WEBVTT NOTE This file was generated by Descript 00:00:04.518 --> 00:00:07.318 A key component of the modern world economy, the chemical 00:00:07.318 --> 00:00:10.858 industry delivers products and innovations to enhance everyday life. 00:00:11.378 --> 00:00:15.818 It is also an industry in transformation where chemical executives and workers 00:00:15.838 --> 00:00:19.458 are delivering growth and industry changing advancements while responding 00:00:19.458 --> 00:00:23.988 to pressures from investors, regulators, and public opinion, discover how 00:00:23.988 --> 00:00:27.838 leading companies are approaching these challenges here on the chemical show. 00:00:28.308 --> 00:00:31.648 Join Victoria Meyer, president of Progressio Global and 00:00:31.658 --> 00:00:33.078 host of the chemical show. 00:00:33.353 --> 00:00:37.553 As she speaks with executives across the industry and learns how they are leading 00:00:37.553 --> 00:00:43.133 their companies to grow, transform, and push industry boundaries on all frontiers. 00:00:43.473 --> 00:00:45.723 Here's your host, Victoria Meyer. 00:00:48.627 --> 00:00:50.127 Victoria: Hi, this is Victoria Meyer. 00:00:50.217 --> 00:00:51.747 Welcome back to The Chemical Show. 00:00:52.317 --> 00:00:55.377 So in today's episode, it's a bit of a unique episode. 00:00:55.377 --> 00:01:01.077 I recorded most of it at the WPC World Petrochemical Conference, 2024. 00:01:01.407 --> 00:01:02.697 Which was held in Houston. 00:01:03.067 --> 00:01:04.207 , just a couple of weeks ago. 00:01:04.577 --> 00:01:07.877 As part of my intro, I'm just going to give you the three things that really were 00:01:07.877 --> 00:01:10.457 in focus for me during the conference. 00:01:10.457 --> 00:01:14.447 And I think for others as well, and number one is the energy transition 00:01:14.477 --> 00:01:20.447 and the critical role that chemicals has to play with the energy transition. 00:01:20.777 --> 00:01:23.177 The second piece is around supply chain and. 00:01:23.387 --> 00:01:25.067 Um, 20, 24. 00:01:25.547 --> 00:01:30.947 Much like 20, 21 and 2022, I think is the year, the year of the supply chain, right? 00:01:30.947 --> 00:01:34.337 Since we've had some dramatic, uh, challenges with it so 00:01:34.337 --> 00:01:35.417 far, already this year. 00:01:35.717 --> 00:01:41.027 Um, and I have a great conversation that I had with Rahul Kapoor from S&P Global that 00:01:41.027 --> 00:01:43.007 you'll be hearing, um, and a little bit. 00:01:43.007 --> 00:01:45.707 And then the third thing is that really this expectation 00:01:45.737 --> 00:01:48.137 of a future upside, an upturn. 00:01:48.737 --> 00:01:51.647 Probably not till the end of the decade. 00:01:51.647 --> 00:01:56.027 So don't be looking too closely for upside because what we really 00:01:56.027 --> 00:02:00.767 know is that there's dramatic oversupply currently in many markets. 00:02:02.057 --> 00:02:05.447 So, you know, as a chemical industry leader and I'm kind of drawing my 00:02:05.477 --> 00:02:08.267 conclusions first here, this time as a chemical industry leader. 00:02:08.567 --> 00:02:13.667 What can you do about this and with this, and when you listen to the, to 00:02:13.667 --> 00:02:18.227 this episode, and as you're thinking about it, Um, What can you be doing? 00:02:18.227 --> 00:02:21.887 And so, number one, I would say, first of all, is understand the role 00:02:22.067 --> 00:02:27.017 that you and your company play in the energy transition, whether it's 00:02:27.017 --> 00:02:29.597 providing products for new technologies. 00:02:29.627 --> 00:02:29.837 Right. 00:02:29.837 --> 00:02:30.647 When I think about. 00:02:31.037 --> 00:02:35.447 Batteries and EVs and even, uh, solar panels and solar cells 00:02:35.447 --> 00:02:37.187 and a wide variety of things. 