WEBVTT NOTE This file was generated by Descript 00:00:01.740 --> 00:00:04.540 A key component of the modern world economy, the chemical 00:00:04.540 --> 00:00:07.990 industry delivers products and innovations to enhance everyday life. 00:00:08.605 --> 00:00:12.594 It is also an industry in transformation where chemical executives and 00:00:12.594 --> 00:00:16.215 workers are delivering growth and industry changing advancements while 00:00:16.215 --> 00:00:19.974 responding to pressures from investors, regulators, and public opinion. 00:00:20.515 --> 00:00:23.445 Discover how leading companies are approaching these challenges 00:00:23.455 --> 00:00:25.064 here on the chemical show. 00:00:25.524 --> 00:00:28.875 Join Victoria Meyer, president of Progressio Global and 00:00:28.885 --> 00:00:30.305 host of the chemical show. 00:00:30.575 --> 00:00:34.775 As she speaks with executives across the industry and learns how they are leading 00:00:34.775 --> 00:00:40.374 their companies to grow, transform, and push industry boundaries on all frontiers. 00:00:40.695 --> 00:00:42.944 Here's your host, Victoria Meyer. 00:00:46.036 --> 00:00:48.796 Victoria: Welcome back to The Chemical Show where chemicals means business. 00:00:49.346 --> 00:00:53.686 If you are new to the show, make sure you follow us on LinkedIn or subscribe 00:00:53.686 --> 00:00:55.316 on your favorite podcast player. 00:00:55.356 --> 00:00:59.346 You definitely do not want to miss a single episode or any of the 00:00:59.356 --> 00:01:01.826 interesting information we share online. 00:01:01.906 --> 00:01:04.082 So do that this week. 00:01:04.082 --> 00:01:08.831 I am speaking with John Richardson, who is a senior consultant at ICIS. 00:01:09.061 --> 00:01:12.981 John is a regular guest of the chemical show, and he's an expert in 00:01:12.981 --> 00:01:17.811 global chemical markets and has been closely following and commenting on 00:01:17.821 --> 00:01:22.111 how China is impacting the global economy and the chemical industry. 00:01:22.731 --> 00:01:26.201 John is always insightful, usually a little bit scathing, 00:01:26.231 --> 00:01:27.701 and definitely very interesting. 00:01:27.751 --> 00:01:29.231 I think you're going to enjoy this conversation. 00:01:30.101 --> 00:01:31.521 John, welcome to The Chemical Show. 00:01:32.361 --> 00:01:33.241 john: Thank you, Victoria. 00:01:33.741 --> 00:01:34.541 Glad to be here again. 00:01:35.181 --> 00:01:35.491 Victoria: Yeah. 00:01:35.521 --> 00:01:36.331 Glad to have you here. 00:01:36.671 --> 00:01:40.381 So we are sitting here firmly in second half of 2024. 00:01:40.451 --> 00:01:45.011 Um, everyone is wondering how is the market playing out for the rest of 00:01:45.011 --> 00:01:47.681 this year as we look ahead into 2025? 00:01:48.061 --> 00:01:51.181 What I've been seeing, and as I've been talking to people based on recent 00:01:51.321 --> 00:01:56.351 earnings reports, based on what people are saying, the answers tend to be mixed. 00:01:57.381 --> 00:01:58.061 What do you see? 00:01:59.871 --> 00:02:01.371 john: I think Victoria is sort of. 00:02:02.821 --> 00:02:05.821 There'll be sort of temporary ups and downs, obviously, 00:02:05.971 --> 00:02:07.381 which we can't predict, right? 00:02:07.591 --> 00:02:10.501 I mean, the things about logistics, which are supporting markets 00:02:10.501 --> 00:02:11.701 because of Red Sea, right? 00:02:11.791 --> 00:02:14.551 So it's made Europe a bit more protected, shall we say. 00:02:15.301 --> 00:02:20.121 I think fundamentally we've got this still in commodity chemicals now. 00:02:20.121 --> 00:02:24.621 It's got this massive imbalance between supply and demand, the, the scale of 00:02:24.621 --> 00:02:26.151 which we've never seen before, right? 00:02:26.151 --> 00:02:31.946 I mean, to give you an example I very rarely look at Styrene. 00:02:32.246 --> 00:02:36.321 I looked at Styrene for a client last week, and it's not how the data is 00:02:36.321 --> 00:02:38.071 consistent across all the petrochemicals. 00:02:38.121 --> 00:02:39.741 So here's the numbers I can remember. 00:02:40.501 --> 00:02:46.601 So we have operating rates averaging globally from 2024 to 2030 at 75%. 00:02:48.736 --> 00:02:52.576 Which, as you know, is very bad, um, historically the 00:02:52.576 --> 00:02:54.736 long term 88 percent globally. 00:02:54.816 --> 00:02:59.316 Now, what you can do, a very simple exercise, which is wrong, of course, 00:02:59.316 --> 00:03:02.796 because it's just guesswork, is you keep production the same, which is about 00:03:02.816 --> 00:03:07.066 demand, isn't it, globally, and you divide production by capacity, you take 00:03:07.076 --> 00:03:11.436 capacity down to get back to 88%, which is normal in the district conditions. 00:03:12.106 --> 00:03:15.816 To do that, Capacity over that period have to fall by 1. 00:03:15.816 --> 00:03:19.126 2 million tons of total across the seven years. 00:03:19.626 --> 00:03:20.046 That's a lot. 00:03:20.776 --> 00:03:23.756 Yeah, as opposed to our base case of capacity growing at 5. 00:03:23.826 --> 00:03:25.186 6 million tons. 00:03:25.766 --> 00:03:27.186 So it's a mirror image, right? 00:03:27.426 --> 00:03:28.156 Imagine that. 00:03:28.156 --> 00:03:29.286 So it has to shrink by 1. 00:03:29.466 --> 00:03:30.116 2 rather than grow by 5. 00:03:30.116 --> 00:03:31.626 6 to get back. 00:03:32.336 --> 00:03:36.156 And you start, you know, going into the data, why are we are where we are? 00:03:36.956 --> 00:03:43.006 Well, to keep saying, I need a wisdom of crowds thing, um, about what 00:03:43.006 --> 00:03:48.269 people thought would happen in China before 2021, the Evergrande moment, 00:03:48.269 --> 00:03:49.781 which we've talked about before. 00:03:49.781 --> 00:03:52.656 And across petrochemicals, they thought China would carry on 00:03:52.666 --> 00:03:54.536 growing 6 to 8 percent a year. 00:03:56.121 --> 00:03:58.391 Now it transpires, that's not going to happen because of 00:03:58.591 --> 00:04:02.011 demographics, the end of the property bubble, the geopolitical issues. 00:04:02.021 --> 00:04:07.221 So it's going to grow 1 percent say, 3%, some people say minus even. 00:04:07.861 --> 00:04:08.241 Wow. 00:04:08.571 --> 00:04:10.001 Chemicals, possibly, I don't know. 00:04:10.401 --> 00:04:13.051 But we know certainly 6 to 8 isn't going to happen. 00:04:13.541 --> 00:04:13.971 Victoria (2): Yeah. 00:04:14.321 --> 00:04:17.301 john: Global capacity was built upon the basis of that 6 to 8%. 00:04:17.951 --> 00:04:19.631 It was sanctioned before 2021. 00:04:20.141 --> 00:04:22.831 So across all the value chains, ethylene, propylene. 00:04:23.226 --> 00:04:25.166 Much bigger than style, you see the same problem. 00:04:26.026 --> 00:04:30.256 Um, so to rebalance that, the problem is, the core of this is 00:04:30.296 --> 00:04:31.696 that, again, you look at the data. 00:04:32.696 --> 00:04:38.526 It's quite remarkable that, you know, in 1992, China was 22 percent of the global 00:04:38.526 --> 00:04:44.266 population, 7 percent of polymers demand, if you look at the big 9 synthetic resin. 00:04:45.516 --> 00:04:49.286 End of this year, 18 percent and 40%. 00:04:49.356 --> 00:04:51.446 18 percent of the global population, 40 percent of demand. 00:04:51.496 --> 00:04:55.246 So you end up hugely dependent on China for that demand. 00:04:56.536 --> 00:04:58.776 So people built the capacity assuming China would grow 00:04:58.776 --> 00:05:00.176 more than it was going to do. 00:05:00.176 --> 00:05:03.946 But the fact that it isn't, and because it's, Such a driver of global demand. 00:05:05.186 --> 00:05:05.366 Yeah. 00:05:05.366 --> 00:05:09.776 Doesn't matter whether you're in Brazil or in Argentina or anywhere. 00:05:10.256 --> 00:05:12.326 The global price more than have been expected. 00:05:12.996 --> 00:05:15.876 Victoria: So John, one of the things, uh, how about this, the 00:05:15.876 --> 00:05:21.926 story that we used to tell ourselves was that part of this growth was 00:05:21.926 --> 00:05:23.456 because of the rising middle class. 