, for Exxon chemical, and 00:03:38.504 --> 00:03:41.774 it was there, I actually found out that the job I do now even exists. 00:03:41.774 --> 00:03:46.484 And I became, uh, on behalf of Exxon, the clients of consulting 00:03:46.484 --> 00:03:48.184 companies like the old. 00:03:48.794 --> 00:03:51.324 CMAI, where I eventually became a partner. 00:03:51.844 --> 00:03:54.944 And we sold CMAI to IHS in, in 2011. 00:03:54.944 --> 00:04:00.217 And then the, the journey with CMAI, IHS, IHS market, the logo keeps 00:04:00.217 --> 00:04:03.107 changing on my business card every two or three years, but I'm more 00:04:03.107 --> 00:04:04.487 or less still doing the same job. 00:04:04.527 --> 00:04:07.277 But I've had the privilege of doing it, not just in Europe, 00:04:07.287 --> 00:04:09.017 but I was four years in Dubai. 00:04:09.027 --> 00:04:10.507 I was five years in Singapore. 00:04:10.757 --> 00:04:14.917 I've had the privilege of sort of talking to C level clients all over the world. 00:04:14.927 --> 00:04:15.677 It's fantastic. 00:04:16.147 --> 00:04:16.577 Victoria: That's great. 00:04:16.587 --> 00:04:20.077 And I, I think, you talk about it being a global career. 00:04:20.417 --> 00:04:24.607 I think many of us in the industry, myself included, didn't realize how 00:04:24.607 --> 00:04:27.367 global my career would be before I joined. 00:04:28.157 --> 00:04:31.257 The industry and certainly have loved every bit of that. 00:04:31.760 --> 00:04:36.140 Kurt: Tony was in spent time in Dubai station there a while and in Singapore. 00:04:36.140 --> 00:04:37.720 I was actually in Singapore as well. 00:04:37.740 --> 00:04:40.790 So, yeah, very, very, very much. 00:04:40.790 --> 00:04:43.930 So very interconnected getting more connected all the time. 00:04:43.930 --> 00:04:44.440 Victoria: Absolutely. 00:04:44.650 --> 00:04:47.150 So let's talk about what's going on in the market today. 00:04:47.190 --> 00:04:49.920 How would you characterize 2024? 00:04:50.280 --> 00:04:54.420 And what are you seeing and expecting in 2025? 00:04:54.460 --> 00:04:57.830 And Kurt, let's start with you because I know the feedstocks is really 00:04:57.840 --> 00:04:59.220 the starting point of everything. 00:05:00.050 --> 00:05:01.880 Kurt: Yeah, no, no, absolutely. 00:05:02.130 --> 00:05:03.880 Maybe I'll share a slide or two here. 00:05:03.880 --> 00:05:04.110 Right. 00:05:04.110 --> 00:05:05.630 And help kind of talk through this. 00:05:05.640 --> 00:05:09.350 So, you know, fundamentally, the fundamentals right in the 00:05:09.610 --> 00:05:14.870 oil, in jail space, maybe to a lesser degree and natural gas is 00:05:15.150 --> 00:05:16.890 the rental over supply, right? 00:05:16.890 --> 00:05:19.550 Or or headed into more of an oversupply. 00:05:19.590 --> 00:05:19.850 Right? 00:05:19.900 --> 00:05:23.670 We're, uh, producing more oil than than we need. 00:05:23.700 --> 00:05:24.020 Right? 00:05:24.020 --> 00:05:28.980 So the global oil supply system, you know, Is, adding more to the market 00:05:28.980 --> 00:05:32.490 than, uh, the, the, the new, right? 00:05:32.490 --> 00:05:34.510 And there's, there's a number of reasons on demand. 00:05:34.510 --> 00:05:39.230 We could talk about China is not growing at kind of the rate we'd expected. 00:05:39.230 --> 00:05:43.560 Evs are a small part of the weak demand today. 00:05:43.830 --> 00:05:47.740 It actually has more to do with kind of vehicle fuel efficiencies. 00:05:48.190 --> 00:05:49.737 But, you know, in a general sense, right? 00:05:49.737 --> 00:05:51.007 We've got oil. 00:05:51.237 --> 00:05:53.957 Prices kind of moving, moving downward. 00:05:54.057 --> 00:05:57.547 And we can come back and talk about, you know, Trump and tariffs and some of the 00:05:57.547 --> 00:06:01.697 factors that are affecting the oil price, you know, kind of day to day week to week. 00:06:01.747 --> 00:06:06.727 But, but I think the key takeaway is, is that we are, in our view, at least 00:06:06.727 --> 00:06:10.807 in the base case headed on a, on a general generally downward track for 00:06:10.807 --> 00:06:14.927 Brent if you kind of shift over a little more into the feedstock side, 1 00:06:14.927 --> 00:06:18.717 of the big dynamics of the past few years is, you know, It's just the amount 00:06:18.717 --> 00:06:21.077 of NGOs that were coming out of the U. 00:06:21.077 --> 00:06:21.237 S. 00:06:21.237 --> 00:06:22.147 supply system. 00:06:22.477 --> 00:06:25.737 And that's, you know, part of that was coming as associated, in 00:06:25.737 --> 00:06:27.467 jails from the oil production. 00:06:27.467 --> 00:06:30.917 And some of it was coming from the, some of the wet gas plays and the 00:06:31.087 --> 00:06:34.407 growth, the natural gas and the, the LNG, uh, to the, to the, uh. 00:06:34.807 --> 00:06:37.287 You know, feed the LNG plants and so forth, right? 00:06:37.717 --> 00:06:40.807 We do think that there's a number of factors that will start to 00:06:40.807 --> 00:06:42.927 slow that, still growth, right? 00:06:42.927 --> 00:06:46.257 And still relatively impressive growth, you know, two or 300, 000 00:06:46.257 --> 00:06:49.637 barrels a day, but that is kind of one of the factors we see. 00:06:49.647 --> 00:06:52.417 And it's, it's part of the longer trend, right? 00:06:52.447 --> 00:06:56.967 We'll come back and talk a little bit about, but, you know, at a high level, 00:06:56.997 --> 00:07:02.017 because of some of the fuel economy standards in, cars and trucks around the 00:07:02.017 --> 00:07:06.687 world, because we are starting to see, some electrification of transport, in 00:07:06.687 --> 00:07:11.707 some markets, there's a number of reasons that we do expect the oil demand globally. 00:07:11.922 --> 00:07:16.672 Right, refined products in particular and transport fuels to start to 00:07:16.672 --> 00:07:20.402 plateau and peak, and that's going to have some real direct implications 00:07:20.412 --> 00:07:22.272 for, for feedstocks, right? 00:07:22.272 --> 00:07:26.092 It's going to mean that we have less, NGL growth, you know, of 00:07:26.102 --> 00:07:30.322 ethane, propane, to use as feedstocks when you come back to naphtha. 00:07:30.332 --> 00:07:35.097 Uh, and we'll need to essentially get more, Hydrocarb out of the crude 00:07:35.097 --> 00:07:39.437 system out of the refining system, to supply that, you know, to meet demand 00:07:39.437 --> 00:07:43.017 growth and chemicals that we, you know, Tony, Tony will talk about. 00:07:43.017 --> 00:07:45.047 So, that's that's kind of in a nutshell, right? 00:07:45.077 --> 00:07:47.667 Kind of the short and long term view, Victoria. 00:07:47.977 --> 00:07:52.037 Victoria: Yeah, so at one point we talked about a shortage, right, that we were 00:07:52.037 --> 00:07:55.687 running out of cheap feedstock, that the Middle East wasn't going to have 00:07:55.697 --> 00:07:57.497 feedstock anymore, and of course the U. 00:07:57.497 --> 00:07:57.747 S. 00:07:57.747 --> 00:08:02.067 With its really strong basis in natural gas, has been a very strong 00:08:02.097 --> 00:08:03.927 part of the, the feedstock chain. 