INSIGHT: Breaking Down Q3 2026 Chemical Earnings: Market Realities and Strategic Portfolio Responses - Ep. 289

As the industry wraps up Q3 2026 earnings season, Victoria Meyer unpacks the business realities behind the numbers and explores how supply disruptions, pricing pressures, geopolitical turbulence, and portfolio decisions are shaping the path ahead. 

She connects the dots between the ongoing impacts of the war in Iran, regional differences, China’s shifting role, and the tangible actions companies are taking to adjust their business models. Victoria highlights not just what’s happening, but why it matters for industry leaders focused on growth, resilience, and strategic positioning going into 2027. 

Topics Covered in This Episode: 

• Pricing Power vs. Demand: Why top-line growth is being driven by higher prices, even as demand remains sluggish, with regional and market-specific variation. 
• Geopolitics and Supply Chain Shifts: How the closure of the Strait of Hormuz, energy price volatility, and ongoing conflict in Iran have exposed vulnerabilities, raised costs, and shifted regional advantages. 
• The China Effect: What China’s increasing domestic capacity and new policy approaches mean for global competitiveness, European market pressure, and future supply-demand balance. 
• Strategic Portfolio Moves: The ways companies are responding through "Prune, Protect, Partner, and Pivot" from European closures and asset reviews to new combinations and business realignment. 
• Leadership Priorities for 2027: The importance of financial flexibility, cash preservation, and strategic clarity as companies face a protracted period of uneven recovery. 

Killer Quote: “Competitive advantage is not permanent. It is in a state of flux. Companies' ability and willingness to change, to seek new markets, seek new business structures, rethink their positions, is critical for long-term success.” - Victoria Meyer 

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Host

Victoria King Meyer

Founder & Host of The Chemical Show + The Chemical Summit; Victoria brings 25+ years industry leadership experience including Shell and Clariant and a Victoria brings a practical, business-focused perspective to conversations about leadership, strategy, innovation, and the forces shaping the future of the chemical industry.to

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Victoria Meyer:
Welcome to The Chemical Show, the podcast where chemical means business. I'm your host, Victoria Meyer, bringing you stories and insights from leaders driving innovation and growth across the chemical industry. Each week, we explore key trends, real-world challenges, and the strategies that make an impact. Let's get started. Welcome back to The Chemical Show, where leaders talk business. Today's episode is Insights and a focus on Q3 2026 earnings reports and just what we can glean from the earnings, the announcements, and the activities that companies have taken certainly over the third quarter. What it means for us going into the fourth quarter of 2026, and of course even into 2027, because here we are almost at the end of the year. If you listen to my second quarter insights, you'll recall that a big part of that conversation was really the early manifestations of the result of the war in Iran, the the Strait of Hormuz, the effect that that's had on supply chain, transportation costs, availability of raw materials, and how those regional competitive differences really started to reshape.

Victoria Meyer:
Those effects really continued into Q3 and probably manifested more completely in Q3, along with the efforts and the responses that companies have taken in response to this disruption that took place in the first quarter. and played out into the second quarter, and here we are, third quarter. And really what I want to focus in on today is 3 kind of topic areas, or maybe we'll call them questions even, as we think about this, which is number one, what's driving those higher chemical prices and earnings while at the same time demand remains weak, and what is the knock-on effect of that? The second piece is around geopolitics in China, and I got introduced to a new term this week, China's involution. We'll talk about that a little bit more and how that is shifting the global competitive equation. And then the third piece of this is really around what does it mean? What are the portfolio actions that companies are taking as a result to strengthen their position, take them forward into 2027 and beyond successfully? Let's start with this first one. which is really around pricing. Pricing is up, and yet demand continues to be mixed. And I think we've seen this really consistently across a lot of the earnings reports and announcements that on just a top-line number, a lot of companies, many companies perform pretty well on their top-line numbers.

Victoria Meyer:
Now, if we go over and we look at like the oil companies and the integrated companies, you've seen those news items all across everywhere, record earnings in some cases. We're not seeing record earnings necessarily across the chemical sector, But what we are seeing is strong pricing and strong top-line numbers. Dow's a good example. They talked about the fact that their Q3 sales were up by 13%, 14% of which is due to pricing. And then they had a bit of a negative volume impact. So it's this aspect of supply and demand is what it is, right? So in Dow's case, their polyethylene was already operating at high rates. There was limited incremental production improvements, but more importantly, Demand is not necessarily strengthening. It's really a supply story still.