00:05:23.516 --> 00:05:24.971 So even with a, yeah. 00:05:25.376 --> 00:05:29.556 declining population, as you've pointed out, that because the middle class is 00:05:29.556 --> 00:05:34.806 rising in these developing countries, China, India, elsewhere, that that 00:05:34.806 --> 00:05:40.076 was going to be the source of a lot of the, uh, let's just take plastics and 00:05:40.076 --> 00:05:41.776 petrochemical and basic chemical growth. 00:05:43.016 --> 00:05:45.236 Is that not true anymore? 00:05:45.236 --> 00:05:46.286 Is it still true? 00:05:46.686 --> 00:05:47.836 How does that factor in? 00:05:48.826 --> 00:05:51.766 john: I think it's the simplification, right? 00:05:52.046 --> 00:05:53.226 Not generalization. 00:05:53.226 --> 00:05:56.786 I think if you look at the China story, there was something remarkable going on. 00:05:57.451 --> 00:05:57.891 Victoria: Yeah. 00:05:58.151 --> 00:06:01.671 john: And again, we've discussed this before, I know, Victoria, but I mean, 00:06:01.671 --> 00:06:05.161 just to remind the people, I mean, there were three economic phases, if you 00:06:05.161 --> 00:06:09.231 like, which delivered tremendous growth in China, particularly, which meant 00:06:09.511 --> 00:06:13.541 it's per capita consumption, you know, divorced from the rest of the developing 00:06:13.541 --> 00:06:15.431 world and grew much more quickly. 00:06:16.151 --> 00:06:19.871 There was economic liberalization in 1992, they joined the World Trade Organization 00:06:19.871 --> 00:06:24.041 in 2001 and sort of tariffs and quotas and restricted exports to the West came up. 00:06:24.041 --> 00:06:24.161 Yeah. 00:06:24.161 --> 00:06:24.176 Yeah. 00:06:24.836 --> 00:06:27.856 So they can maximize the advantage of a youthful population then. 00:06:28.396 --> 00:06:31.936 And there's this massive economic stimulus in 2009. 00:06:32.596 --> 00:06:35.786 We know the population of course now is, it's a demographic 00:06:35.786 --> 00:06:36.816 crisis the world has never seen. 00:06:36.816 --> 00:06:39.146 The scale of this is incredible. 00:06:40.126 --> 00:06:41.746 And you've got the end of the debt bubble. 00:06:42.706 --> 00:06:44.456 You know, a lot of money going to real estate. 00:06:44.506 --> 00:06:49.036 So yes, China's got richer, but it's grown too much. 00:06:49.696 --> 00:06:52.866 Now you look at the developing world outside China, which is much more 00:06:52.866 --> 00:06:59.031 populous, It's grown, grown very well over the next 30 years, but you 00:06:59.031 --> 00:07:04.501 know, it's 68 percent of the global population, 32 percent of polymers demand. 00:07:06.361 --> 00:07:09.781 So you say, right, okay, China's grown too much. 00:07:10.401 --> 00:07:12.241 We got the demand growth wrong. 00:07:12.921 --> 00:07:14.241 It's moderating. 00:07:14.801 --> 00:07:15.261 Victoria (2): Yeah. 00:07:15.441 --> 00:07:18.311 john: Um, is it going to go in minus territory? 00:07:18.311 --> 00:07:18.771 We don't know. 00:07:18.771 --> 00:07:20.291 It may be, maybe that's the case. 00:07:20.781 --> 00:07:26.741 at the same time as well, we have the capacity, both in China, the Middle 00:07:26.741 --> 00:07:28.691 East, less so the United States. 00:07:28.721 --> 00:07:30.421 That was previous waves of capacity, wasn't it? 00:07:31.291 --> 00:07:32.771 The new wave is not that big. 00:07:33.111 --> 00:07:35.191 But most of the capacity additions are in China. 00:07:35.651 --> 00:07:37.931 So it's had a capacity quicker than people had expected. 00:07:38.901 --> 00:07:42.101 So the middle class thing is, is true. 00:07:42.131 --> 00:07:45.841 People get richer, they buy modern day goods for the first time, blah de blah. 00:07:46.726 --> 00:07:48.776 But in China, there was something else going on. 00:07:48.786 --> 00:07:55.246 It was these three stages of history, if you like, which kind of were exceptional. 00:07:55.386 --> 00:08:00.766 Um, forward, we have that repeat in the rest of the developing world. 00:08:01.786 --> 00:08:06.166 Can anybody, I mean, a lot of his export focus growth, of course, in case of China. 00:08:09.126 --> 00:08:10.316 Victoria: Do you see that happening? 00:08:10.356 --> 00:08:14.816 Do you see other parts of the developing world, whether it be India 00:08:14.826 --> 00:08:20.416 or elsewhere, being as structured to create these different programs? 00:08:21.211 --> 00:08:24.421 Um, to drive some of that. 00:08:24.561 --> 00:08:25.481 john: Yeah, it's a good question. 00:08:25.481 --> 00:08:26.541 I mean, India is fascinating. 00:08:26.541 --> 00:08:30.151 I mean, we think India's polymers demand is one tenth of that of China, despite 00:08:30.151 --> 00:08:31.421 it being a more populous country. 00:08:31.421 --> 00:08:31.711 Right. 00:08:31.991 --> 00:08:32.431 Yeah. 00:08:32.961 --> 00:08:38.581 Um, but I think China still has massive supply chain advantages in manufacturing. 00:08:40.501 --> 00:08:44.351 Um, Which will mean they'll still hold that position. 00:08:44.401 --> 00:08:47.351 Well, the geopolitics were separate thing, right? 00:08:47.621 --> 00:08:48.671 The sort of trade tension. 00:08:48.681 --> 00:08:52.011 Victoria: Well, and, and the China demand John is for export. 00:08:52.051 --> 00:08:54.201 It's not for domestic consumption, right? 00:08:54.201 --> 00:08:56.961 Because at least to the U S India is. 00:08:58.181 --> 00:09:01.551 When you think about finished goods, and that's where I think a lot of the, 00:09:01.561 --> 00:09:06.391 the China consumption goes, when you think about finished goods, I don't 00:09:06.711 --> 00:09:11.011 see a lot of finished goods coming from China or semi or rather from India. 00:09:11.211 --> 00:09:14.361 I don't see a lot of some finished goods or semi finished goods 00:09:15.461 --> 00:09:17.501 coming from India into the US. 00:09:18.751 --> 00:09:20.731 john: Well, it's about India. 00:09:20.791 --> 00:09:23.551 I mean, the education system is problematic. 00:09:24.551 --> 00:09:29.521 Um, still have issues around infrastructure, but it has improved 00:09:29.581 --> 00:09:36.771 power supply, investment simplification, shall we say, makes it difficult. 00:09:37.371 --> 00:09:43.361 Um, and there's a space given the child dominates the manufacturing value chains. 00:09:43.361 --> 00:09:46.811 I mean, there's lots of manufacturing has moved to places like India, Bangladesh, 00:09:46.811 --> 00:09:48.111 Pakistan for wage cost reasons. 00:09:48.361 --> 00:09:48.581 But 00:09:48.901 --> 00:09:49.401 Victoria: yeah, 00:09:50.141 --> 00:09:54.331 john: you know, I think, and also the question is, There's a demand in the West 00:09:54.521 --> 00:09:59.511 for another China because we've got aging populations across most of the G20, right? 00:09:59.661 --> 00:10:04.341 So, you know, will the West, we had that amazing period, didn't we, from I guess, 00:10:04.761 --> 00:10:08.231 late 90s through to 2008, 9, 10, 12. 00:10:08.291 --> 00:10:11.398 Well, later than that, when the West was buying an awful lot of 00:10:11.398 --> 00:10:13.681 stuff because the baby boomers were at their peak of their earnings. 00:10:13.911 --> 00:10:15.521 Well, no, we're all retiring now, aren't we? 00:10:16.871 --> 00:10:18.951 So, and also sustainability as well. 00:10:18.981 --> 00:10:22.111 Victoria: And needing less stuff and wanting a more sustainable world 00:10:22.111 --> 00:10:24.241 and circularity and all of that. 00:10:24.251 --> 00:10:24.691 Yeah. 00:10:24.711 --> 00:10:28.021 john: We've all got young kids have got different attitudes towards buying things. 00:10:28.201 --> 00:10:30.131 I mean, they want experiences rather than things, you know? 00:10:30.661 --> 00:10:35.391 So, and then on top of that, you look at Africa with its 55 odd countries. 00:10:37.091 --> 00:10:40.271 It's a lump of demand, which is a lot smaller than China, but you've got all 00:10:40.271 --> 00:10:44.941 the issues around climate change, I hate to say it, but corruption and conflict, 00:10:46.121 --> 00:10:46.531 Victoria: you know, 00:10:46.971 --> 00:10:49.921 john: and all the different countries and customs regulations, et cetera. 