00:08:04.817 --> 00:08:07.037 Do we still have those conversations? 00:08:07.037 --> 00:08:10.447 Are we running out of petrochemical feedstock? 00:08:11.237 --> 00:08:12.987 Kurt: Yeah, I'd say we're not running out. 00:08:13.497 --> 00:08:14.707 That's a good context, right? 00:08:14.707 --> 00:08:16.407 If you go far enough back, right? 00:08:16.407 --> 00:08:19.077 We kind of thought we were running out or had those concerns. 00:08:19.077 --> 00:08:24.377 And then, as you said, the supply kind of rose a guy to the Middle East. 00:08:24.377 --> 00:08:26.817 And then, and then the US, we found title, right? 00:08:26.817 --> 00:08:29.187 Shell gas and title oil. 00:08:29.457 --> 00:08:32.887 I would say we're not worried about availability of these thoughts. 00:08:32.887 --> 00:08:35.697 I think it's more about the costs and economics. 00:08:36.337 --> 00:08:39.927 That will ultimately come with that right because we again we won't 00:08:39.937 --> 00:08:43.107 have as much surplus in gls, right? 00:08:43.107 --> 00:08:46.397 So the ngl Markets are quite interesting. 00:08:46.397 --> 00:08:51.907 They're one of the few markets that that we view as Not so much demand pull, right? 00:08:51.907 --> 00:08:54.897 It's not the demand, like you have in gasoline, right? 00:08:54.897 --> 00:08:57.617 You think about gasoline demand or or ethylene, right? 00:08:57.627 --> 00:09:00.487 You think about, you know, the pull from the derivative plants, right? 00:09:00.797 --> 00:09:03.827 The jail business is much more of a supply push. 00:09:04.147 --> 00:09:04.877 Business, right? 00:09:05.057 --> 00:09:09.007 They're a, they're a byproduct of natural gas and crude oil production. 00:09:09.337 --> 00:09:11.417 You're generally not drilling for NGLs. 00:09:11.757 --> 00:09:16.067 Um, and then you kind of need to, to clear the market with those NGLs, right? 00:09:16.067 --> 00:09:18.977 And the, the clearing market is, petrochemicals, right? 00:09:18.977 --> 00:09:21.207 It's, it's the marginal market for, um, oil and gas. 00:09:21.297 --> 00:09:25.277 For NGLs and so it becomes really a price signal, right? 00:09:25.277 --> 00:09:29.997 At which point, you would switch that flex cracker or over long term, 00:09:30.027 --> 00:09:34.337 you know, change your investment profile to to those feedstocks, right? 00:09:34.387 --> 00:09:35.397 And so if you. 00:09:35.762 --> 00:09:39.102 If you take our view, right, that we're, we're not going to have as 00:09:39.102 --> 00:09:42.972 much in jails, then effectively, you just need to go back to the refining 00:09:42.972 --> 00:09:46.392 system and get more feedstocks now, but they may cost you a little more. 00:09:46.402 --> 00:09:46.682 Right? 00:09:46.682 --> 00:09:48.982 So the nap, the crack may be a little wider. 00:09:49.382 --> 00:09:53.262 Ultimately, we may need, you know, we think we will go into, 00:09:53.362 --> 00:09:57.132 deeper conversion, like different cruel, the chemical technologies, 00:09:57.432 --> 00:09:57.732 Victoria: yeah. 00:09:58.032 --> 00:10:02.322 So I know this week, I was reading that Lyondell Bissell is starting 00:10:02.692 --> 00:10:05.242 to shut down the Houston refinery. 00:10:05.292 --> 00:10:08.602 And of course, that's been something that's been coming for a long time. 00:10:09.005 --> 00:10:12.435 does you see this affecting the market availability? 00:10:12.794 --> 00:10:14.904 Kurt: Yeah, so, so, um, yeah, essentially, right. 00:10:14.904 --> 00:10:17.204 Broader demand trends, it's on the chart here, right? 00:10:17.454 --> 00:10:18.864 We will see rationalization. 00:10:18.864 --> 00:10:22.024 We have, we've, we've seen rationalization, for a long time, right? 00:10:22.024 --> 00:10:25.424 We used to have whatever the number was twice as many refiners in the U. 00:10:25.424 --> 00:10:25.624 S. 00:10:26.024 --> 00:10:29.714 Actually, in hindsight, the industry rationalized a little more than 00:10:29.724 --> 00:10:34.374 we maybe should have because when demand came roaring back and, oh, 00:10:34.374 --> 00:10:38.384 the Russian invasion of Of Ukraine and the high natural gas 00:10:38.384 --> 00:10:40.614 price kind of exacerbated that. 00:10:40.684 --> 00:10:40.944 Victoria: Got it. 00:10:41.004 --> 00:10:41.304 All right. 00:10:41.304 --> 00:10:44.004 And as you guys might have noticed, my internet has decided to be 00:10:44.004 --> 00:10:46.884 a little unstable, but we are going to push through with this. 00:10:47.114 --> 00:10:50.304 So Tony, let's talk about chemical markets. 00:10:50.474 --> 00:10:54.764 And when you see, you know, when we talk about this influence, 00:10:54.814 --> 00:10:59.104 the feedstock picture, how do we start taking this into chemicals? 00:10:59.104 --> 00:10:59.158 Okay. 00:10:59.309 --> 00:11:01.959 Tony: Yes, so I mean, just a message on feedstocks, you know, 00:11:02.139 --> 00:11:06.429 wherever the industry produces, advantage price, ether, it's 00:11:06.429 --> 00:11:07.719 going to get cracked eventually. 00:11:08.099 --> 00:11:11.299 The US isn't going to run out of ethane any, any time soon. 00:11:11.569 --> 00:11:16.299 The Saudis have a gas initiative and, you know, we were hearing numbers that 00:11:16.339 --> 00:11:19.829 there'll be sufficient incrementally then for, you know, another 6, 000, 000 00:11:19.829 --> 00:11:23.749 tons of ethylene and that's before they get on to, all of their crude oil to 00:11:23.749 --> 00:11:28.059 chemicals complexes that they they'd like to build at some point in the future. 00:11:28.632 --> 00:11:31.682 but generally, the industry is oversupplied. 00:11:32.602 --> 00:11:36.162 It's built its way into a problem in most value chains. 00:11:36.392 --> 00:11:40.472 What I show here is sort of incremental capacity in the. 00:11:40.837 --> 00:11:46.117 Bars for ethylene globally, the bars of the incremental capacity, 00:11:46.467 --> 00:11:49.497 the gray shaded area in the background is the incremental demand. 00:11:49.977 --> 00:11:53.977 And you can see that period starting in 2020, when the bar, the height of the 00:11:53.977 --> 00:11:55.577 bars is much higher than, than the demand. 00:11:55.677 --> 00:11:59.317 The height of the shaded area behind the color coding. 00:11:59.467 --> 00:12:01.507 China is is red. 00:12:01.587 --> 00:12:05.367 And, you know, you can see China is accounted for a good 50 00:12:05.367 --> 00:12:09.500 percent of incremental capacity in in the last few years. 00:12:09.910 --> 00:12:10.530 And so. 00:12:10.870 --> 00:12:14.320 Industry capacity utilization is quite poor. 00:12:14.350 --> 00:12:15.940 You go back 4 or 5 years. 00:12:15.940 --> 00:12:19.350 It was up at 90 percent and that's effectively full on 00:12:19.350 --> 00:12:20.610 an employee basis, right? 00:12:20.630 --> 00:12:24.610 Every year, the industry, you know, shuts 4 percent down for planned maintenance, 00:12:24.620 --> 00:12:29.050 turnarounds, loses another 4 percent to unplanned outages, when you're talking 00:12:29.050 --> 00:12:32.770 about 90 percent capacity utilization, the industry's full, you know, and you 00:12:32.770 --> 00:12:36.757 go back 4 Pre 2020 prices and margins were very good for the industry. 