00:02:37.217 --> 00:02:41.147 There is no doubt that the energy transition is not 00:02:41.177 --> 00:02:43.067 possible without chemicals. 00:02:43.157 --> 00:02:46.877 So that's one piece, um, And then the second piece that goes with it as 00:02:46.877 --> 00:02:50.837 around, you know, reducing your footprint and your carbon footprint while still 00:02:50.837 --> 00:02:54.977 supporting growth, maybe is a little easier said than done, but nonetheless, 00:02:54.977 --> 00:02:56.867 that's, that's one of the considerations. 00:02:57.377 --> 00:03:02.267 The second piece is around building supply chain resilience. 00:03:03.167 --> 00:03:06.317 So we've been talking about this for a few weeks on and 00:03:06.317 --> 00:03:07.697 off here on the chemical show. 00:03:07.967 --> 00:03:10.337 Um, and really for a couple of years, about the importance 00:03:10.337 --> 00:03:11.777 of supply chain resilience. 00:03:12.137 --> 00:03:18.197 This year's events with crisis and the Red Sea and a crisis in the Panama Canal 00:03:18.227 --> 00:03:21.137 have created some dramatic challenges. 00:03:21.587 --> 00:03:23.627 Um, What does that mean for you? 00:03:23.627 --> 00:03:25.667 And what do you need to be thinking about doing is number 00:03:25.667 --> 00:03:27.947 one, building optionality, right? 00:03:27.947 --> 00:03:31.187 So understanding your options and alternatives as it 00:03:31.187 --> 00:03:32.417 relates to your supply chain. 00:03:32.747 --> 00:03:33.767 And then number two. 00:03:34.517 --> 00:03:36.257 Um, looking at alternatives, right? 00:03:36.257 --> 00:03:39.407 So, uh, alternatives in product. 00:03:39.527 --> 00:03:41.597 At alternatives and supply points. 00:03:41.927 --> 00:03:43.397 Alternatives and suppliers. 00:03:43.967 --> 00:03:49.667 Having a really robust strategy and frankly not just a strategy. 00:03:50.177 --> 00:03:54.767 An execution plan that's been tested and understood and is 00:03:54.767 --> 00:03:56.807 ready to go is really critical. 00:03:58.847 --> 00:04:02.147 The third piece is preparing for a future upside. 00:04:02.237 --> 00:04:07.367 So there is investment underway, even though markets are long and they're 00:04:07.367 --> 00:04:09.347 going to be long for quite a while. 00:04:09.557 --> 00:04:12.887 However, as we all know, this industry is cyclical and 00:04:12.887 --> 00:04:14.447 markets will tighten up again. 00:04:14.777 --> 00:04:20.027 So, um, preparing for that future upside with financial discipline. 00:04:20.057 --> 00:04:24.467 And in fact, one of the speakers on stage talked about the fact that, 00:04:24.557 --> 00:04:29.417 um, the focus right now and for the next several years is truly financial 00:04:29.417 --> 00:04:31.247 discipline, particularly in Asia. 00:04:31.277 --> 00:04:35.837 It was a, a speaker from Asia who was referencing this and financial 00:04:35.837 --> 00:04:37.097 discipline is really critical. 00:04:37.457 --> 00:04:41.177 And then practice playing a long and strategic game. 00:04:41.547 --> 00:04:45.657 So, what I mean by that is really looking at today's markets and 00:04:45.657 --> 00:04:48.267 responding, but don't over respond. 00:04:48.687 --> 00:04:53.457 However understand the markets and the products where you are going to be winners 00:04:53.547 --> 00:05:00.447 and losers in the longterm and positioning yourself to move into those markets, 00:05:00.747 --> 00:05:03.507 finding opportunities to differentiate. 00:05:03.537 --> 00:05:03.837 Right. 00:05:03.867 --> 00:05:05.367 And differentiation is key. 00:05:05.757 --> 00:05:06.987 What I think is interesting. 00:05:07.017 --> 00:05:08.097 You'll hear from me later. 