00:10:49.941 --> 00:10:54.401 How could Africa so middle class is a very, very simple way of looking. 00:10:54.411 --> 00:10:56.411 I'm not saying there won't be great opportunities, right? 00:10:56.451 --> 00:10:56.761 Victoria: Yeah, 00:10:57.741 --> 00:10:59.401 john: but I think basically we've got to get used to the 00:10:59.401 --> 00:11:00.621 idea that China was a one off. 00:11:01.021 --> 00:11:02.721 It was very easy for the chemical industry. 00:11:02.721 --> 00:11:08.181 The growth was You know, and 00:11:08.181 --> 00:11:11.021 Victoria: it's, and it's a point out, it's a single country, 00:11:12.301 --> 00:11:14.531 a very under a single regime. 00:11:14.981 --> 00:11:19.701 So you understood what you're working with, as opposed to your point of 50 00:11:19.751 --> 00:11:25.521 countries and regimes in Africa, uh, other parts of the world, John, what 00:11:25.521 --> 00:11:30.781 about, um, what's the effect of the rat what's going on in the rest of the world? 00:11:30.801 --> 00:11:34.571 So I feel like, uh, aside from. 00:11:35.316 --> 00:11:39.326 The announcements that seem to be occurring on a weekly basis about, uh, 00:11:39.376 --> 00:11:44.506 chemical businesses shutting down and assets shutting down in Europe, uh, not 00:11:44.526 --> 00:11:50.356 hearing a lot directly about the Russia Ukraine war and the knock on effects of 00:11:50.356 --> 00:11:51.936 what's going on in the chemical markets. 00:11:52.536 --> 00:11:57.506 I'm not hearing a lot currently about, uh, global supply chains and 00:11:57.506 --> 00:11:59.716 some of the challenges we're seeing coming out of the Middle East. 00:12:01.586 --> 00:12:04.866 Are they just secondary effects at this point, or is it. 00:12:05.641 --> 00:12:06.661 How are they driving things? 00:12:07.451 --> 00:12:10.451 john: Well, as in the Red Sea, we mentioned at the beginning, um, 00:12:10.571 --> 00:12:15.171 I was talking to a Middle East producer a few weeks ago and they 00:12:15.171 --> 00:12:19.521 can sell polymers to Europe, but the converters set the price entirely. 00:12:19.521 --> 00:12:24.021 You know, you've got to go through the Cape of Good Hope, haven't you? 00:12:24.121 --> 00:12:29.541 Um, it's longer, it's more expensive and you don't know where it's going to arrive. 00:12:30.461 --> 00:12:31.211 So I think. 00:12:32.306 --> 00:12:36.636 So theory going the rounds, people will disagree with this, that it's giving 00:12:36.646 --> 00:12:40.626 Europe a bit more protection, if you like, as long as that goes on, um, 00:12:40.636 --> 00:12:43.906 whether that's true or not, other people would disagree given that the recent 00:12:43.986 --> 00:12:46.856 data on Eurozone growth is horrendous. 00:12:46.896 --> 00:12:48.756 The PMI the other day was really bad. 00:12:49.196 --> 00:12:49.666 Victoria (2): Yeah. 00:12:50.306 --> 00:12:53.696 john: So, but it's certainly making it difficult to 00:12:54.486 --> 00:12:56.166 effectively or profitably export. 00:12:56.786 --> 00:13:01.756 You know, uh, to the West from the Middle East, certainly, uh, South Korea is 00:13:01.806 --> 00:13:07.186 similarly struggling to get polymers into, uh, into Europe and they, they're relevant 00:13:07.206 --> 00:13:08.396 because they can do all the grades. 00:13:10.076 --> 00:13:10.446 Victoria (2): Gotcha. 00:13:11.326 --> 00:13:14.266 john: Uh, Middle East can do a lot of the grades, whereas China can't do the grades. 00:13:14.326 --> 00:13:17.566 So it's not really an issue for a lot of the sort of converters have 00:13:17.566 --> 00:13:18.816 got to live with ground owners. 00:13:18.986 --> 00:13:21.486 Um, but I mean, the broader issue. 00:13:22.106 --> 00:13:22.506 So to 00:13:22.506 --> 00:13:27.286 Victoria: a certain degree, it's protecting the European plastics industry. 00:13:27.286 --> 00:13:27.346 Yeah. 00:13:29.446 --> 00:13:30.526 john: Anecdotally, look at the data. 00:13:30.526 --> 00:13:35.386 I mean, I'm not entirely sure that that, but anecdotally, that's what we're here. 00:13:35.686 --> 00:13:39.086 I hear, um, I think, um, but the broader challenges are still there. 00:13:40.056 --> 00:13:44.586 Energy costs are still double what they were before you, um, you've 00:13:44.586 --> 00:13:45.916 got the Antwerp Declaration. 00:13:45.916 --> 00:13:47.991 I think again, we talked about that last time, but. 00:13:48.331 --> 00:13:52.981 You know, set a framework, which some people would say a bit late for trying 00:13:52.981 --> 00:13:54.431 the things that need to be done like it. 00:13:55.061 --> 00:13:57.861 I mean, I think with, with the European chemical industry, I think 00:13:57.861 --> 00:14:01.361 we get on to say sustainability now is, is the future sustainability. 00:14:01.371 --> 00:14:02.871 Is that how they brand themselves? 00:14:02.921 --> 00:14:05.271 Not just brand themselves, how they reinvent themselves? 00:14:05.301 --> 00:14:05.661 Sorry. 00:14:07.281 --> 00:14:11.091 And for that you need the EU to create a unified waste, plastic waste 00:14:11.091 --> 00:14:14.011 market, which we don't have at the moment, a unified electricity market. 00:14:14.011 --> 00:14:17.761 It takes 15 years to get a permit to connect renewable electricity 00:14:17.761 --> 00:14:20.271 or to build renewable electricity, you know, all these things. 00:14:21.301 --> 00:14:24.301 And we don't have chemical recycling classified as recycling. 00:14:25.216 --> 00:14:25.656 Victoria: That's right. 00:14:25.676 --> 00:14:28.876 Well, and in fact, that's, that's maybe one of the biggest challenges when I talk 00:14:28.876 --> 00:14:34.566 to people across the industry, us, Europe, uh, I don't engage nearly as much as in, 00:14:34.586 --> 00:14:42.046 in Asia as you do, but this whole aspect of, um, we want different products, right? 00:14:42.046 --> 00:14:45.326 We want to quote unquote, sustainable products, sustainable, green 00:14:45.446 --> 00:14:47.976 electricity, green chemistry, et cetera. 00:14:48.196 --> 00:14:53.661 And yet people are, companies are struggling to get technologies 00:14:53.661 --> 00:14:57.651 and products approved to be able to use and accelerate. 00:14:58.061 --> 00:15:02.091 Um, they're struggling to have the backend infrastructure. 00:15:02.091 --> 00:15:07.111 If you believe that circularity is one of the answers, well, then the entire value 00:15:07.111 --> 00:15:11.321 chain needs to be circular, not just one component of it, because this whole, if 00:15:11.321 --> 00:15:13.311 you build it, they will come is not true. 00:15:13.601 --> 00:15:18.631 There's no, there's an insufficient amount of feedstock available to support. 00:15:19.051 --> 00:15:23.016 Even, you know, we were talking before we started talking about, uh, recycled PET. 00:15:23.816 --> 00:15:28.826 There's an insufficient amount of recycled PET available today to 00:15:28.906 --> 00:15:30.756 support the recycled PET needs. 00:15:31.716 --> 00:15:38.986 Um, and so all the pieces have to be working in sync and they're not. 00:15:40.196 --> 00:15:40.796 john: Interesting. 00:15:40.796 --> 00:15:41.206 Yeah. 00:15:41.276 --> 00:15:42.476 A constant problem with feedstock. 00:15:42.786 --> 00:15:43.196 Yeah. 00:15:43.316 --> 00:15:45.576 We were saying before about Naphtha, weren't we? 00:15:45.576 --> 00:15:45.976 And SAF. 00:15:46.886 --> 00:15:47.816 Great ideas. 00:15:48.196 --> 00:15:48.286 Yeah. 00:15:48.946 --> 00:15:50.536 But how do you make it scalable? 00:15:50.911 --> 00:15:52.051 How would you get enough cooking oil? 00:15:52.711 --> 00:15:53.421 That's right. 00:15:54.821 --> 00:15:58.761 Um, is that really going to be more than just a tiny drop in feedstock? 00:15:58.761 --> 00:16:00.101 Or is it going to change the game? 00:16:00.331 --> 00:16:00.841 You know, 00:16:01.111 --> 00:16:04.721 Victoria: um, And then the question is, how does it change the game? 00:16:04.721 --> 00:16:06.221 And when does it change the game? 00:16:06.231 --> 00:16:06.981 john: When does it change? 00:16:06.981 --> 00:16:09.941 I mean, the thing is, if you think about the concept though, you know, 00:16:09.941 --> 00:16:11.581 you've got the CBAM possibly by 2030. 