00:12:37.157 --> 00:12:41.327 Last year, industry capacity utilization bottomed out around 80%. 00:12:41.957 --> 00:12:43.397 That's the black line on this. 00:12:43.457 --> 00:12:47.547 And you can see it's a long, slow haul up to the sort of, mid to 00:12:47.547 --> 00:12:51.797 high 80s where, you know, the industry, the NAP, the cracking 00:12:51.797 --> 00:12:57.867 industry can, can leverage margins, generally, profitability is poor. 00:12:57.917 --> 00:13:00.567 The industry is talking about rationalization. 00:13:00.967 --> 00:13:05.367 That process has started mainly in Europe, but you know, we'll 00:13:05.367 --> 00:13:06.787 get some closures in Japan. 00:13:06.787 --> 00:13:11.687 We'll probably get some closures in Korea this cycle for the first time. 00:13:12.070 --> 00:13:14.550 The place that's actually very disciplined about closing all 00:13:14.590 --> 00:13:16.180 small capacity down is China. 00:13:16.595 --> 00:13:18.720 Often goes unnoticed, but, you know, they build 1. 00:13:18.720 --> 00:13:22.065 5, 2 million tons of new capacity and they quietly shut, you know, 00:13:22.065 --> 00:13:26.305 150, 200, 000 ton old cracker, which is exactly what they should do. 00:13:26.815 --> 00:13:30.375 But, you know, I've seen a few of these cycles now, and there's never 00:13:30.375 --> 00:13:35.415 enough rationalization to sort of jumpstart this, into a sort of 00:13:35.415 --> 00:13:38.705 profitable area of industry utilization. 00:13:39.100 --> 00:13:43.680 you know, I would say in the ideal world for the producers, they'd shut down 20 00:13:43.680 --> 00:13:47.730 million tons of capacity and that black line would take a step change upwards 00:13:48.150 --> 00:13:50.160 and all would be sweetness and light. 00:13:50.190 --> 00:13:51.440 And that's not going to happen. 00:13:51.440 --> 00:13:53.540 Everyone wants someone else to go first. 00:13:53.810 --> 00:13:58.270 We can envisage, you know, 5 or 6 million tons of rationalization this 00:13:58.270 --> 00:14:02.300 cycle and, you know, the industries into that, not all doom and gloom. 00:14:02.300 --> 00:14:03.330 So, you know, for your U. 00:14:03.330 --> 00:14:03.560 S. 00:14:03.560 --> 00:14:07.060 listeners, it's the nap, the cracking industry that's challenged. 00:14:07.070 --> 00:14:08.270 That's the high cost. 00:14:08.280 --> 00:14:13.480 And if we maybe go forward a couple of slides we publish this every week. 00:14:13.480 --> 00:14:18.210 So this is a sort of spot variable cost of production for ethylene for. 00:14:18.210 --> 00:14:20.060 From from various feedstocks. 00:14:20.130 --> 00:14:21.410 These are generic crackers. 00:14:21.410 --> 00:14:22.590 They're not any particular. 00:14:22.940 --> 00:14:26.820 So, you know, the lowest cost production right at the moment, 00:14:26.830 --> 00:14:28.950 the bottom left is, you know, U. 00:14:28.950 --> 00:14:29.050 S. 00:14:29.050 --> 00:14:30.130 ethane cracking. 00:14:30.500 --> 00:14:33.510 It's as cheap as Saudi ethane cracking right now. 00:14:33.865 --> 00:14:38.265 The generic NAPTHA crackers prevalent in Europe and Asia, the two orange 00:14:38.265 --> 00:14:39.645 bars on the right hand scale. 00:14:39.995 --> 00:14:45.165 You know, it's that right hand end of the chart that sets the general level 00:14:45.165 --> 00:14:46.925 of petrochemical and polymer pricing. 00:14:47.585 --> 00:14:50.925 So, you know, all of the things being equal, the old price moves up and down. 00:14:50.925 --> 00:14:51.665 So does NAPTHA. 00:14:51.855 --> 00:14:55.675 So does ethylene, polyethylene, benzene, styrene, you name it. 00:14:55.915 --> 00:14:57.355 But what you can see is, you know, U. 00:14:57.355 --> 00:14:57.545 S. 00:14:57.545 --> 00:14:59.205 Ethan, best producer has got a. 00:14:59.420 --> 00:15:04.000 Six, 700 a ton cost of production advantage relative to a typical, 00:15:04.300 --> 00:15:05.660 nap, the cracker right now. 00:15:05.790 --> 00:15:09.790 So, you know, if you've got advantage price feedstock, money is being 00:15:09.800 --> 00:15:11.580 made, in some parts of the world. 00:15:12.050 --> 00:15:16.210 And then, then there are other little niches that are doing quite well. 00:15:16.590 --> 00:15:20.220 When we talk about an 80 percent capacity utilization, actually 00:15:20.280 --> 00:15:23.740 the high cost end, the industry, the nap, the cracking industry. 00:15:24.230 --> 00:15:29.620 is disproportionately pulled back more, and that actually creates shortages of 00:15:29.650 --> 00:15:33.820 co products, and the obvious one at the moment is C4s, so there's a shortage 00:15:33.820 --> 00:15:38.760 of crude C4 molecules and you know butadiene margins are doing great as a. 00:15:39.015 --> 00:15:41.375 As a result of that, but those are niches. 00:15:41.702 --> 00:15:45.212 Victoria: Hey, Tony, when we look at this slide real quick is, the yellow 00:15:45.212 --> 00:15:49.252 orange bars of European nap then Asia nap that is that to indicate that 00:15:49.262 --> 00:15:50.772 that's where the price is being set. 00:15:50.792 --> 00:15:55.052 If we think about a traditional supply demand curves that are price setters. 00:15:55.275 --> 00:15:58.269 Tony: It's exactly, it's the requirement of the high cost producer 00:15:58.469 --> 00:16:02.089 to cover their cost of production more or less sets the price. 00:16:02.089 --> 00:16:05.569 If you go over to this one, so this is, you know, basket of base chemicals. 00:16:05.899 --> 00:16:09.029 And this is the industry nameplate capacity utilization 00:16:09.029 --> 00:16:10.549 and the top blue lines, ethylene. 00:16:10.599 --> 00:16:11.589 I talked about that. 00:16:11.589 --> 00:16:14.799 It went from 90 to down to 80. 00:16:15.169 --> 00:16:16.759 The purple lines, paraxylene. 00:16:17.124 --> 00:16:21.384 You know, that was also up at 90 percent a few years ago, and that bottomed out 00:16:21.384 --> 00:16:27.414 last year at around 70%, but actually Parazilin has been doing okay, right? 00:16:27.454 --> 00:16:32.104 And so industry capacity utilization of nameplate capacity 00:16:32.164 --> 00:16:33.734 utilization isn't the full story. 00:16:33.744 --> 00:16:36.504 You've got to get it where the effective utilization is, 00:16:36.504 --> 00:16:37.664 where the pinch points are. 00:16:38.134 --> 00:16:42.214 And in the case of aromatics, the gasoline industry has been supporting it. 00:16:42.224 --> 00:16:46.184 So, you know, high octane values and all the money has been made 00:16:46.184 --> 00:16:50.604 in making the toluene and the xylene for its octane value. 00:16:50.604 --> 00:16:53.754 If you had to buy mixed xylenes on the market, you know, there was 00:16:53.754 --> 00:16:57.037 no extraction margin to produce para xylene or ortho xylene. 00:16:57.037 --> 00:16:59.787 That's maintained some margin in the aromatics industry. 