Victoria Meyer:
So I think what we saw in Q2 was a lot of a supply story. We're certainly seeing that play out in Q3. Just this aspect of, is supply actually available? The demand, in many cases, flat, very mixed based on what markets you're playing in. And so there's a lot of the pie is getting sliced in different ways, but it's not necessarily growing. Certainly from a demand perspective. And I think one of the things that we need to think about with this is that the Middle East changed the supply availability and the economics, right? We've certainly seen some regional, significant regional variances affecting the movement of energy, of feedstocks, of chemical products. And frankly, the producers with better access to reliable feedstocks and really established production capacity gained a relative advantage. That's certainly the story that we've seen play out.

Victoria Meyer:
At the same time, these higher input costs are being passed through, right? So we've seen it from a number of people. I talked about Dow. Lenks has talked about their sales being up 10%, primarily from price increases to recover high raw material costs. And yet Lenks' CEO Matthias Zachert said, many of our core markets are still not experiencing a broad and sustained recovery in demand. No surprise. I think if I go back to the beginning of the year where, you know, the pundits, if you will, the real experts that are watching this, some of the folks, whether it be from S&P Global, Chemical Market Analytics, ICIS, they're saying it's going to be years before we see a real broad recovery in demand. I think that's certainly true. What we're seeing is periodic fragmentation, some improved pricing, and improved businesses.

Victoria Meyer:
And yet demand remains uneven. This is regional. This is based on end-use markets. We know that there are certain markets— automotive, construction, agchem— that are soft. Right? And they remain pretty weak. If you look at consumer spending, heck, if you look at your and my spending, we're not necessarily buying more goods, but we're certainly paying more money for it. And that's playing out not just at a consumer level, but also at a chemical industry level. What I think is interesting with this is, as these prices go up, one of the things that have come through really clearly across a number of earnings reports is working capital concerns, right? So when everything's lifting, when your prices are lifting for your finished goods, that is somebody else's intermediate product, there's a real concern about working capital and just the large amounts of working capital that people are retaining.

Victoria Meyer:
And so what we've consistently seen is a real focus on working capital, drawing down inventories, right-sizing inventories. I suspect This is my hypothesis. As companies work on protecting their earnings and their cash, we're going to see probably a bit of softness in Q4. Too soon for me to tell, as people try to manage their balance sheets, right? And perhaps that whipsaw effect for Q1, which we often see that seasonality, I suspect it's going to be greater when we look at the end of '26 going into '27. With these disruptions, with the higher prices, there's also a lot more focus on maintaining financial flexibility through actions that they themselves can control. Question number 2, as we look at 3rd quarter earnings, which is how are geopolitics and China changing the competitive equation, right? So what we've certainly seen, and we've been talking about this, that supply chains and manufacturing advantages are being reshaped by disruption, by structural capacity changes. This has been an ongoing facet of our competitiveness across the industry for the last couple of years, certainly accelerated this year by some of the activities in the Middle East. And so, you know, a couple points on this, which is, first of all, the Middle East disruption exposed some real vulnerabilities.

Victoria Meyer:
The Iran war, the closure of the Strait of Hormuz disrupted energy and chemical supply routes. We've seen higher shipping costs, longer transit times, uncertainty around feedstock availability, And with this, companies that have had more reliable production, favorable feedstock conditions, frankly producing, buying, and selling in the right, if you will, geographies, have been better positioned, have been more robust. We've also seen impacts, some negative impacts, of which Solvay talked about this. They reported an approximately €25 million negative EBITDA impact in Q3 from the Middle East conflict. So direct bottom line benefit, including about $15 million of negative EBITDA related to having to suspend operations at their complex in Saudi Arabia. So a real tangible example of geopolitical disruption that's really affected directly the production and capacity. Of course, we've seen this and we've heard this. What about China? And the China story, as you guys know, is a lot more complex.

Victoria Meyer:
And it's gotten more challenging, right? We talked about this again in second quarter in some of my follow-on conversations. China is changing the longer-term balance. I think this continues to come through in our earnings reports, right? So China continues to add chemical capacity, or it's coming online. Like, I'm not sure that they've got newly announced capacity necessarily, but we're certainly seeing that the China effect continues to take effect. And one of the things that we've really seen is With this disruption in the Middle East and the effect that it's had on supply chains, frankly, China's been able to take advantage. Some of the Chinese producers have in terms of entering markets where they weren't otherwise able to enter markets easily. Right. So, you know, a couple of things at play with this is China, as they've increased their internal production, has been able to replace imports with domestic production.