00:16:12.861 --> 00:16:13.091 Yep. 00:16:13.111 --> 00:16:17.021 So you suddenly have, um, you know, ability to price carbon 00:16:17.101 --> 00:16:18.461 overseas coming into Europe. 00:16:18.746 --> 00:16:23.146 If you can get to that lower carbon position and, and circularity is a 00:16:23.146 --> 00:16:26.416 separate thing I know, but you get to those two positions, then you have a 00:16:26.426 --> 00:16:28.386 more competitive industry in theory. 00:16:28.926 --> 00:16:30.866 But what's the scale of that industry? 00:16:31.446 --> 00:16:31.866 Yeah. 00:16:32.386 --> 00:16:35.466 Is it, you know, is it a scale? 00:16:36.176 --> 00:16:38.966 Is it a smaller niche industry, chemical industry? 00:16:38.986 --> 00:16:41.846 So what happens to the crackers in Europe is the question. 00:16:41.876 --> 00:16:43.906 I was talking to my colleague Nigel Davies about this yesterday. 00:16:43.956 --> 00:16:43.976 Yeah. 00:16:45.226 --> 00:16:47.626 You know, do they import the base chemicals, 00:16:50.236 --> 00:16:53.646 or do you keep a few smaller crackers running and import 00:16:53.696 --> 00:16:54.846 some of the base chemicals? 00:16:54.936 --> 00:16:58.046 Because if you're a giant chemical company in Europe, you still need 00:16:58.056 --> 00:17:00.476 your own ethylene and propylene probably, don't you, right? 00:17:00.526 --> 00:17:01.386 Right, right. 00:17:01.826 --> 00:17:05.671 Victoria: Well, and then, and then my question to you, John, has, Europe learned 00:17:05.671 --> 00:17:14.631 its lesson in terms of, uh, relying on imports to be a critical feedstock, right? 00:17:14.721 --> 00:17:18.621 So one of the challenges that they're facing today, obviously, is because 00:17:18.621 --> 00:17:21.491 they were completely reliant on Russia. 00:17:21.841 --> 00:17:25.371 For natural gas, because again, it's the, well, we don't want to produce 00:17:25.371 --> 00:17:32.011 it here, so we're going to, but if we import it, then it's more sustainable, 00:17:32.021 --> 00:17:37.341 more cost effective, et cetera, that works until something doesn't, and 00:17:40.361 --> 00:17:41.831 things are going to go awry. 00:17:42.431 --> 00:17:46.281 john: Do we have confidence in the EU getting that geopolitical risk factor? 00:17:48.291 --> 00:17:53.461 Um, and that, that, I mean, 27 jurisdictions and, you know, directives, 00:17:53.631 --> 00:17:59.551 not regulations and, you know, I mean, I've got some friends who would 00:17:59.601 --> 00:18:05.161 disagree, um, but, um, it's just the ability to, to regulate effectively 00:18:05.161 --> 00:18:06.681 across the block that I worry about. 00:18:07.541 --> 00:18:08.411 Yeah, right. 00:18:08.411 --> 00:18:08.601 I mean, 00:18:09.691 --> 00:18:14.221 Victoria: and then it assumes that it's, it assumes that all the countries 00:18:14.351 --> 00:18:20.701 and all the leaders in all the regions across the world comply and stay the 00:18:20.701 --> 00:18:27.256 same and don't ever want to change the Their position in the world, 00:18:29.616 --> 00:18:33.476 and history says that that's not the case. 00:18:34.056 --> 00:18:37.456 john: And we've got to say it costs a year alone is 27, isn't it? 00:18:37.616 --> 00:18:39.266 Um, I mean, it's interesting. 00:18:39.266 --> 00:18:42.656 We have a discussion with, uh, under the client the week about green hydrogen. 00:18:45.086 --> 00:18:49.106 China is pouring a massive amount of investment into new energy, new 00:18:49.106 --> 00:18:50.616 industries, you know, green industry. 00:18:50.616 --> 00:18:53.296 So you've got VVs, obviously, all on those solar panels, don't we, 00:18:53.296 --> 00:18:54.646 and all the tensions around that. 00:18:54.646 --> 00:18:56.436 But apparently green hydrogen, because it's got lots of 00:18:56.616 --> 00:19:00.476 renewable electricity, which is basically free over supply, right? 00:19:01.176 --> 00:19:03.976 But as this contact was saying to me, what's traceability on 00:19:03.976 --> 00:19:04.926 that green energy coming in? 00:19:04.936 --> 00:19:08.796 Is it really based on coal or renewable electricity for electrolysis? 00:19:08.856 --> 00:19:09.681 Victoria: Yeah, who knows? 00:19:10.791 --> 00:19:15.761 john: Um, and also why can become dependent on green, uh, on, on ammonia 00:19:16.521 --> 00:19:20.521 imported from China when you just broke your dependence on Russian gas? 00:19:21.901 --> 00:19:22.981 Victoria: That's my point. 00:19:24.371 --> 00:19:25.071 That's my point. 00:19:25.131 --> 00:19:29.951 I mean, just should, should Europe become beholden on that? 00:19:32.591 --> 00:19:33.881 And how do they make sure they're not? 00:19:34.566 --> 00:19:38.666 john: Yeah, so I think the sustainability is a factor to reinvent, but is it a 00:19:38.666 --> 00:19:43.276 smaller, more niche industry and what's the geopolitical aspect to it as well? 00:19:43.896 --> 00:19:44.276 Victoria (2): Yeah. 00:19:44.516 --> 00:19:48.416 john: But I don't have a clear view of how Europe gets from where we are today 00:19:48.416 --> 00:19:50.346 to a competitive position at the moment. 00:19:51.066 --> 00:19:51.786 Victoria: I don't either. 00:19:51.956 --> 00:19:52.326 All right. 00:19:52.536 --> 00:19:57.566 So John, I'm going to take you through, um, you published with your, your, 00:19:57.706 --> 00:20:04.056 uh, styrene commentary and assessment, um, 10 interconnected forces shaping 00:20:04.066 --> 00:20:08.096 the new global chemical landscape. 00:20:08.426 --> 00:20:08.706 john: Hmm. 00:20:09.356 --> 00:20:14.691 Victoria: Um, So, so a couple of them, and we've already talked about it, so maybe 00:20:14.691 --> 00:20:18.671 I'm going to get you to chime in on some of them, one of which was, you know, most 00:20:18.671 --> 00:20:23.851 of the G20 countries, which account for 70 percent of global polyethylene demand. 00:20:28.496 --> 00:20:34.246 Immigration is, of course, the answer, um, but it's not easy to do in the West. 00:20:34.486 --> 00:20:37.596 I mean, you know what, John, it's not easy to do in the East 00:20:37.696 --> 00:20:38.946 either from what I've told. 00:20:38.966 --> 00:20:41.396 So it's just not easy to do globally. 00:20:41.436 --> 00:20:41.996 Am I right? 00:20:42.696 --> 00:20:42.966 john: That's true. 00:20:42.966 --> 00:20:48.456 I mean, obviously the poster boy for demographics is Japan and 00:20:48.676 --> 00:20:53.116 immigration to Japan is difficult and it will be the same in South Korea, 00:20:53.116 --> 00:20:56.296 I think as well, cultural issue. 00:20:56.836 --> 00:20:59.366 Victoria: So what's interesting is, so I watched, did you watch the Olympics, John? 00:20:59.366 --> 00:21:01.636 So the Olympics happened, what, a month or so ago? 00:21:01.706 --> 00:21:03.176 Did you, did you watch this? 00:21:03.796 --> 00:21:04.336 john: Not much. 00:21:04.646 --> 00:21:04.816 Victoria: Okay. 00:21:06.196 --> 00:21:09.906 I, I, well, and it was not a great, Well, it was an okay time zone for you. 00:21:09.916 --> 00:21:10.326 Who knows? 00:21:10.436 --> 00:21:17.116 Anyway, I watched a lot of it in, um, I actually find observing 00:21:17.156 --> 00:21:20.876 the composition of the different teams to be very interesting. 00:21:21.016 --> 00:21:24.286 And so, you know, sitting here in the U S and a lot of people 00:21:24.296 --> 00:21:25.906 say we're not very diverse. 00:21:26.586 --> 00:21:30.456 Um, And let's be honest, nothing is perfect, right? 00:21:30.456 --> 00:21:34.146 This is not, uh, I believe that nothing is perfect and there's a lot 00:21:34.146 --> 00:21:36.636 of policies and other things that need to potentially get straightened out. 00:21:36.936 --> 00:21:40.346 But when you look at the composition of the U S Olympic 00:21:40.376 --> 00:21:49.756 team, virtually every race, color, nationality was represented, right? 00:21:50.366 --> 00:21:52.776 Same is true of much of the European teams, right? 00:21:52.836 --> 00:21:56.946 So when we talk about immigration, it's immigration at the moment. 00:21:57.806 --> 00:22:03.456 And yet US and Western Europe are actually quite diverse. 