00:17:00.257 --> 00:17:05.137 Kurt's already mentioned gasoline balance is probably lengthening 00:17:05.137 --> 00:17:08.747 as a result of, you know, huge refineries like the Dangote refinery. 00:17:09.147 --> 00:17:11.847 As that premium and octane comes off, then. 00:17:12.342 --> 00:17:18.642 Paraziline will begin to experience the full impact of that, you know, 70, 75%. 00:17:19.292 --> 00:17:19.682 Victoria: Okay. 00:17:19.892 --> 00:17:23.002 And how does this play out when we go further down the value chain? 00:17:23.032 --> 00:17:25.742 Obviously, because these are kind of the big building blocks. 00:17:26.252 --> 00:17:29.782 Where do you see it taking into more differentiated products 00:17:29.782 --> 00:17:31.177 or more specialty products? 00:17:31.417 --> 00:17:34.437 Tony: We define a specialty as as something that's sold on the 00:17:34.437 --> 00:17:37.967 basis of its performance rather than its cost of production. 00:17:38.347 --> 00:17:40.967 So it can cover a multitude of things, but what's a specialty 00:17:40.967 --> 00:17:42.707 depends where you sit in the. 00:17:42.927 --> 00:17:46.307 In the value chain, I talked to some Middle East producers, and they talk 00:17:46.307 --> 00:17:48.847 about specialties and really, they're going to produce intermediates. 00:17:49.307 --> 00:17:53.317 That's a mixed bag, um, depending on the industry and the overbuild. 00:17:54.107 --> 00:17:59.757 But if you look at the, financial performances, you know, of the Clarions 00:17:59.757 --> 00:18:03.177 and, you know, the big specialty chemicals producers, they've suffered as well. 00:18:03.437 --> 00:18:05.127 But we expect that to start picking up. 00:18:05.512 --> 00:18:07.992 Victoria: How about the wonderful world of plastics, right? 00:18:08.002 --> 00:18:11.022 Cause obviously a big part of the ethylene value chain goes into 00:18:11.022 --> 00:18:13.082 polyethylene and then, you know. 00:18:13.427 --> 00:18:15.117 Polypropylene and all the other polys. 00:18:15.147 --> 00:18:18.917 Tony: Most of it, most of this ends up in plastic one way or another, ethylene 00:18:18.967 --> 00:18:25.257 into polyethylene, PVC, propylene, polypropylene, PET from parazylene, 00:18:25.257 --> 00:18:31.307 benzene into, you know, the styrenics, so most of it actually ends up in polymers, 00:18:31.447 --> 00:18:35.797 one way or another, and the polymer plants get built on the same cycle 00:18:36.157 --> 00:18:39.647 as the monomer plants, so, you know, you build a, you build an ethylene 00:18:39.657 --> 00:18:42.397 plant, you build the polyethylene and the polypropylene with it. 00:18:42.677 --> 00:18:48.737 So the curves look more or less the same and, you know, are equally as challenged. 00:18:48.907 --> 00:18:54.417 Yeah, it can be a bit misleading to talk about ethylene profitability, you know, on 00:18:54.417 --> 00:18:58.867 its own, because you've got to look at the integrated economics into the derivative, 00:18:58.887 --> 00:19:02.397 but I should say the polyethylene curve looks the same as the ethylene curve. 00:19:02.821 --> 00:19:07.981 Victoria: So global chemical markets are imbalanced, in a way that I've never seen 00:19:07.981 --> 00:19:09.801 and, and we've gone through a few cycles. 00:19:09.801 --> 00:19:11.811 You've already referenced how overbuilt it is. 00:19:11.841 --> 00:19:15.751 But, if we think about just the, the regional dynamics are 00:19:15.751 --> 00:19:17.231 shifting quite a bit, right? 00:19:17.241 --> 00:19:21.141 Suffolk's director general, Marco men sink recently warned that the 00:19:21.141 --> 00:19:25.121 chemical and the European chemical industry is at a breaking point. 00:19:25.121 --> 00:19:31.071 With over 11 million tons of capacity being Shut down over the past couple 00:19:31.071 --> 00:19:32.381 of years or at least announced. 00:19:32.661 --> 00:19:38.021 We're seeing significant overbuilds in china As well as pretty low 00:19:38.021 --> 00:19:44.091 demand growth and then uh, we've got North america seems fairly strong. 00:19:44.171 --> 00:19:49.871 But how do you see companies, both global companies and regional 00:19:49.931 --> 00:19:52.931 chemical companies navigating this. 00:19:53.101 --> 00:19:57.651 Because I'm certain this is a conversation you're having with leaders all the time. 00:19:57.882 --> 00:19:58.038 Tony: Yeah. 00:19:58.038 --> 00:20:02.108 I mean, if you look at let's take Europe as an example, I'm sat in Germany, where 00:20:02.108 --> 00:20:09.142 I live and You know, you Europe's got probably the oldest cracker stock in the 00:20:09.162 --> 00:20:12.282 world right plants are 1450 years old. 00:20:12.722 --> 00:20:14.612 Some of them are even slightly older than that. 00:20:15.022 --> 00:20:16.692 They're old and they're small. 00:20:17.972 --> 00:20:22.742 There are A dozen at least old small crackers that have got a 00:20:23.022 --> 00:20:25.942 capacity of 400, 000 tons or less. 00:20:26.462 --> 00:20:29.172 When a world scale cracker, you know, people are building 1. 00:20:29.172 --> 00:20:32.682 5, 2 million ton crackers these days. 00:20:33.192 --> 00:20:36.252 And the thing is, they dotted around the coast of Europe. 00:20:36.282 --> 00:20:40.062 They're not connected to anything other than their own derivative plants. 00:20:40.622 --> 00:20:42.932 And so if you want to take a cracker shutdown decision, you have to 00:20:42.982 --> 00:20:44.352 take a site shutdown decision. 00:20:44.702 --> 00:20:49.752 And over the cycle, they've tended to be cash positive, right? 00:20:49.772 --> 00:20:51.482 These things are fully depreciated. 00:20:51.652 --> 00:20:55.612 As long as they don't need a big capital injection, there's cash to be made. 00:20:55.958 --> 00:21:02.438 What's different in this cycle is that as Players are faced with the choice to 00:21:02.438 --> 00:21:05.958 inject capital to de carbonize, right? 00:21:05.978 --> 00:21:09.718 That's probably going to tip some of them into shutdown decisions. 00:21:09.718 --> 00:21:12.798 And it's, you know, it's probably right that all small capacity shuts 00:21:12.798 --> 00:21:16.958 down in favor of, you know, newer, bigger, more efficient capacity. 00:21:17.108 --> 00:21:18.688 That's the way markets work. 00:21:19.148 --> 00:21:20.928 But the exit costs are high in Europe. 00:21:20.928 --> 00:21:22.288 Site remediation costs. 00:21:22.288 --> 00:21:23.938 You've got the whole political factor. 00:21:24.298 --> 00:21:28.958 No EU politician worth their salt wants to shut a, um, a chemical 00:21:28.958 --> 00:21:30.398 complex down on their soil. 00:21:30.398 --> 00:21:34.228 You know, France, I'm thinking France, Spain, Italy, where some 00:21:34.228 --> 00:21:35.628 of these small crackers are. 00:21:36.028 --> 00:21:38.348 And the politics is always about employment. 00:21:38.893 --> 00:21:39.813 And that's the issue. 00:21:39.813 --> 00:21:41.273 And so it's a slow process. 00:21:41.723 --> 00:21:48.440 Ironically, as Europe talks about decarbonization and about, things like 00:21:48.440 --> 00:21:54.030 CBAM, Carbon Border Adjustment Mechanisms, that actually could create effectively 00:21:54.030 --> 00:21:58.730 a tariff around Europe that Prolongs the life of all small crackers, you 00:21:58.730 --> 00:22:00.830 know, a lot of unintended circumstances. 