00:05:08.427 --> 00:05:12.477 And, and this was a topic of conversation with folks when we were talking about 00:05:12.507 --> 00:05:16.647 like who's paying for it and how do we pay for quote, unquote green. 00:05:16.997 --> 00:05:21.167 chemicals, whether it be green ammonia, green, hydrogen, uh, other 00:05:21.197 --> 00:05:24.497 products would even talk a lot about green surfactants and bio-based 00:05:24.527 --> 00:05:26.117 surfactants throughout these. 00:05:26.807 --> 00:05:32.237 Nobody really wants to pay more for what is effectively a drop in replacement. 00:05:32.567 --> 00:05:36.797 So therefore figuring out how to create meaningful differentiation. 00:05:37.427 --> 00:05:39.947 Understanding your markets, understanding what you're bringing 00:05:39.947 --> 00:05:44.717 to tape the table, what your customers need and differentiate, 00:05:44.807 --> 00:05:46.697 differentiate, differentiate. 00:05:46.697 --> 00:05:49.037 That's probably my number one message for you guys today. 00:05:50.237 --> 00:05:53.807 We're going to segue over to our onsite recordings. 00:05:54.287 --> 00:05:57.797 And let me know what you think about today's episode. 00:05:57.857 --> 00:06:03.977 And if you were at WPC, what you heard and saw and what your takeaways were. 00:06:04.037 --> 00:06:05.027 We'd love to hear from you. 00:06:08.647 --> 00:06:15.177 Hi, I'm recording today at the WPC World Petrochemical Conference 2024, 00:06:15.557 --> 00:06:17.367 which is sponsored by S& P Global. 00:06:17.677 --> 00:06:22.107 The theme of this year's conference is Positioning for the Next Upturn. 00:06:23.077 --> 00:06:26.287 And it's actually been a really interesting mix of conversations both 00:06:26.347 --> 00:06:33.147 on stage and off stage about what that actually looks like because there is, you 00:06:33.147 --> 00:06:34.727 know, a number of key themes around this. 00:06:35.272 --> 00:06:38.492 One of which, and in fact, this is the overarching theme, is that, 00:06:38.832 --> 00:06:41.112 yes, well, we're in a bit of a downturn at the moment, right? 00:06:41.112 --> 00:06:41.842 There's no doubt. 00:06:42.402 --> 00:06:46.002 Supply, or demand is flat, or appears to be relatively flat. 00:06:46.002 --> 00:06:47.422 We're in oversupply. 00:06:47.442 --> 00:06:49.482 Inflation has had an effect. 00:06:49.882 --> 00:06:51.772 What's going on in China has had an effect. 00:06:51.782 --> 00:06:53.352 Interest rates have had an effect. 00:06:53.832 --> 00:06:59.173 Yet, the industry continues to be cyclical, and that we are 00:06:59.173 --> 00:07:01.640 clearly poised for an upturn. 00:07:02.627 --> 00:07:04.707 Maybe not this year or next year. 00:07:04.707 --> 00:07:08.287 But certainly when we think about by the end of the decade, there is 00:07:08.287 --> 00:07:14.177 an expectation of significant growth and investment restarting globally. 00:07:14.917 --> 00:07:17.997 So a couple of big themes that we talked about here 00:07:18.047 --> 00:07:20.477 at the conference that I think are just worth sharing. 00:07:20.477 --> 00:07:21.987 Number one is decarbonization. 00:07:21.987 --> 00:07:26.627 In fact, I spent a lot of time this week in conversations around 00:07:26.627 --> 00:07:30.877 decarbonization, hearing from people on stage as well as off stage. 00:07:30.897 --> 00:07:36.977 And so what's really interesting is the onstage carbon onstage conversations for 00:07:37.007 --> 00:07:40.847 80 percent of the time where basically that, Hey Decarbonization is here. 00:07:40.847 --> 00:07:41.767 We need to get there. 00:07:41.867 --> 00:07:44.677 Um, we need to be investing in hydrogen. 00:07:44.677 --> 00:07:47.017 We need to be reducing our greenhouse gas emissions. 00:07:47.017 --> 00:07:49.397 We need to be targeting 2050. 