00:22:04.736 --> 00:22:08.456 If you take the Olympic team as a snapshot of that. 00:22:09.746 --> 00:22:14.426 Now the same is not necessarily true of other regions. 00:22:14.896 --> 00:22:16.866 So it's really the developing regions. 00:22:16.866 --> 00:22:20.136 If you just, again, just take the Olympic team compositions as a, 00:22:20.366 --> 00:22:27.216 as a very simple snapshot of this, uh, still huge opportunities for. 00:22:30.286 --> 00:22:30.926 Victoria (2): Immigration. 00:22:32.996 --> 00:22:34.436 john: Yeah, I think that's right. 00:22:34.486 --> 00:22:37.146 I mean, I think bring me your huddle muscles, a sort of 00:22:37.216 --> 00:22:38.576 thing, you know, the US, I mean, 00:22:40.716 --> 00:22:44.516 despite the politics, which let's not talk about that, um, the US is a 00:22:44.646 --> 00:22:47.836 very diverse country and it's built on immigration as is Australia. 00:22:48.536 --> 00:22:48.976 Victoria (2): Yeah. 00:22:49.406 --> 00:22:54.626 john: And we have politics there again, which we create issues, but, um, but it's, 00:22:54.626 --> 00:22:59.471 it's the constant issue of politics, that, that there is a supply, another supply 00:22:59.471 --> 00:23:04.151 of babies in other countries there, but it's ability to constantly move them 00:23:04.151 --> 00:23:05.681 to the developed, developed countries. 00:23:05.681 --> 00:23:09.821 I think, and as you say, some, some countries are much less diverse, 00:23:12.061 --> 00:23:14.851 Victoria: um, or perhaps it's, and they're much more populous. 00:23:14.851 --> 00:23:17.401 So, I mean, there's, there's a lot of reasons behind it. 00:23:17.401 --> 00:23:21.961 So I think, um, I think, but I do think immigration globally is one of these 00:23:21.961 --> 00:23:23.971 things that's just difficult to execute. 00:23:23.971 --> 00:23:24.301 Right. 00:23:24.691 --> 00:23:30.836 Um, the next force that you guys recognize is, um, 00:23:33.056 --> 00:23:36.596 uh, basically not enough people of working age is that the next point? 00:23:36.606 --> 00:23:36.946 Right? 00:23:37.016 --> 00:23:39.246 So people are just trying to get into this. 00:23:39.246 --> 00:23:42.006 So this is all the first 3 are all about people in population. 00:23:42.386 --> 00:23:46.126 Um, climate change is the force 1, right? 00:23:46.196 --> 00:23:49.316 So climate change will be more successfully mitigated. 00:23:50.316 --> 00:23:57.726 In the rich developed world, um, but the risk is that the developing 00:23:57.726 --> 00:24:02.076 world, uh, does not get the financing needed to support that. 00:24:02.136 --> 00:24:04.016 Is that, is that really true? 00:24:04.016 --> 00:24:04.376 John? 00:24:05.246 --> 00:24:07.466 I mean, you, you reference other than China. 00:24:07.536 --> 00:24:08.676 So you're saying except China. 00:24:08.886 --> 00:24:12.391 So China's got a ton of investment, but the rest of it, you see. 00:24:13.671 --> 00:24:14.191 john: I hope not. 00:24:15.341 --> 00:24:18.761 Yeah, I hope it is available, but there's a risk it isn't right. 00:24:19.561 --> 00:24:24.531 Um, and it's obviously when you think about equatorial regions of when we were 00:24:24.531 --> 00:24:27.121 heavily affected sub Saharan Africa. 00:24:27.711 --> 00:24:31.571 Yeah, you know, and there was the conduct got the conflict issues as well. 00:24:32.046 --> 00:24:38.236 Um, you know, the governance issues, um, I mean, ironically, places like Canada will 00:24:38.236 --> 00:24:39.956 have more growing seasons, won't they? 00:24:41.456 --> 00:24:42.476 Victoria: Yeah, theoretically. 00:24:43.666 --> 00:24:48.276 john: Ironically, you know, there's a mountain of methane you'd be released 00:24:48.276 --> 00:24:52.106 from, tundra, permafrost, nevermind, that's quite worrying, isn't it? 00:24:52.836 --> 00:24:57.571 But anyway, um, uh, I do worry, right? 00:24:57.701 --> 00:25:00.051 I mean, I don't think it's, I don't think it's evident. 00:25:00.051 --> 00:25:02.151 I don't think we can avoid it from happening. 00:25:03.291 --> 00:25:05.941 Victoria: Well, and I think the flip side of this, John, and this is 00:25:05.941 --> 00:25:09.941 part of the debate and the dialogue that I've, I've seen and heard is 00:25:10.781 --> 00:25:15.691 when you look at, for instance, Uh, greenhouse gas emissions or relative 00:25:15.711 --> 00:25:18.131 greenhouse gas emissions again, U. 00:25:18.131 --> 00:25:18.251 S. 00:25:18.551 --> 00:25:24.281 Western world, Western Europe have significantly decreased versus where 00:25:24.281 --> 00:25:29.171 it was 10 or 20 years ago, and that the bulk of the emissions are now coming 00:25:29.171 --> 00:25:32.811 from China, Asia, India, elsewhere. 00:25:32.811 --> 00:25:38.661 Um, and so there's this counterpoint that says, how much further do we have to go to 00:25:38.691 --> 00:25:41.861 support pollution and the rest of the world? 00:25:45.051 --> 00:25:45.151 john: Do you hear that? 00:25:45.151 --> 00:25:45.691 Do 00:25:45.691 --> 00:25:46.811 Victoria (2): you hear that and see that? 00:25:47.501 --> 00:25:49.021 john: I get that, but I suppose the issue is 00:25:51.096 --> 00:25:56.796 I mean, you almost want emissions, and it's how you mitigate and 00:25:57.376 --> 00:26:00.336 capture them or control them or reduce them, minimize them. 00:26:00.416 --> 00:26:03.636 You want, almost want plastic waste, but you want to collect it 00:26:03.676 --> 00:26:06.196 and recycle it wherever possible. 00:26:06.256 --> 00:26:09.806 So what I'm saying is that the very nature of economic growth means that 00:26:09.876 --> 00:26:11.526 emissions and plastic waste go up. 00:26:13.401 --> 00:26:16.491 Because you want people to escape from poverty in Africa. 00:26:16.581 --> 00:26:19.551 You want me to be wrong about climate change. 00:26:19.551 --> 00:26:21.801 You want me to be wrong about governance, and that the 55 00:26:22.181 --> 00:26:23.141 countries can work together. 00:26:23.141 --> 00:26:24.791 You want that to be wrong. 00:26:25.431 --> 00:26:29.271 You want people to be buying modern day food wrapped in plastics 00:26:29.281 --> 00:26:31.491 for the first time, so they don't die of bloody dysentery. 00:26:33.131 --> 00:26:36.111 them to get modern day medical supply chains, they have their first 00:26:36.601 --> 00:26:39.841 smartphone to do business, they want to have decent roads and education and 00:26:39.841 --> 00:26:44.901 healthcare, etc, etc, etc, which is all emissions and all plastic waste. 00:26:45.931 --> 00:26:49.161 Victoria: Emissions, plastics, chemicals, petroleum, 00:26:49.731 --> 00:26:53.311 john: you know, microplastics, etc, etc, whatever. 00:26:54.426 --> 00:26:56.786 Forever chemicals, you know, all this stuff. 00:26:56.786 --> 00:26:59.976 So how do we deal with that in a sustainable way? 00:26:59.976 --> 00:27:02.746 So that's why we need to transfer technologies and know how, and you 00:27:02.746 --> 00:27:05.806 cannot expect the developing world not to increase its emissions. 00:27:05.886 --> 00:27:06.546 That's silly. 00:27:07.316 --> 00:27:10.416 We've reached the point now where we're rich, we're comfortable. 00:27:10.846 --> 00:27:13.886 We can afford to worry about these things where, you know, in the developing world, 00:27:13.886 --> 00:27:15.146 it's about feeding your family, isn't it? 00:27:15.166 --> 00:27:16.496 Giving your kids an opportunity. 00:27:17.506 --> 00:27:17.746 Yeah. 00:27:17.796 --> 00:27:18.996 So I think you. 00:27:19.316 --> 00:27:21.986 I mean, there's certain things around coal, obviously, where you can think, 00:27:21.986 --> 00:27:27.566 right, okay, China is a big emitter of DOT because it's coal fired power gen. 00:27:27.696 --> 00:27:28.876 How do you deal with that? 00:27:29.386 --> 00:27:30.296 Um, Yeah. 00:27:30.296 --> 00:27:34.656 It's not a case of just saying, stop using coal, because where's the alternative 00:27:34.746 --> 00:27:35.736 energy going to come from, you know? 00:27:36.291 --> 00:27:38.991 Victoria: Well, I mean, you could be, you could be burning down trees 00:27:38.991 --> 00:27:42.821 and that's actually a worse emissions and worse for the environment. 