00:22:01.270 --> 00:22:04.540 So we'll see how that pans out, but Europe certainly started 00:22:04.550 --> 00:22:07.760 that, that journey of shutdowns. 00:22:07.920 --> 00:22:11.090 We talked about the players regionally, many of the players 00:22:11.090 --> 00:22:12.140 in Europe are global players. 00:22:12.625 --> 00:22:15.725 I mean, Exxon is shutting down a cracker in France. 00:22:15.975 --> 00:22:19.055 Sabic is shutting down a cracker in the Netherlands you know, so they have 00:22:19.065 --> 00:22:21.075 global supply strategies anywhere. 00:22:21.075 --> 00:22:24.705 I'm not expecting Exxon to sell less polymer in Europe as a result of 00:22:25.015 --> 00:22:26.705 shutting down the gravel machine cracker. 00:22:27.305 --> 00:22:29.155 Um, the issue is where it comes from. 00:22:29.875 --> 00:22:30.435 Victoria: Fair enough. 00:22:30.685 --> 00:22:35.915 We started talking and Kurt referenced a little bit, um, You know, politics and 00:22:35.925 --> 00:22:38.505 geopolitics and the influence, right? 00:22:38.505 --> 00:22:39.095 So the U. 00:22:39.095 --> 00:22:39.305 S. 00:22:39.305 --> 00:22:43.885 has just brought in a new president, Donald Trump and administration in the U. 00:22:43.885 --> 00:22:44.535 S., 00:22:44.965 --> 00:22:48.225 who's already making a lot of bold statements, about trade and tariffs. 00:22:48.295 --> 00:22:53.905 We've seen presidential changes in a lot of other countries, leadership 00:22:53.905 --> 00:22:59.045 changes, across the globe, both, uh, Latin America, Europe, right? 00:22:59.075 --> 00:23:02.145 I mean, France had two or three snap elections last year. 00:23:02.455 --> 00:23:04.805 We're starting to see it in Asia as well. 00:23:05.015 --> 00:23:08.555 So, you know, I know you guys are tracking and monitoring, these political shifts. 00:23:08.975 --> 00:23:13.285 What influence do you see this having on the chemical industry, either, 00:23:13.295 --> 00:23:14.765 you know, this year or next year? 00:23:14.765 --> 00:23:17.955 I know nothing is immediate, but how do you see this playing out? 00:23:18.705 --> 00:23:19.425 Kurt: Yeah, so you're right. 00:23:19.425 --> 00:23:24.955 Everybody's trying to monitor and see, you know, what exactly this means. 00:23:24.955 --> 00:23:25.145 Right? 00:23:25.145 --> 00:23:26.315 I think you laid it out. 00:23:26.315 --> 00:23:26.795 Well, right. 00:23:26.795 --> 00:23:30.115 I think the Trump administration's the one that everybody's looking at, but there's 00:23:30.115 --> 00:23:34.655 been a number of shifts of different administrations, around the globe. 00:23:34.665 --> 00:23:34.955 Right? 00:23:34.955 --> 00:23:38.035 And I think, you know, what does this mean for energy? 00:23:38.045 --> 00:23:39.725 What does it mean for policy? 00:23:39.965 --> 00:23:44.035 What's this mean for trade and tariffs when they weren't a very, you know, 00:23:44.295 --> 00:23:48.355 globally interconnected market or, you know, for oil and for chemicals. 00:23:48.355 --> 00:23:48.685 Right? 00:23:49.055 --> 00:23:51.025 And I think the other thing, right? 00:23:51.025 --> 00:23:51.725 That we're 00:23:51.955 --> 00:23:53.685 thinking about right is okay. 00:23:53.715 --> 00:23:57.435 You know, what are not just the actions, but what are the reactions, right? 00:23:57.475 --> 00:24:00.185 Because, Trump puts tariffs on Columbia, right? 00:24:00.185 --> 00:24:02.865 What's, what's Columbia do, how do they react? 00:24:02.865 --> 00:24:06.465 And then, you know, you've got some of the bigger players, that are kind 00:24:06.465 --> 00:24:08.845 of in the middle, like India, Brazil 00:24:08.845 --> 00:24:11.895 the, the one to keep good relations with the West and with, uh, with, uh, With 00:24:11.895 --> 00:24:19.075 China and with Russia, perhaps, and so, how does all that, uh, all that, I think, 00:24:19.245 --> 00:24:21.575 if you get down into kind of some of the. 00:24:21.575 --> 00:24:24.755 Energy policies that Trump is, you know, has announced on the campaign 00:24:24.755 --> 00:24:27.525 trail, signed some executive orders on. 00:24:27.795 --> 00:24:30.695 some of those are quite impactful, uh, in the media. 00:24:30.725 --> 00:24:33.965 Things like reduction of subsidies of electric vehicles, right? 00:24:33.965 --> 00:24:38.525 That's going to slow, the sale of electric vehicles in the us. 00:24:38.835 --> 00:24:42.165 Particularly for some of the, some of the big three automotive manufacturers, 00:24:42.165 --> 00:24:44.765 maybe a bit less for Tesla, and so forth. 00:24:44.765 --> 00:24:49.015 But things like oil production, the executive in the, in the White 00:24:49.015 --> 00:24:51.980 House doesn't really have much to do with oil production in the us. 00:24:52.510 --> 00:24:55.410 They will relax some of the regulations, some of the environmental 00:24:55.650 --> 00:24:58.740 rules, shelve the methane Rule. 00:24:58.980 --> 00:25:03.840 Um, but most of the drilling and most of the growth of oil production is on 00:25:03.840 --> 00:25:09.490 state and private lands, and most of the decisions that the executives are 00:25:09.490 --> 00:25:15.820 making on how much to drill is really being informed more by their shareholders 00:25:15.970 --> 00:25:18.750 desire and the price of oil, right? 00:25:18.750 --> 00:25:20.290 And so that in some ways. 00:25:20.840 --> 00:25:24.030 You know, the administration could actually lower the price of oil 00:25:24.030 --> 00:25:27.300 and actually reduce some of the drilling activity potentially. 00:25:27.910 --> 00:25:31.530 Tony: And I think for chemicals, again, it depends on the responses 00:25:31.540 --> 00:25:33.460 from, the other countries, right? 00:25:33.460 --> 00:25:34.660 So, I mean, the U. 00:25:34.660 --> 00:25:35.140 S. 00:25:35.140 --> 00:25:41.450 exports a lot of polymers to China, if he slaps tariffs on plastic, right, 00:25:42.010 --> 00:25:46.240 if China were to do the same, what tends to happen with tariffs is the 00:25:46.240 --> 00:25:48.800 world rebalances, it just reshapes. 00:25:48.925 --> 00:25:50.495 So a lot of plastic goes from the U. 00:25:50.495 --> 00:25:50.625 S. 00:25:50.625 --> 00:25:52.035 Gulf coast to China. 00:25:52.390 --> 00:25:53.660 And then it comes back to the U. 00:25:53.660 --> 00:25:53.870 S. 00:25:53.900 --> 00:25:56.080 as finished goods, semi finished goods, right? 00:25:56.140 --> 00:25:59.140 Maybe via Mexico, maybe via Vietnam, right? 00:25:59.680 --> 00:26:01.290 All sorts of games can be played. 00:26:01.590 --> 00:26:04.950 But, but let's say, let's pretend, you know, China slaps 00:26:04.950 --> 00:26:06.710 a 25 percent tariff on U. 00:26:06.710 --> 00:26:06.830 S. 00:26:06.830 --> 00:26:07.390 plastics. 00:26:07.680 --> 00:26:10.030 All that would happen is we'd probably see more U. 00:26:10.030 --> 00:26:10.210 S. 00:26:10.210 --> 00:26:11.800 exports to places like Europe. 