00:07:50.127 --> 00:07:57.607 And yet, um, aside from one bold panelist who talked about how we're 00:07:57.607 --> 00:08:01.647 paying for this, that, that was really primarily the sidebar conversation. 00:08:01.997 --> 00:08:07.017 Almost every break I was in after every panel or every 00:08:07.017 --> 00:08:11.417 discussion was Decarbonization is great, but who's paying for it? 00:08:11.797 --> 00:08:17.187 The investment in hydrogen, ammonia, methanol, um, as the future of the 00:08:17.187 --> 00:08:20.197 energy transition is expensive. 00:08:20.227 --> 00:08:24.547 It's expensive, it's costly, it requires a public and private 00:08:24.547 --> 00:08:29.587 partnership, and it's not yet clear, really, who's paying for it. 00:08:29.647 --> 00:08:33.717 Because, of course, there's a conundrum, and, and you guys know this, and I know 00:08:33.717 --> 00:08:40.127 this, and, is that, um, People want or think they want sustainable products. 00:08:40.127 --> 00:08:41.407 They want greener products. 00:08:41.407 --> 00:08:44.137 They want products with a lower carbon footprint. 00:08:44.137 --> 00:08:48.447 However, they need to be offering something more. 00:08:48.467 --> 00:08:50.137 Otherwise they're not paying for them. 00:08:50.137 --> 00:08:53.957 And so this is a little bit of a dilemma I see is that, you know, if 00:08:53.957 --> 00:08:57.517 we think about some of these products that are very much commoditized, 00:08:57.527 --> 00:08:59.607 um, let's take ammonia, for example. 00:09:00.457 --> 00:09:01.817 Ammonia is ammonia is ammonia. 00:09:01.887 --> 00:09:04.487 Now, okay, somebody who's producing and selling ammonia, you might tell 00:09:04.487 --> 00:09:07.857 me differently, but the reality is it is very much a commodity product. 00:09:08.137 --> 00:09:11.337 And so there needs to be a bigger differentiator. 00:09:11.682 --> 00:09:14.342 People are not buying on product alone. 00:09:14.632 --> 00:09:16.762 What is the rest of your differentiation story? 00:09:17.012 --> 00:09:20.542 And that is something that frankly, we did not talk about a lot here on 00:09:20.542 --> 00:09:23.062 stage, but I think it's something to talk about and we'll be continuing 00:09:23.062 --> 00:09:24.832 to talk about on The Chemical Show. 00:09:24.832 --> 00:09:28.222 Cause as you guys know, I like to talk about the customer experience, 00:09:28.232 --> 00:09:29.802 how you differentiate your business. 00:09:30.132 --> 00:09:34.752 Um, and, uh, How you really create value and you're not creating 00:09:34.752 --> 00:09:36.802 value by doing the same thing. 00:09:37.132 --> 00:09:40.612 You have to create value by understanding your customers' "why". 00:09:41.052 --> 00:09:46.692 Creating a differentiation, whether it be in product or in service or an offering 00:09:46.692 --> 00:09:48.412 or how you package it all together. 00:09:48.722 --> 00:09:51.536 Um, and that is where the value comes in. 00:10:24.727 --> 00:10:31.087 /Hi, I'm here with Rahul Kapoor from S& P Global today here at WPC 2024. 00:10:31.617 --> 00:10:34.897 Um, and we're going to be just talking a few things about the shipping 00:10:34.897 --> 00:10:36.287 industry and what's going on there. 00:10:36.287 --> 00:10:37.797 So, Rahul, thanks for joining me. 00:10:38.007 --> 00:10:38.657 / Rahul: /Thanks, Victoria. 00:10:38.657 --> 00:10:40.801 Good to be at WPC and welcome. 00:10:40.801 --> 00:10:43.427 / Victoria: /So, first of all, let's just talk about what's 00:10:43.427 --> 00:10:45.297 going on in shipping today. 00:10:45.917 --> 00:10:46.157 / Rahul: /Sure. 00:10:46.352 --> 00:10:48.642 I think if you look at the shipping industry, right, or rather the 00:10:48.642 --> 00:10:52.092 shipping markets, what we are seeing today is it's in the midst of what 00:10:52.092 --> 00:10:53.652 we call a geopolitical storm, right? 