00:27:42.821 --> 00:27:43.061 Right? 00:27:43.111 --> 00:27:45.411 So I think I've, I've seen some of those same logic, right? 00:27:45.411 --> 00:27:49.251 If you move from a oil burning stove to a gas burning stove, it's 00:27:49.251 --> 00:27:51.001 actually a significant improvement. 00:27:51.331 --> 00:27:55.291 It's still fossil fuels, but it's a cleaner fossil fuel. 00:27:55.341 --> 00:27:59.611 So I think it's all, it's that relativity that we have to take into consideration. 00:28:00.216 --> 00:28:00.826 john: Exactly. 00:28:01.056 --> 00:28:02.736 Step changes towards the goal. 00:28:02.736 --> 00:28:06.916 So I think, um, the West has to lead, I guess. 00:28:07.646 --> 00:28:08.036 Victoria: Yeah. 00:28:08.276 --> 00:28:08.646 Okay. 00:28:08.716 --> 00:28:12.206 So then my next one on this, on your list, John, is China is the 00:28:12.206 --> 00:28:16.766 immediate center of the crisis for the global chemical industry. 00:28:16.776 --> 00:28:22.066 And we started out talking about just how oversupplied the market is. 00:28:23.006 --> 00:28:27.706 And yet how much investment China appears to still be making. 00:28:27.736 --> 00:28:28.406 Is that true? 00:28:28.656 --> 00:28:31.596 Are they still, do you still see them actively investing like 00:28:31.596 --> 00:28:32.846 they were a couple of years ago? 00:28:34.746 --> 00:28:35.426 john: Good question. 00:28:35.436 --> 00:28:36.706 It's more complicated. 00:28:36.706 --> 00:28:41.566 I think between 2014 and 2024, so let's make it 10 years. 00:28:41.756 --> 00:28:44.616 It seemed very straightforward that China said, we want self sufficiency. 00:28:44.756 --> 00:28:45.386 We're going for it. 00:28:45.386 --> 00:28:45.636 Right. 00:28:45.636 --> 00:28:52.146 But, um, You know, anecdotally again, it's getting the data out of 00:28:52.146 --> 00:28:53.416 China is always a challenge, right? 00:28:54.246 --> 00:28:54.976 Reliable data. 00:28:55.476 --> 00:28:58.186 People have been around the construction yards for all the equipment for 00:28:58.186 --> 00:28:59.676 chemical plants, and they're quiet. 00:29:00.346 --> 00:29:02.929 And China makes its own equipment now. 00:29:02.929 --> 00:29:05.116 It doesn't need to be imported anymore. 00:29:05.496 --> 00:29:08.366 And what seems to have happened, and there are arguments about whether 00:29:08.366 --> 00:29:10.866 this is a temporary thing to do with the end of the five year plan. 00:29:11.606 --> 00:29:13.706 You know, the current five year plan is ending. 00:29:14.256 --> 00:29:18.716 People tend not to do things until towards the end of the five year plan, but each of 00:29:18.716 --> 00:29:20.726 the provinces has a carbon budget, right? 00:29:21.676 --> 00:29:26.526 Obviously the, the, the developed provinces are producing more carbon. 00:29:27.146 --> 00:29:29.796 So in order to make space for a new chemicals plant, you've got 00:29:29.796 --> 00:29:31.456 to close other facilities down. 00:29:32.736 --> 00:29:39.076 And, um, because the EVs are growing so rapidly in China, They're capping 00:29:39.076 --> 00:29:40.696 the refinery capacity from 2027. 00:29:42.576 --> 00:29:45.586 So the two issues there, is there space for new chemical 00:29:45.906 --> 00:29:47.546 capacity within carbon budgets? 00:29:48.576 --> 00:29:52.066 Is this just a five year plan thing, or is it something more fundamental? 00:29:52.406 --> 00:29:55.436 And will we have the feedstocks to keep growing chemicals 00:29:55.436 --> 00:29:56.796 capacity at the same rate? 00:29:57.736 --> 00:29:59.166 As he has been going forward, 00:29:59.606 --> 00:30:00.596 Victoria: or is it refineries? 00:30:01.146 --> 00:30:01.476 john: Yeah. 00:30:01.476 --> 00:30:04.996 Or is it a case of turn those refineries more into chemical centers? 00:30:05.076 --> 00:30:07.316 Because if you, you don't have the demand for the gasoline and of 00:30:07.316 --> 00:30:10.466 course you can use the molecules to make more feedstock, can't you? 00:30:10.466 --> 00:30:14.146 Not, not crude ultrachemicals now, cause that's more grassroots, but 00:30:14.146 --> 00:30:18.601 just, you know, existing technology or well established technology, shall 00:30:18.601 --> 00:30:23.899 we say, to, to make more, you know, chemically intensive refineries. 00:30:23.899 --> 00:30:24.381 Yeah. 00:30:25.551 --> 00:30:26.191 Complicated. 00:30:26.361 --> 00:30:26.931 I don't know. 00:30:27.481 --> 00:30:32.611 I think, um, But then you've got to throw into that the possibility that 00:30:32.641 --> 00:30:34.321 the geopolitics come into it in China. 00:30:34.431 --> 00:30:37.061 If he does it carry on importing lots of chemicals and polymers 00:30:37.061 --> 00:30:38.011 might do it from his friends 00:30:40.201 --> 00:30:41.411 and they tend to be in the Middle East. 00:30:42.221 --> 00:30:43.181 So there's that issue. 00:30:43.531 --> 00:30:46.241 Um, it's certainly more complex. 00:30:46.241 --> 00:30:48.411 Victoria: Help me understand what you, what you're seeing 00:30:48.431 --> 00:30:49.491 from where you sit, John. 00:30:51.361 --> 00:30:54.561 john: Well, if you think a lot more NGLs have been discovered in 00:30:54.561 --> 00:30:58.451 the Middle East of late, you know, NGLs, but the ethane has been quite 00:30:58.511 --> 00:31:00.241 tight in the kingdom and elsewhere. 00:31:00.241 --> 00:31:02.781 There's lots more of that, lots of confidence that we can build 00:31:02.781 --> 00:31:06.281 more, um, across the Middle East. 00:31:07.111 --> 00:31:11.591 Um, so is that going to be the way forward that they build that capacity 00:31:12.111 --> 00:31:15.281 and supply either the feedstock directly or the chemicals and polymers to China? 00:31:15.281 --> 00:31:16.496 More likely the chemicals, I think. 00:31:17.046 --> 00:31:17.226 Yeah. 00:31:17.346 --> 00:31:20.556 Problem is adding value into the feedstock and supplying it to China. 00:31:21.556 --> 00:31:23.676 So then the question is, where does that put the United States 00:31:24.336 --> 00:31:26.816 long term, given the geopolitics? 00:31:28.546 --> 00:31:31.516 Um, I think that these are questions I cannot answer, but 00:31:31.536 --> 00:31:33.286 they need to be asked by companies. 00:31:33.376 --> 00:31:35.896 You know, what's the trade flow is going to be like in 10 years. 00:31:36.916 --> 00:31:39.526 Are we, I've talked about this before, bipolar world, 00:31:40.856 --> 00:31:42.536 China and its friends, the US and its friends. 00:31:42.536 --> 00:31:47.586 And what, you know, given the, you know, if China cannot push 00:31:47.596 --> 00:31:49.276 self sufficiency that much harder. 00:31:50.281 --> 00:31:52.961 There's still going to be a huge deficit on MEG, PX and 00:31:52.961 --> 00:31:55.051 polyethylene for the next 10 years. 00:31:56.316 --> 00:31:59.976 Victoria (2): That it still needs some more, you're saying it's short. 00:32:01.296 --> 00:32:04.516 john: Well, and then of course, then you think, okay, no, no, 00:32:04.516 --> 00:32:05.446 no, no, no, no, that's not right. 00:32:05.446 --> 00:32:06.926 Because the man's going to collapse. 00:32:07.716 --> 00:32:07.886 Victoria (2): Right. 00:32:09.436 --> 00:32:10.976 john: Uh, so you speak the other way. 00:32:10.976 --> 00:32:14.016 I mean, my colleague, Kevin Swift, I think, you know, Kevin used to be, 00:32:14.476 --> 00:32:16.106 uh, the American chemistry council. 00:32:16.206 --> 00:32:16.536 Didn't they? 00:32:16.776 --> 00:32:17.256 Yeah. 00:32:17.266 --> 00:32:22.176 I mean, he did some interesting work for our magazine ICB and 00:32:22.216 --> 00:32:24.686 he, he would disagree with that. 00:32:24.866 --> 00:32:27.366 Well, first of all, he starts with looking at population. 00:32:27.946 --> 00:32:31.176 And, um, the Chinese population is 1. 00:32:31.176 --> 00:32:33.646 4 billion officially in 2020. 00:32:33.926 --> 00:32:37.566 It could be between 130 and 250 million lower than that figure 00:32:39.516 --> 00:32:40.676 because there's one demography. 00:32:40.676 --> 00:32:43.966 Victoria: So 10 to 15 percent, is that what that amounts to? 00:32:44.976 --> 00:32:46.296 john: Breathtaking, yeah, numbers. 