00:26:12.047 --> 00:26:15.007 And then the slack into China would be taken up by the Middle East, 00:26:15.287 --> 00:26:17.907 so that the world would reshape. 00:26:18.397 --> 00:26:19.427 To tariffs, right? 00:26:19.857 --> 00:26:26.217 The bigger concern is, you know, what does inflation do to demand, and does that 00:26:26.417 --> 00:26:30.857 depress the industry tariffs are going to lead to inflation, which potentially 00:26:30.877 --> 00:26:32.647 could lead to low growth, right? 00:26:32.647 --> 00:26:33.402 I mean, tariffs. 00:26:33.412 --> 00:26:33.892 The U. 00:26:33.892 --> 00:26:34.032 S. 00:26:34.032 --> 00:26:35.572 could be shooting themselves in the foot here. 00:26:36.122 --> 00:26:36.982 And you know, the U. 00:26:36.982 --> 00:26:37.142 S. 00:26:37.162 --> 00:26:39.462 is a big component of, of global demand. 00:26:40.152 --> 00:26:41.732 That becomes an issue as well. 00:26:42.392 --> 00:26:43.052 Victoria: I will tell. 00:26:43.342 --> 00:26:46.692 So let's talk about sustainability and decarbonization. 00:26:46.802 --> 00:26:50.352 Any conversation in chemicals, we would be remiss without that. 00:26:50.642 --> 00:26:54.142 And that certainly also ties in politically because we're seeing a bit of 00:26:54.142 --> 00:27:01.687 a waning of Interest or support for some of the commitments that were placed, at 00:27:01.687 --> 00:27:05.917 the beginning of the decade or even prior to then, and I think in certain places, 00:27:06.077 --> 00:27:08.177 you know, we say, well, we're here, right? 00:27:08.177 --> 00:27:10.597 So there's significant investments in carbon capture. 00:27:10.617 --> 00:27:14.097 There's been a lot of ongoing efficiency and carbon management. 00:27:14.427 --> 00:27:18.387 There's a lot of green chemicals, circularity at play. 00:27:18.427 --> 00:27:20.607 And yet, in many ways, we are still. 00:27:21.107 --> 00:27:25.697 In our infancy, as it relates to sustainability and decarbonization, 00:27:25.697 --> 00:27:28.377 and we've got this whole big question of who's going to pay for it? 00:27:28.597 --> 00:27:32.937 Because sometimes it seems to only make sense when there's subsidies, right? 00:27:32.937 --> 00:27:36.177 If we think about electric vehicles, for instance, and the knock on effect 00:27:36.177 --> 00:27:41.367 it has, but we're, I feel like we're in a bit of a the pendulum is swinging. 00:27:41.407 --> 00:27:41.967 How's that? 00:27:41.987 --> 00:27:45.557 Um, how do you guys see this playing out, when you talk about 00:27:45.627 --> 00:27:49.107 sustainability, decarbonization across energy and chemicals? 00:27:49.947 --> 00:27:50.397 Tony: Yeah. 00:27:50.507 --> 00:27:54.917 Um, I think there's a lot of very worthy projects out there that 00:27:54.967 --> 00:27:57.237 together do not add up to enough. 00:27:57.757 --> 00:27:59.307 Countries will miss targets. 00:27:59.567 --> 00:28:03.817 I'm sort of more interested in whether individual company pledges meet targets. 00:28:03.817 --> 00:28:05.407 And I think we're seeing evidence that. 00:28:05.907 --> 00:28:09.687 2030 milestones are slipping to 2035. 00:28:10.317 --> 00:28:12.717 Of course, the big thing in the chemical industry is the 00:28:12.717 --> 00:28:14.347 circularity of polymers, right? 00:28:14.367 --> 00:28:18.767 If you could perfectly recycle, every pound of polymer, you wouldn't 00:28:18.767 --> 00:28:20.567 need to make much virgin polymer. 00:28:21.047 --> 00:28:26.317 Um, at the moment, we estimate, you know, probably about 8 percent of 00:28:26.447 --> 00:28:29.527 polyolefins are mechanically recycled. 00:28:30.077 --> 00:28:36.307 Um, Globally, even if you assume a doubling and almost tripling 00:28:36.307 --> 00:28:39.647 over the next years in those volumes is what we sort of expect. 00:28:39.877 --> 00:28:45.937 It's not enough to blunt the underlying growth demand for virgin pollen. 00:28:46.542 --> 00:28:46.742 Right. 00:28:46.742 --> 00:28:51.982 So it takes the edge off it a little bit, but virgin demand keeps growing. 00:28:51.982 --> 00:28:54.622 And that, that's an important message for the chemical industry. 00:28:54.622 --> 00:28:58.662 It says that the chemical industry still needs to invest to grow. 00:28:59.222 --> 00:29:04.092 So you've heard Kurt talk about, you know, the oil complex peaking, and then 00:29:04.092 --> 00:29:09.432 in 2050, there's 12 and a half million barrels a day of, less of, of oil demand. 00:29:09.442 --> 00:29:10.702 The chemical industry keeps growing. 00:29:11.187 --> 00:29:15.327 And even if you assume them absolute massive increase in, in mechanical 00:29:15.327 --> 00:29:19.797 recycling, the world's still gonna need to build another a hundred million tons of 00:29:19.797 --> 00:29:22.497 ethylene between 2030 and 2050 at least. 00:29:22.987 --> 00:29:25.597 And that's a very positive message for the industry in 00:29:25.597 --> 00:29:26.797 terms of, you know, the need to. 00:29:27.477 --> 00:29:29.207 And decarbonized. 00:29:29.847 --> 00:29:33.207 The other thing that's going on is the, the advanced or the chemical recycling 00:29:33.207 --> 00:29:37.267 where you turn plastic into, something that looks like chemical feedstock that 00:29:37.267 --> 00:29:40.957 doesn't get rid of the need to build the cracker to process that, right? 00:29:40.957 --> 00:29:43.147 So it, it, it impacts the feedstock balance. 00:29:43.737 --> 00:29:45.687 It's a very slow process. 00:29:45.687 --> 00:29:49.197 And there are some parts of the world where it's hardly developed at all. 00:29:49.317 --> 00:29:51.567 The only chemical, the only plastic. 00:29:52.022 --> 00:29:56.112 That with substantially higher recycle rates is PET bottle resin. 00:29:56.572 --> 00:29:58.862 And, and that's, that's fairly obvious. 00:29:59.012 --> 00:30:01.482 The average consumer can identify it. 00:30:01.512 --> 00:30:02.782 They can separate it. 00:30:02.905 --> 00:30:05.935 You know, So you can collect it very, very easily. 00:30:06.015 --> 00:30:11.020 And by the way, a lot of it gets down cycled into polyester fiber, right? 00:30:11.060 --> 00:30:14.260 Only about 12 percent of bottles end up as new bottles. 00:30:14.300 --> 00:30:17.980 But the total numbers, when you look at what gets reused as polyester, 00:30:17.990 --> 00:30:19.790 that's that's more like 60%. 00:30:20.060 --> 00:30:23.130 And then you look at how the chemicals made, right? 00:30:23.150 --> 00:30:25.930 The decarbonization of the plants themselves. 00:30:26.340 --> 00:30:28.230 That is a very slow process. 00:30:29.090 --> 00:30:30.170 There are tests. 00:30:30.465 --> 00:30:32.605 E furnaces, electric furnaces. 00:30:33.055 --> 00:30:36.425 But no one's built a new cracker yet with E furnaces, right? 00:30:36.445 --> 00:30:40.205 All these new crackers in China have conventional furnaces, when you add 00:30:40.205 --> 00:30:43.885 it all up, you can't conceive of the chemical industry getting to net zero 00:30:43.895 --> 00:30:47.765 without substantial carbon capture, you know, at the end of the pipe. 00:30:48.024 --> 00:30:49.174 Kurt: I think on the energy side, right? 