00:10:54.062 --> 00:10:56.332 If I take you back three years, it started with COVID. 00:10:56.362 --> 00:10:59.982 We had all the supply chain disruptions, massive ones at the end, right? 00:10:59.982 --> 00:11:03.742 So we had port blockages, we had all the stuff at the other end of the 00:11:03.742 --> 00:11:07.102 world, and we were waiting for all the Uh, shipments to arrive in the U. 00:11:07.102 --> 00:11:07.222 S. 00:11:07.242 --> 00:11:08.082 and other markets, right? 00:11:08.362 --> 00:11:11.702 So we went through that, it normalized, freight rates corrected, freight rates 00:11:11.712 --> 00:11:15.505 actually went to record highs, we were actually looking at 20, 000 per 00:11:15.505 --> 00:11:18.392 TEU, and that has made an impact on many of the chemical companies, right? 00:11:18.692 --> 00:11:20.302 So the whole supply chains were disrupted. 00:11:20.637 --> 00:11:23.607 We went through that, then we had Russia, Ukraine, right? 00:11:23.937 --> 00:11:25.997 I think that led to many trade flow changes. 00:11:26.027 --> 00:11:29.277 When you look at the pet camps, when you look at the oil markets and so 00:11:29.277 --> 00:11:30.867 on, so that had an impact as well. 00:11:31.227 --> 00:11:35.357 And just recently, back in November, we had this Red Sea crisis, right? 00:11:35.697 --> 00:11:39.747 So back to back, shipping has been facing some of these geopolitical crises. 00:11:39.837 --> 00:11:42.417 Uh, just talking about the Red Sea, and if, uh, you want to go 00:11:42.417 --> 00:11:44.577 there, because that's a major disruption which we're seeing. 00:11:44.727 --> 00:11:46.657 / Victoria: /Yeah, let's, let's talk a little bit more about the Red 00:11:46.657 --> 00:11:49.927 Sea, because obviously, you know, we thought things had normalized. 00:11:50.977 --> 00:11:54.257 And then along comes the Red Sea crisis, which is a crisis, 00:11:54.547 --> 00:11:56.147 you know, not just for shipping. 00:11:56.147 --> 00:12:00.547 It's certainly a humanitarian crisis and a crisis for the people in the region. 00:12:00.877 --> 00:12:03.557 But as we think about the relationship and what it means 00:12:03.557 --> 00:12:04.887 to chemical shipping, can you 00:12:06.797 --> 00:12:07.997 / Rahul: /I think there are two parts to it, right? 00:12:07.997 --> 00:12:12.887 So first of all, Red Sea or the Suez Canal is a global artery 00:12:12.887 --> 00:12:14.077 for maritime trade, right? 00:12:14.627 --> 00:12:18.067 You can call it a super my time highway, the 20, 000 ships which pass through that 00:12:18.697 --> 00:12:23.877 around 20, 25 percent of the global Uh, container trade, then you have almost 8 00:12:23.877 --> 00:12:26.567 million barrels of products and crudes, including chemicals passing through 00:12:26.567 --> 00:12:28.417 it, both eastbound and northbound. 00:12:28.867 --> 00:12:30.387 And then you have LNG LPG, right? 00:12:30.387 --> 00:12:33.017 So it's, it's a major highway, uh, my time, super highway. 00:12:33.357 --> 00:12:37.197 What we have here is we have to understand that, uh, uh, within the 00:12:37.247 --> 00:12:40.797 commercial shipping, there's a principle of freedom of safe navigation, right? 00:12:41.262 --> 00:12:42.612 That's been severely challenged. 00:12:42.652 --> 00:12:45.522 These are commercial ships which are passing through a narrow channel 00:12:45.862 --> 00:12:47.122 and they become an easy target. 00:12:47.452 --> 00:12:50.372 Uh, the only time we've seen that is back in 1980s when we 00:12:50.382 --> 00:12:51.652 had the tanker wars, right? 00:12:51.652 --> 00:12:54.392 But otherwise commercial shipping, despite the wars and all of 00:12:54.392 --> 00:12:55.612 that, continues to flow through. 