Victoria Meyer:
It rechanges just the balances everywhere. And companies reflected on this in Q3. So Westlake in particular said that increasing imports from Asia was one of the pressures facing their European chemical production. We saw the same thing similarly. Olin also talked about that export pricing was significantly pressured by excess Chinese production. So we're seeing this in a couple of different places. Europe appears to be particularly challenged and exposed as a result of some of these geopolitical differences and the pressures that have taken place. due to what's going on in the Middle East, the pressures from China, Asian import competition.

Victoria Meyer:
And so this connects to some of the continuing shutdowns that we're seeing and announcements that we're seeing across Europe. European producers are competing against regions with different feedstock economics, energy costs, capacity additions, and market access, right? These are really structural competitive pressures that have made a change. Yeah, we could say that some of the disruption in the Middle East is maybe more of a temporary thing. Although, temporary is how long? It's not a month, it's a year. It's perhaps more, especially when we think about what needs to take place in order to rebuild and restart assets that maybe were shut down or rebuild supply chains. And I wanted to talk about China's anti-involution efforts. So that's something that's come up recently. They've been talking— Beijing and China has been talking about this for at least a year or more about curbing excessive industrial competition and overcapacity.

Victoria Meyer:
So, trying not to have so much build taking place that it's really destructive, not just globally, but inside of China, globally elsewhere. And they've had policy announcements. They've made changes around this. Although what I would say is we've not yet seen clear and sustained improvements in global chemical supply demand. Frankly, no surprise, because policy takes a while to trickle through. An investment gets started, it takes a couple years before we see the realization of it. But we are continuing to see in CEOs and across the earnings reports— in fact, BASF CEO Markus Kemmeth acknowledged China's anti-inflation measures during his earnings call, the BASF earnings call, and yet said there is no quick fix on this. So I think we know that we can make policy decisions.

Victoria Meyer:
The effect of it takes a bit of time. The 3rd element that really comes through in Q3 earnings reports is around the pressure to restructure, to change portfolios, to make adjustments is intensifying. And I would say we've been talking about this as one of these things that's going to happen. That's definitely happening. One of the key drivers in '26 going into '27 as companies respond to demand changes, changing cost positions, global overcapacity, and the need to allocate capital more effectively. Companies are reshaping advantage. It's something I've been talking about. I talked about it at the Chemical Summit recently at the CPI Polyurethanes Conference.

Victoria Meyer:
I delivered a keynote called When Advantage Shifts. Which really recognizes this idea that competitive advantage is not permanent. It is in a state of flux. And frankly, companies' ability and willingness to change, to seek new markets, seek new business structures, rethink their positions, is critical for long-term success. I shared during that keynote, and in fact, I'm gonna talk to you about this a little bit here, the 4 strategic responses that companies take, which is prune, protect, partner, and pivot. And, you know, Q3 earnings announcements and some of the recent industry announcements really point to how companies are putting these changes in place. Now, sidebar on this, I am bringing these conversations about the 5 fundamental shifts that are facing the chemical industry, about the ways that companies are making strategic decisions, And I'm taking this on the road. I'm bringing it to events and to customize executive briefings inside of your company.

Victoria Meyer:
If you are interested in me coming in and talking with your leadership team or board, reach out directly. LinkedIn is probably your best bet. If you're on my email list, you got my email, so you can reach out to me there as well. And would love the opportunity to talk with you about what I'm seeing, how these activities connect to the industry and to your company. Now, Back to this. What are we seeing in Q3? Prune. Prune is one of— pruning is one of the fundamentals. And I, you know, again, I will say I've talked about this.

Victoria Meyer:
If you're a gardener, if you have trees in your yard, you know that pruning is essential to growth. Whether we prune dead weight, whether we prune because we want our trees, our businesses to grow in a different direction, It's really around removing businesses and assets that no longer fit. Maybe they're not delivering performance. Maybe they're better served elsewhere because you want your business to grow in a different direction. And we're seeing this, right? So operating plant closures that we're seeing across Europe and also, by the way, in North America and other regions, whether it's Dow's European closures. Westlake recently talked about its European PVC closures. And, you know, part of pruning is also just rethinking what part of your portfolio stays, which of course we're seeing. ScienceCo has openly talked about a strategic review of their performance and care business.