00:30:49.174 --> 00:30:50.274 Very similar, right? 00:30:50.274 --> 00:30:53.284 I think, policy matters, but so do economics, right? 00:30:53.284 --> 00:30:56.674 And I think, uh, I think we're at that point where, companies, right? 00:30:56.674 --> 00:30:59.194 Or try to try and figure out where the economics are. 00:30:59.204 --> 00:31:02.154 I mean, there's been cost inflation in the supply chain, right? 00:31:02.154 --> 00:31:05.174 So some of this, uh, kit is going to cost more than maybe 00:31:05.174 --> 00:31:07.104 we thought a few years ago. 00:31:07.104 --> 00:31:08.554 And then, we go back to Trump, right? 00:31:08.554 --> 00:31:10.474 I mean the IRA, right? 00:31:10.474 --> 00:31:14.914 The Inflation Reduction Act was the 800 pound gorilla and where a lot of companies 00:31:14.914 --> 00:31:17.484 were putting a lot of attention, right? 00:31:17.484 --> 00:31:20.434 Because there were some really big tax credits there that 00:31:20.434 --> 00:31:22.204 looked quite, quite attractive. 00:31:22.324 --> 00:31:26.754 But now that's all been put on hold in know, our own view is that a good 00:31:26.754 --> 00:31:28.254 portion of that will continue on. 00:31:28.254 --> 00:31:32.184 Maybe it gets suggested and relabeled a bit by the new administration, but, 00:31:32.514 --> 00:31:34.464 but that uncertainty, right, is really. 00:31:34.764 --> 00:31:37.904 It's something that companies have to have to struggle with that. 00:31:37.924 --> 00:31:42.904 The economics aren't there, you know, what to what degree do you rely on policy? 00:31:43.214 --> 00:31:47.754 And how much do you want to put that risk out there? 00:31:47.964 --> 00:31:51.894 I just say 1 other quick thing on the at a 50, 000 foot level. 00:31:51.904 --> 00:31:55.814 If you kind of step back and look at the energy, we have not done a lot of 00:31:55.814 --> 00:31:57.904 decarbonization kind of Tony's point. 00:31:58.154 --> 00:31:59.984 We've done a lot of electrification. 00:32:00.319 --> 00:32:04.249 PV, solar and wind is economic, and we see a lot of growth in that. 00:32:04.834 --> 00:32:08.334 Um, you know, in the West, in China, a lot of other markets in the Middle 00:32:08.334 --> 00:32:13.594 East, as well, EVs also we're, you know, becoming somewhat successful, different 00:32:13.604 --> 00:32:19.494 markets, but the actual decarbonization of the molecules of carbon, uh, still, 00:32:19.774 --> 00:32:22.114 still in its, early, early stages, right? 00:32:22.114 --> 00:32:22.409 Tony: Yeah. 00:32:22.409 --> 00:32:24.154 And you asked about who pays. 00:32:24.264 --> 00:32:25.614 I mean, ultimately the consumer. 00:32:26.009 --> 00:32:26.299 Right. 00:32:26.459 --> 00:32:31.559 What's interesting is the pull from the brand owners, uh, for 00:32:31.559 --> 00:32:38.059 recycled plastics is, you know, is more than the availability of right 00:32:38.119 --> 00:32:40.409 quality recyclers at the moment. 00:32:40.439 --> 00:32:43.079 And that's why, you recycle pellets, you know, are trading 00:32:43.079 --> 00:32:45.349 at a premium to Virgin pellets. 00:32:45.349 --> 00:32:49.319 It's, it's got nothing to do with the cost of production of those, those recycled 00:32:49.319 --> 00:32:53.419 pellets, it's the Dan owners and the Nestle's, you know, they want to be able 00:32:53.419 --> 00:32:58.059 to print on their yogurt pot that that yogurt pot is 40 or 50 percent recycled, 00:32:58.449 --> 00:33:00.969 uh, material and will the consumer pay? 00:33:01.339 --> 00:33:03.529 Well, rich consumers in Europe. 00:33:03.779 --> 00:33:06.199 We'll pay an extra penny, to go green. 00:33:06.579 --> 00:33:10.379 Um, I think the evidence from the U S is even the green consumers. 00:33:10.379 --> 00:33:15.629 No, I still want it as, as, as cheap as the Virgin plastic yogurt plus. 00:33:15.689 --> 00:33:16.419 So, yeah, 00:33:16.449 --> 00:33:18.699 Victoria: I want it to be good, but not expensive. 00:33:18.759 --> 00:33:19.599 That's the message. 00:33:19.919 --> 00:33:20.389 Well, this is. 00:33:21.019 --> 00:33:24.409 This has been great, and I know we've covered a lot, and Tony and 00:33:24.409 --> 00:33:25.839 Kurt, I really appreciate that. 00:33:26.679 --> 00:33:29.859 Of course, we can only cover so much in our 40 minutes together, 00:33:29.859 --> 00:33:32.459 and then we're leaving some time for questions, which I want to do. 00:33:33.049 --> 00:33:35.999 And I know that you guys are going to be covering this in depth. 00:33:36.349 --> 00:33:39.769 One, you do it all the time with clients, but then World Petrochemical 00:33:39.769 --> 00:33:43.239 Conference is coming up, and I would imagine that we're going to see some 00:33:43.239 --> 00:33:45.632 of these things in greater detail. 00:33:45.792 --> 00:33:48.192 And, and more topics at WPC. 00:33:48.202 --> 00:33:50.602 So can one of you guys talk about that a little bit? 00:33:50.612 --> 00:33:53.302 What should we be expecting from WPC this year? 00:33:53.862 --> 00:33:55.202 Uh, and, and who should be, 00:33:55.872 --> 00:33:59.192 Tony: Anyone who is remotely connected with the chemical industry, right? 00:33:59.192 --> 00:34:03.232 So whether it's, product managers, analysts, financial analysts, 00:34:03.242 --> 00:34:07.622 producer, analysts, strategic planners, anyone involved in the 00:34:07.622 --> 00:34:11.092 buying and selling of, of chemicals, you want to know what the industry 00:34:11.092 --> 00:34:12.352 is going to look like going forth. 00:34:12.762 --> 00:34:13.552 Come and talk to us. 00:34:13.822 --> 00:34:15.622 It's the week of the 17th of March. 00:34:15.722 --> 00:34:17.292 It's the 40th anniversary. 00:34:17.302 --> 00:34:22.892 So we got some special guests who, you know, from the industry, scan the QR 00:34:23.696 --> 00:34:27.346 If you want to send Kurt or I an email, we can probably wangle you a discount. 00:34:27.776 --> 00:34:33.136 Uh, or I think, uh, I think actually, I think, yeah, we do have a discount. 00:34:33.136 --> 00:34:34.316 Victoria: I will, uh, I'll send it out. 00:34:34.316 --> 00:34:39.166 We've got a, discount it's I will, uh, in fact, it's long, so I can't remember, 00:34:39.166 --> 00:34:40.626 but we've got a 5 percent discount. 00:34:40.636 --> 00:34:41.781 So, uh, use it. 00:34:41.991 --> 00:34:44.351 Save some money and let people know that you heard it from me. 00:34:44.657 --> 00:34:47.227 Tony: Format is, we have an executive conference. 00:34:47.227 --> 00:34:52.897 That's a plenary with, CEO level speakers and panelists, you know, on that first 00:34:52.897 --> 00:34:57.797 day, you'll get, uh, you get the basics of our economic outlook, our oil forecast. 