00:12:56.012 --> 00:12:59.092 So essentially coming here is we've seen almost 80 percent off. 00:12:59.372 --> 00:13:01.192 Container trade, which has been diverted, right? 00:13:01.582 --> 00:13:05.702 What that means is you're spending more time at sea, additional two weeks on. 00:13:05.722 --> 00:13:08.152 So that is high inventory cost, right? 00:13:08.162 --> 00:13:11.352 We did hear about some of the European customers, particularly suffering 00:13:11.352 --> 00:13:15.682 because of this high inventory cost as well as most, uh, time at sea, right? 00:13:16.012 --> 00:13:17.682 So there is a bit of a disruption. 00:13:18.047 --> 00:13:20.847 The good thing was demand is soft as we were talking earlier, right? 00:13:21.127 --> 00:13:24.557 So I think that has helped and some of the capacity has been, uh, coming back. 00:13:24.557 --> 00:13:28.437 So overall the impact on prices, freights are still higher, but they're 00:13:28.437 --> 00:13:32.387 not to the level of it's, it's not as bad as COVID it is bad, but nothing 00:13:32.387 --> 00:13:33.767 comparable to what we had back then. 00:13:34.017 --> 00:13:34.297 / Victoria: /Right. 00:13:34.307 --> 00:13:37.337 So I think most chemical companies would not think that demand 00:13:37.347 --> 00:13:38.677 being soft is a good thing. 00:13:38.977 --> 00:13:42.447 But as you point out, in, in context of combining it with the shipping 00:13:42.447 --> 00:13:48.867 crisis, it certainly has eased some of the, the concerns and the height of 00:13:48.867 --> 00:13:50.307 what the disruption could really be. 00:13:50.807 --> 00:13:51.337 That's a good idea. 00:13:51.407 --> 00:13:51.717 Yeah. 00:13:52.137 --> 00:13:56.227 So, so let's talk about, um, how this, these geopolitical 00:13:56.227 --> 00:13:57.847 challenges start factoring in. 00:13:58.157 --> 00:13:59.657 And there's a couple of things that. 00:14:00.292 --> 00:14:03.312 When I talk with companies, we're talking about, one of which is 00:14:03.312 --> 00:14:09.332 regionalization, and when we look at potentially shifting to more regional 00:14:09.362 --> 00:14:14.752 supply chains, and in some ways regional independence of supply chains. 00:14:15.357 --> 00:14:15.697 / Rahul: /Certainly. 00:14:15.907 --> 00:14:21.017 I think if you go back and the global, if you say the global economy has benefited 00:14:21.017 --> 00:14:24.197 from globalization in that sense, or the world trade, right, since China 00:14:24.217 --> 00:14:28.377 joined WTO, essentially, you've seen a lot of increase in the global trade 00:14:28.907 --> 00:14:33.687 coming out of 2012 14, when we started seeing some of these companies as well 00:14:33.687 --> 00:14:37.637 as some of the policymakers talking about a bit of protectionism, right? 00:14:38.037 --> 00:14:40.587 We started seeing that some of the tariffs which came about. 00:14:40.907 --> 00:14:42.627 So the global trade still continues to grow. 00:14:43.007 --> 00:14:46.567 But COVID actually brought to the fore what we call supply chain resilience. 00:14:46.857 --> 00:14:51.197 And last year at WPC, we actually did that track was the supply chain resilience. 00:14:51.197 --> 00:14:52.967 And this year we're doing decarbonization, right? 00:14:53.267 --> 00:14:55.027 Supply chain resilience is very important. 00:14:55.027 --> 00:14:57.287 And that was challenged massively in the COVID time. 00:14:57.647 --> 00:15:01.087 So there is a small effort towards what you would call 00:15:01.087 --> 00:15:02.787 a French shoring, reassuring. 00:15:03.177 --> 00:15:03.377 Right? 00:15:03.377 --> 00:15:06.587 Some of these, but China still stays at the center of the global 00:15:06.587 --> 00:15:07.627 factory of the world, right? 