00:32:46.296 --> 00:32:49.436 I mean, basically, the data problem in China has always 00:32:49.436 --> 00:32:50.776 been there, but this is about. 00:32:50.846 --> 00:32:56.646 One demographer from the Wisconsin Madison University looked at primary 00:32:56.646 --> 00:33:00.746 school enrollments and vaccination rates and said the numbers don't add up. 00:33:01.566 --> 00:33:02.676 Victoria: I think I've seen some of 00:33:02.696 --> 00:33:04.996 that from, from that, it's from that professor. 00:33:05.036 --> 00:33:05.946 Yeah, absolutely. 00:33:05.966 --> 00:33:07.226 john: Yes, exactly. 00:33:07.506 --> 00:33:07.906 Yeah. 00:33:08.036 --> 00:33:10.486 It's something in the Wall Street Journal, which we've got, which piqued 00:33:10.486 --> 00:33:14.666 our interest chart showing his estimates versus UN and various other people. 00:33:15.506 --> 00:33:17.516 So he did some modeling what that means. 00:33:18.556 --> 00:33:22.316 Um, and from memory, by the end of the century, if you take the 00:33:22.336 --> 00:33:28.056 pessimistic Dyer, um, outcome, uh, I think base chemical, base polymers 00:33:28.306 --> 00:33:32.416 demand is not 89 million, by the end of the century, it's 30 odd million, 00:33:33.806 --> 00:33:35.466 for bigger than 9 synthetic resins. 00:33:35.466 --> 00:33:40.046 And then what he did is, taking that Dyer scenario, let's assume that By 00:33:40.826 --> 00:33:44.366 2050 now, at the end of the century, China becomes a major net exporter 00:33:44.416 --> 00:33:47.496 because demand growth is lower of those nine synthetic residents. 00:33:47.586 --> 00:33:49.316 Our base case is that it was a net importer. 00:33:49.316 --> 00:33:52.216 So it's really complicated. 00:33:52.216 --> 00:33:55.846 If you're in a lower demand growth scenario based on these demographic 00:33:55.846 --> 00:33:59.456 outcomes, these diagraphic outcomes, then China can become a major net exporter. 00:34:00.501 --> 00:34:02.081 But I think we just don't know. 00:34:02.131 --> 00:34:02.611 I mean, 00:34:02.611 --> 00:34:04.911 Victoria: To whom it becomes the question, right? 00:34:04.911 --> 00:34:08.501 Because who who's needs it because everybody's already in net exporters. 00:34:08.541 --> 00:34:09.891 So, um, 00:34:10.001 --> 00:34:14.531 john: And also the geopolitics coming to it, can they export because, you 00:34:14.531 --> 00:34:18.701 know, Then there's the issue about, you know, direct chemical exports. 00:34:19.501 --> 00:34:21.221 I think it's value chains as well, right? 00:34:21.621 --> 00:34:25.241 So, in polyester fiber, they're the world's biggest 00:34:25.301 --> 00:34:27.221 net exporter by a long shot. 00:34:27.241 --> 00:34:29.551 They totally dominate the polyester fiber business. 00:34:29.641 --> 00:34:32.031 Where else would you get the molecules from than China? 00:34:32.031 --> 00:34:36.571 So, you know, if it's a textile mill in Bangladesh, polyester fiber comes 00:34:36.571 --> 00:34:38.031 from China, that's going to carry on. 00:34:38.041 --> 00:34:40.471 Why on earth would you build a whole new value chain around polyester 00:34:40.611 --> 00:34:42.961 fiber, even with the trade tensions? 00:34:43.591 --> 00:34:48.421 Polypropylene, however, there's lots of other producers of polypropylene. 00:34:48.621 --> 00:34:50.621 So I'm talking about direct chemical exports now. 00:34:50.621 --> 00:34:52.411 Victoria: Yeah, it's a pretty fragmented market. 00:34:52.441 --> 00:34:52.721 Yes. 00:34:52.721 --> 00:34:57.731 john: So polypro, the other producers may say, well, we 00:34:57.731 --> 00:34:58.901 want to protect our position. 00:34:58.921 --> 00:35:01.121 So you get more anti dumping, uh, more trade. 00:35:01.121 --> 00:35:03.911 I mean, you've got Brazil increasing import juices potentially on 00:35:04.451 --> 00:35:05.801 polypropylene, for example. 00:35:06.981 --> 00:35:10.771 So he produces incumbent producers saying so that that makes it difficult for them 00:35:10.771 --> 00:35:13.811 to export in some chemical value chains. 00:35:13.811 --> 00:35:14.141 Yeah. 00:35:14.701 --> 00:35:15.041 Victoria: Yeah. 00:35:16.171 --> 00:35:17.001 So, all right. 00:35:17.031 --> 00:35:19.691 So, John, yeah, it sounds like we don't know 00:35:22.051 --> 00:35:27.331 john: What we do know that the essential part of Victoria is this is a downturn. 00:35:27.511 --> 00:35:28.611 That's not going to go away. 00:35:29.441 --> 00:35:33.341 Because the scale of capacity rationalization required to get markets 00:35:33.501 --> 00:35:36.141 back into balance is off the charts. 00:35:37.361 --> 00:35:38.831 Victoria: So what do we do instead? 00:35:38.961 --> 00:35:40.711 I guess maybe that's the question, John. 00:35:40.711 --> 00:35:44.571 So maybe this may be our wrap up, our wrap up question, because we didn't get through 00:35:44.571 --> 00:35:47.451 all 10, but I'll share them online. 00:35:47.521 --> 00:35:50.231 And I know that you'll give me some slides and some links and 00:35:50.231 --> 00:35:52.121 things to share, so thank you. 00:35:52.471 --> 00:35:58.231 Um, we're in a period of wrap of dramatic oversupply. 00:35:59.546 --> 00:36:04.866 The likelihood of getting enough rationalization to accommodate and get 00:36:04.866 --> 00:36:10.686 us back to typical or preferred operating rates, um, isn't going to happen quickly. 00:36:12.526 --> 00:36:14.126 So what are we doing, John? 00:36:14.216 --> 00:36:16.396 What are companies doing when you talk to your clients? 00:36:17.096 --> 00:36:18.916 Um, what are they talking about? 00:36:20.726 --> 00:36:24.756 john: I think short term, it's understanding every regional market. 00:36:25.231 --> 00:36:27.301 Looking for arbitrage opportunities, right? 00:36:27.791 --> 00:36:28.851 Where the money is to be made. 00:36:29.001 --> 00:36:32.801 So being flexible about what you produce, where you produce, when you produce it. 00:36:34.241 --> 00:36:36.091 I mean, I'm off to Turkey in a few weeks. 00:36:37.011 --> 00:36:37.821 That will be interesting. 00:36:37.821 --> 00:36:41.901 There are opportunities in different markets, right? 00:36:42.021 --> 00:36:43.701 And so it's not all linear. 00:36:44.111 --> 00:36:45.091 You can make money. 00:36:45.561 --> 00:36:47.871 You can save money as well by being flexible. 00:36:47.871 --> 00:36:50.581 That's the, that's the key in commodities, obviously. 00:36:51.511 --> 00:36:52.561 Then longer term. 00:36:52.841 --> 00:36:53.891 So that's the short term. 00:36:53.921 --> 00:36:56.691 These are big generalizations, of course, Victoria, lots of detail. 00:36:57.661 --> 00:36:59.611 Longer term is where you are as a company. 00:36:59.641 --> 00:37:00.951 Who are the winners and losers? 00:37:01.231 --> 00:37:02.641 Victoria: Well, that's what's going to be my question. 00:37:02.671 --> 00:37:04.171 Who are the winners and who are the losers? 00:37:04.521 --> 00:37:06.481 Uh, it just, if you were to characterize it. 00:37:07.761 --> 00:37:10.601 john: In, a big commodity chemicals, you think probably the U. 00:37:10.601 --> 00:37:10.791 S. 00:37:11.481 --> 00:37:14.581 Geopolitics aside, and you can still export to Europe, can't you? 00:37:14.591 --> 00:37:14.741 Of course. 00:37:15.856 --> 00:37:18.096 Latin America, they're the bigger markets for the U. 00:37:18.096 --> 00:37:18.441 S. 00:37:19.111 --> 00:37:24.121 You've got the Middle East with all its extra hydrocarbon feedstock, hydrocarbons. 00:37:24.261 --> 00:37:27.291 And you've got, I guess in commodities, you've got China 00:37:27.291 --> 00:37:29.741 wanting to be bigger, you know. 00:37:30.431 --> 00:37:32.011 Victoria (2): Which is all contradictory. 00:37:32.211 --> 00:37:33.181 So then who are the losers? 00:37:34.791 --> 00:37:37.831 john: Uh, well, we've talked about Europe. 00:37:37.831 --> 00:37:41.491 Can Europe redefine itself around niche, sustainable? 00:37:41.801 --> 00:37:42.691 I mean, I have my doubts. 00:37:43.681 --> 00:37:49.461 South Korea has got major problems because, um, on a commodity basis, 00:37:50.056 --> 00:37:53.326 People say, well, how much percentage would you have to shut down? 00:37:53.336 --> 00:37:54.246 You can play with the numbers. 