00:34:57.797 --> 00:35:02.432 We've got people like Dan Juergen, uh, speaking, uh, uh, but it's then in days 00:35:02.432 --> 00:35:06.242 two and three, there's a multitude of breakout streams, some of them value 00:35:06.242 --> 00:35:13.312 chain specific and all of Fin's ammonia stream, uh, refining and feedstock 00:35:13.332 --> 00:35:19.477 stream, but some of them also as a whole day, dedicated to, circularity and. 00:35:19.547 --> 00:35:23.147 The, and the developments there, so, you know, whether it's mechanical 00:35:23.147 --> 00:35:27.537 recycling, advanced recycling, looking at the technologies involved, looking 00:35:27.537 --> 00:35:30.437 at alternate feedstocks, you mentioned green chemicals, there's lots of green 00:35:30.437 --> 00:35:35.037 chemicals, but they are very niche in relatively small volume and a very tiny 00:35:35.037 --> 00:35:39.407 sliver of the supply pie right now. 00:35:39.417 --> 00:35:40.717 But, you know, come and learn. 00:35:41.407 --> 00:35:45.017 You know, the prospects for for all those areas of the industry, especially 00:35:45.017 --> 00:35:46.417 the chemical stream as well, actually. 00:35:46.847 --> 00:35:49.487 Victoria: Yeah, I will say one of the things I've always loved about 00:35:49.547 --> 00:35:55.037 attending WPC, and I've been able to attend on and off through the years 00:35:55.047 --> 00:35:59.327 is, um, it is one spot to get a lot of. 00:35:59.942 --> 00:36:01.402 in-depth information. 00:36:01.652 --> 00:36:06.862 And frankly, I'm not sure if I should admit this to you guys or not, but 00:36:06.862 --> 00:36:09.792 as a, you know, as a small business owner, or sometimes even in a big 00:36:09.792 --> 00:36:15.082 business, we couldn't necessarily afford to pay for the big programs that 00:36:15.082 --> 00:36:18.902 you guys produce in terms of all the analytics and the data and subscribing. 00:36:18.902 --> 00:36:23.922 And so, uh, attending WPC is great value. 00:36:23.992 --> 00:36:28.152 Because the amount of information that is shared, that you can take and 00:36:28.152 --> 00:36:31.032 directly apply to your business and look like the smartest person in the 00:36:31.032 --> 00:36:33.092 room, because you know, what's going on. 00:36:34.032 --> 00:36:34.262 Tony: Awesome. 00:36:34.292 --> 00:36:35.402 What better endorsement? 00:36:35.612 --> 00:36:35.732 Thank you. 00:36:36.492 --> 00:36:37.122 Victoria: Absolutely. 00:36:37.482 --> 00:36:40.102 Tony: But it's great, great networking as well. 00:36:40.102 --> 00:36:43.392 You know, you come and you meet your industry peers, very social, 00:36:43.642 --> 00:36:47.272 uh, events in terms of receptions and, and things like that as well. 00:36:47.322 --> 00:36:50.822 But, but people from all over the world, it is a, it is a world. 00:36:53.817 --> 00:36:56.517 Victoria: So, so I'm going to wrap up the formal part of this interview and then 00:36:56.517 --> 00:37:00.257 we're going to move to questions, but I want to ask, Kurt and Tony, you know, 00:37:00.267 --> 00:37:05.987 if there was one thing that you would advise a chemical leader, a strategist, 00:37:05.987 --> 00:37:12.027 a business leader to be monitoring in 2025 to be ready to take action 00:37:12.027 --> 00:37:13.347 in their business, what would it be? 00:37:14.077 --> 00:37:16.557 Tony: I think, I think for chemicals, look, Dan, Dan turns are just brilliant. 00:37:16.832 --> 00:37:20.332 Good for ruining, as you said earlier on, right? 00:37:20.562 --> 00:37:23.672 You know, it's it is the opportunity to make your 00:37:23.672 --> 00:37:25.692 organization that little bit leaner. 00:37:26.102 --> 00:37:27.882 We all need to shed cost. 00:37:27.882 --> 00:37:30.512 It doesn't matter what the industry is, but. 00:37:30.842 --> 00:37:34.382 Becoming lean is also about becoming fit for future growth. 00:37:34.892 --> 00:37:36.702 And, you know, this is a long downturn. 00:37:37.212 --> 00:37:41.002 We had a long upturn in the, you know, 2010 to 2020. 00:37:41.162 --> 00:37:43.742 We had, you know, people were talking about a super cycle. 00:37:43.782 --> 00:37:47.162 We had a long period of profitability that's soon forgotten, right? 00:37:47.472 --> 00:37:50.152 We're struggling now and it's a long downturn, but it 00:37:50.152 --> 00:37:51.652 will come to an end, right? 00:37:52.212 --> 00:37:55.152 And then the industry does need to invest. 00:37:55.697 --> 00:37:56.237 To grow. 00:37:56.707 --> 00:38:01.597 So it's about getting your organization fit for that growth and you need to be 00:38:01.607 --> 00:38:04.097 studying your investment options now. 00:38:04.717 --> 00:38:09.277 To start up in the early 2030s, and it doesn't matter who the president 00:38:09.277 --> 00:38:11.437 of the United States is, right? 00:38:11.437 --> 00:38:15.557 You're gonna build, a refinery, an energy plant or whatever, to 00:38:15.557 --> 00:38:19.607 last 40 years, maybe 50 years, it's gonna see a few presidents, right? 00:38:19.607 --> 00:38:20.927 So don't worry about who's in power. 00:38:20.927 --> 00:38:21.017 Love 00:38:22.272 --> 00:38:22.432 Victoria: it. 00:38:22.552 --> 00:38:23.097 Thank you. 00:38:23.817 --> 00:38:24.207 Current, 00:38:24.917 --> 00:38:26.267 Kurt: keep that long view, right? 00:38:26.387 --> 00:38:30.727 Uh, you know, I think, yeah, we are oil demand will be plateau. 00:38:30.777 --> 00:38:34.787 And I think, you know, there's, we could all debate kind of win and how quickly. 00:38:34.787 --> 00:38:40.087 So I think the whole feedstock, keeping that feedstock you over the long 00:38:40.087 --> 00:38:44.577 term, and I think the coal climate sustainability will continue as well. 00:38:44.577 --> 00:38:46.157 Different bases, different markets. 00:38:46.157 --> 00:38:46.437 Right? 00:38:46.437 --> 00:38:48.337 So don't get too balled up. 00:38:48.337 --> 00:38:49.247 Don't, um. 00:38:49.662 --> 00:38:53.532 Okay, too frozen right in, you know, we're going into a period of high 00:38:53.532 --> 00:38:57.502 uncertainty like we talked about, but that doesn't mean, you shouldn't 00:38:57.502 --> 00:39:02.002 be making business decisions and keeping kind of that long view across, 00:39:02.052 --> 00:39:04.622 political systems will will ship, right? 00:39:04.622 --> 00:39:08.472 And we'll be here 5, 10 years ago talking about a shift of 00:39:08.472 --> 00:39:10.152 that pendulum back the other way. 00:39:10.442 --> 00:39:10.802 Victoria: Awesome. 00:39:11.022 --> 00:39:11.322 All right. 00:39:11.322 --> 00:39:13.352 Well, Tony and Kurt, this has been excellent. 00:39:13.362 --> 00:39:14.222 Thank you. 00:39:14.702 --> 00:39:17.702 I really appreciate your time today and I appreciate everyone joining us. 00:39:18.922 --> 00:39:21.082 Thanks for joining us today on The Chemical Show. 00:39:21.422 --> 00:39:25.882 If you enjoyed this episode, be sure to subscribe, leave a review, 00:39:26.152 --> 00:39:29.712 and most importantly, share it with your friends and colleagues. 00:39:30.542 --> 00:39:33.432 For more insights, visit TheChemicalShow. 00:39:33.442 --> 00:39:35.962 com and connect with us on LinkedIn. 00:39:36.612 --> 00:39:40.562 You can find me at Victoria King Meyer on LinkedIn, and you can also 00:39:40.562 --> 00:39:42.512 find us at The Chemical Show Podcast. 00:39:42.922 --> 00:39:46.152 Join us next time for more conversations and strategies 00:39:46.412 --> 00:39:48.202 shaping the future of the industry. 00:39:48.572 --> 00:39:49.282 We'll see you soon.