Victoria Meyer:
Q3 earnings, they said, you know, still ongoing. It's not that the business is not good, it's just that perhaps that business is not part of their future. And pruning is essential to growth. Protecting, you know, the second fundamental piece of this is around protecting your genuine sources of advantage, whether they are your landmark businesses, whether it's people, whether it's assets. In volatile markets, companies need to protect the capabilities that truly differentiate them and enable their future success. So in the case, you know, Dow talks about its advantaged polyethylene assets in production. ScienceCo has talked about their differentiated composites business and specialty polymers that they are really protecting and growing to serve growing markets. Protecting is really about making strategic choices about where to invest, and it's not about defending every business.

Victoria Meyer:
It's really protecting the ones that are your future. Partner. Partnering has always been a key element of strategic business success across the industry. What are we seeing in Q3, and what are those results? Well, one of the the ones that are, you know, the fresh ones, if you will, was BASF and Evonik, which, by the way, there is no defined partnership there. But BASF has made repeated approaches to Evonik openly, really saying that they see that partnership and that combination of businesses being successful. Evonik doesn't see it the same way. Where is this shaking out? We don't know. In the meantime, we've seen progress on ExxonMobil and Axalta.

Victoria Meyer:
Combining. We've seen progress on Olin and Huntsman partnering and combining. So partnering sometimes is big in the entire company. Partnering sometimes is individual product lines. The question is really, when we think about partnering, is not whether bigger is better, but it's whether that combination of businesses, of assets, of products creates capabilities, efficiencies, or market positions that wouldn't exist independently. I'm a big believer that there are synergies available when you create the right combinations, and that's what these companies are seeking to do. The 4th element of this is pivoting. Pivot is really about redirecting resources to better opportunities.

Victoria Meyer:
The example I sometimes like to use, and I had kids that played soccer, and they always be, you're in a kind of a V formation and you're pivoting to where the ball is. Companies are also pivoting to where the business opportunity is. A great example that came through in 3rd quarter results is really around Stepan. Stepan, frankly, needing some positive results and finally getting some of those around customer diversification, expanding their product applications, pivoting where their focus is in order to create long-term, short-term, and long-term value and growth. It's one of these aspects where growth opportunities exist, But companies maybe need to take a slightly different approach and reshape where they're going in order to capture those opportunities. Overall, when we look at Q3 earnings, you know, it's a mixed bag, right? And I think, but it also tells us the story of where the industry is and where the industry is going. First of all, strong pricing, so-so demand, right? And I think we're not seeing a reshaping of this For some time, right? Demand and earnings are diverging. Global competitiveness is changing.

Victoria Meyer:
The effects of what's taking place in the Middle East, what we're seeing really manifesting around Europe, the effect of China's evolving position and regional cost differences. You know, I've talked a lot about how we're shifting from globalization to regionalization. I didn't talk about it today, but I've talked about it in the past. I think that's really playing through as we look at what's happening and what companies are saying in Q3 in their earnings reports as they think about how their business businesses are strengthening, where they're profitable, and where they're most robust. And the third piece around this is companies are really taking strategic action to respond. In fact, I think kind of the anecdotal comments that came through in a lot of the earnings reports and in the investor calls was really that while in some cases, in many cases, Q3 looked better than perhaps the first half of the year, companies were taking action and really strategic, decisive action to reshape, not just for today, not just for '26 and '27, but for their future. And that's where I'm going to close. I hope you enjoyed today's episode.

Victoria Meyer:
If any of this resonated, I would love to hear from you what you're seeing coming out of the Q3 earnings reports, where you see Q4 manifesting as we go into 2027. And as always, Thank you for joining me today. Keep listening, keep following, keep sharing, and we will talk with you again soon. Thanks for joining us today on The Chemical Show. If you enjoyed this episode, be sure to subscribe, leave a review, and most importantly, share it with your friends and colleagues. For more insights, visit thechemicalshow.com and connect with us on LinkedIn. You can find me at Victoria King-Meyer on LinkedIn, and you can also find us at The Chemical Show Podcast. Join us next time for more conversations and strategies shaping the future of the industry.

Victoria Meyer:
We'll see you soon.