00:37:55.256 --> 00:37:56.656 They lose the China market. 00:37:57.026 --> 00:37:58.786 They struggle to export elsewhere. 00:37:59.906 --> 00:38:00.566 What do they do? 00:38:01.226 --> 00:38:05.226 I mean, Japan's interesting in that they've been consolidating for 20 years. 00:38:06.636 --> 00:38:11.476 Uh, and they're focusing on decarbonization, hydrogen economy, 00:38:11.506 --> 00:38:12.586 all sorts of stuff going on. 00:38:12.586 --> 00:38:15.046 There are lots of innovation into composites. 00:38:16.746 --> 00:38:18.566 Let's not hit the EU target. 00:38:18.656 --> 00:38:23.596 The target the EU want, in theory, 25 percent of automobiles be made 00:38:23.596 --> 00:38:25.546 of recycled plastics by 2030. 00:38:26.656 --> 00:38:31.106 Very ambitious target, but you know, can you, can you innovate to help the EU hit 00:38:31.106 --> 00:38:33.076 that target through compounding, right? 00:38:34.446 --> 00:38:38.996 So I think you need to decide, am I a niche, more niche chemical player? 00:38:39.916 --> 00:38:43.476 There's some commodities, but I can't be a huge commodity player. 00:38:44.246 --> 00:38:45.856 Am I a huge commodity player? 00:38:46.526 --> 00:38:48.406 Where do I sit on that spectrum? 00:38:48.626 --> 00:38:52.496 Am I niche niche, slightly niche, or a big commodity player? 00:38:52.496 --> 00:38:55.731 But I think the big commodity players will be limited to those three regions. 00:38:56.421 --> 00:38:58.411 China, Middle East and U. 00:38:58.411 --> 00:39:00.681 S., Canada, I suppose we can throw in, can't we? 00:39:01.431 --> 00:39:04.581 Um, you know, it's difficult to imagine. 00:39:05.291 --> 00:39:07.801 I mean, the, the, the Southeast Asia is interesting because 00:39:07.831 --> 00:39:11.551 you've got the incumbent state owned or state connected company. 00:39:12.381 --> 00:39:12.651 Victoria (2): Right. 00:39:13.831 --> 00:39:17.771 john: And they'll be okay, but I can't see them expanding much. 00:39:17.781 --> 00:39:20.131 They'll be okay in that regional market, right? 00:39:21.481 --> 00:39:22.081 Probably. 00:39:23.041 --> 00:39:24.781 Because they've got oil and gas to support them. 00:39:25.031 --> 00:39:26.326 I don't think the chemicals business is a problem. 00:39:27.776 --> 00:39:31.886 not going to expand much So they'll, they'll hold if you like, but then 00:39:31.906 --> 00:39:34.416 if you look elsewhere, you've got Europe challenges, you've got South 00:39:34.416 --> 00:39:37.606 Korea, you've got Japan on well on the way towards consolidation, they'll 00:39:37.606 --> 00:39:39.766 close more commodity capacity down. 00:39:40.246 --> 00:39:45.576 Singapore is interesting because it's been based on exporting to China. 00:39:45.576 --> 00:39:47.776 They're going to have been some interesting issues, I think. 00:39:47.916 --> 00:39:50.786 Victoria: They have a very high cost basis coming out of Singapore 00:39:51.006 --> 00:39:51.546 john: anymore. 00:39:51.736 --> 00:39:57.476 So, so it's, you've got to decide where you want to be in 10 years time. 00:39:57.576 --> 00:40:01.466 Where's your competitive advantage, and it's a different game, I think. 00:40:01.466 --> 00:40:03.356 Victoria: It comes back to strategy. 00:40:03.686 --> 00:40:04.036 Right. 00:40:04.386 --> 00:40:07.836 So I think we, uh, we went through a period of time that you didn't 00:40:07.926 --> 00:40:10.076 have to be strategically strong. 00:40:10.416 --> 00:40:11.106 john: I'm going to pinch that. 00:40:11.116 --> 00:40:11.696 That's a quote. 00:40:11.756 --> 00:40:12.336 I like it. 00:40:12.336 --> 00:40:13.076 Victoria: It was really good. 00:40:13.276 --> 00:40:15.256 I don't know, but I think so. 00:40:15.516 --> 00:40:15.806 Right? 00:40:15.836 --> 00:40:16.086 I like you. 00:40:18.521 --> 00:40:26.051 It's kind of like, uh, my, my shorter analogy on this John is in 2000 and 2001, 00:40:26.081 --> 00:40:29.601 or sorry, in 2020 and 2021 in the U. 00:40:29.601 --> 00:40:29.801 S. 00:40:29.901 --> 00:40:31.241 logistics were so tight. 00:40:32.371 --> 00:40:36.441 Anybody that had a truck and could get a trailer could become a logistics 00:40:36.441 --> 00:40:41.861 driver and a hot shotter of, you know, commodity non hazardous products. 00:40:42.556 --> 00:40:46.566 And then 2022 comes along when the logistics kind of lined 00:40:46.566 --> 00:40:49.946 out and it was like, oh, well, crap, that didn't work anymore. 00:40:49.956 --> 00:40:53.776 I couldn't do it just because I had the assets and the 00:40:53.776 --> 00:40:55.676 money to set it up up front. 00:40:56.136 --> 00:40:57.646 Now you have to get strategic again. 00:40:57.666 --> 00:40:59.936 And I suppose we're kind of there again. 00:40:59.996 --> 00:41:02.416 So if you look at, um. 00:41:02.966 --> 00:41:07.116 Let's just say the 2010s, the 2000s and the 2010s, 00:41:09.166 --> 00:41:13.466 a lot of companies could build and grow and maintain a market position 00:41:13.486 --> 00:41:14.826 just because they were there. 00:41:16.356 --> 00:41:20.496 But now we have to get to be strategically smart and making real strategic decisions 00:41:20.506 --> 00:41:25.036 about where you're playing in order to be able to thrive into the next decade. 00:41:26.036 --> 00:41:26.546 john: I think that's right. 00:41:26.736 --> 00:41:31.276 There's lots of micro decisions in there as well, at least the macro, right? 00:41:31.336 --> 00:41:33.106 Victoria: I come up with good stuff once in a while, John. 00:41:34.151 --> 00:41:35.061 john: That's good stuff. 00:41:35.061 --> 00:41:37.689 I mean, since I just think , the story of in Australia with the commodities 00:41:37.709 --> 00:41:41.559 boom, I don't know if it's true, but it's a good story about the guy who 00:41:41.569 --> 00:41:47.439 works on a mine site turning a stop go sign, right, left and right, earning more 00:41:47.439 --> 00:41:51.259 than 150, 000 Australian dollars a year. 00:41:51.839 --> 00:41:55.789 Victoria: We have the same stories in, in the U S uh, like during the shale 00:41:55.799 --> 00:41:57.579 gas boom, when it was really booming. 00:41:58.239 --> 00:42:02.429 Um, truck drivers that were driving like water and sand, 00:42:03.629 --> 00:42:06.699 we're making 100, 000, 150, 000. 00:42:06.699 --> 00:42:09.179 Um, now the challenge, of course, is finding somebody that wants to 00:42:09.179 --> 00:42:14.769 be a truck driver and that's willing to stay, uh, drug free and safe. 00:42:16.004 --> 00:42:18.264 All the things that are required because you need to be able 00:42:18.264 --> 00:42:20.064 to, you know, put a mask on. 00:42:20.414 --> 00:42:24.644 But like if you're in, I remember coaching people like seriously, just like, just 00:42:24.694 --> 00:42:26.834 don't do drugs and you can get a job. 00:42:28.084 --> 00:42:28.664 john: Oh dear. 00:42:28.764 --> 00:42:29.034 Yeah. 00:42:29.034 --> 00:42:30.454 There's zero tolerance for that. 00:42:31.714 --> 00:42:32.064 Yeah. 00:42:32.224 --> 00:42:32.704 Victoria: Yeah. 00:42:32.934 --> 00:42:33.574 Absolutely. 00:42:33.994 --> 00:42:34.544 Absolutely. 00:42:34.624 --> 00:42:34.944 Anyway. 00:42:34.964 --> 00:42:36.054 Well, John, this was good. 00:42:36.364 --> 00:42:36.974 Thank you. 00:42:37.134 --> 00:42:38.774 Thank you for sharing your insights. 00:42:38.774 --> 00:42:44.044 And, uh, I think we'll see where these forces go here through the next 00:42:44.274 --> 00:42:47.434 rest of the year, uh, and going on, 00:42:47.434 --> 00:42:50.294 Victoria (2): but your advice would be pick where you want to win. 00:42:52.034 --> 00:42:52.454 You have it. 00:42:53.874 --> 00:42:54.294 john: Yeah. 00:42:54.464 --> 00:42:54.894 Victoria: All right. 00:42:55.244 --> 00:42:55.734 Thanks, Sean. 00:42:55.734 --> 00:42:56.814 Thanks for joining us again. 00:42:56.814 --> 00:42:58.684 And thanks everyone for listening today. 00:42:58.684 --> 00:43:01.124 Keep listening, keep following, keep sharing, and we will 00:43:01.154 --> 00:43:02.564 talk with you again soon.