00:15:07.847 --> 00:15:09.217 It's a very long drawn process. 00:15:09.217 --> 00:15:13.257 We've seen some of that move to Vietnam, India, and so other places, but it's 00:15:13.257 --> 00:15:14.557 a very slow process I would say. 00:15:14.637 --> 00:15:15.397 / Victoria: /Yeah, definitely. 00:15:15.577 --> 00:15:18.797 And one of the things I've seen and have heard is that there's some of 00:15:18.797 --> 00:15:22.917 this regionalization is kind of North South instead of moving East West, that 00:15:22.917 --> 00:15:24.527 we're going to see more North South. 00:15:25.267 --> 00:15:29.197 Which I also think ties into decarbonization, because when I think 00:15:29.197 --> 00:15:34.167 about supply chains and the effect that they have on emissions, and certainly 00:15:34.577 --> 00:15:39.812 Tier 3 emissions, which is, is due to the supply chain, um, It makes 00:15:39.832 --> 00:15:41.922 sense to have shorter supply chains. 00:15:42.152 --> 00:15:44.232 So what do you see happening from that space? 00:15:44.722 --> 00:15:48.312 / Rahul: /That's one of the key topics which we are covering at WPC, right? 00:15:48.362 --> 00:15:52.522 Uh, I'm doing a track chairing essentially called decarbonization of supply chains. 00:15:52.562 --> 00:15:55.512 The first session is about this chemical value chain and the second 00:15:55.512 --> 00:15:56.752 is about the transportation, right? 00:15:57.102 --> 00:15:59.242 It is at the core of what's going to happen over the 00:15:59.242 --> 00:16:00.682 next 15, 20, 30 years, right? 00:16:01.062 --> 00:16:04.522 Uh, if you look at particularly on the transport side, right, and we talked 00:16:04.522 --> 00:16:08.502 about Red Sea, Uh, energy security essentially means that the ships 00:16:08.502 --> 00:16:12.082 which are rerouting now are emitting three times to four times more. 00:16:13.337 --> 00:16:17.307 So in the times of energy security, the sustainability goals take a hit because 00:16:17.317 --> 00:16:20.177 the ships have to reroute, they're speeding up, they're spending more time 00:16:20.177 --> 00:16:21.537 at sea and burning more fuel, right? 00:16:21.937 --> 00:16:24.927 But if you look at what, where we are coming from, as well as what we look 00:16:24.927 --> 00:16:28.547 at, uh, the supply chains, particularly on the transport side are going 00:16:28.547 --> 00:16:32.547 from what you used to call a single bunker or for that matter, bottom of 00:16:32.547 --> 00:16:36.587 the barrel, uh, heavy fuel oil, low sulfur fuel oil to what we have today 00:16:36.587 --> 00:16:39.837 is ammonia, methanol, we're talking about hydrogen, carbon capture, right? 00:16:40.127 --> 00:16:41.467 It's a multi fuel future. 00:16:41.757 --> 00:16:43.117 which is going to be costlier, right? 00:16:43.477 --> 00:16:45.637 So it will have an impact on the chemical value chain. 00:16:45.637 --> 00:16:49.007 It will have an impact on the global supply chains in terms of higher costs. 00:16:49.767 --> 00:16:49.967 / Victoria: /Hmm, 00:16:49.997 --> 00:16:50.717 that's interesting. 00:16:50.717 --> 00:16:56.607 So one of the sessions I was in earlier today talked about how, um, the costs will 00:16:56.607 --> 00:17:00.997 be coming down when we think about energy transition broadly, not specifically about 00:17:00.997 --> 00:17:03.087 the decarbonization of supply chains. 00:17:03.147 --> 00:17:09.627 But as these technologies get more robust, um, higher, uh, higher 00:17:09.627 --> 00:17:11.112 supply availability of energy. 00:17:11.112 --> 00:17:12.178 So, the question is, how do we get to the point where we can actually 00:17:12.178 --> 00:17:13.012 start coming down the cost curve? 00:17:13.242 --> 00:17:16.152 Should we expect to see that in decarbonization of supply chains? 00:17:16.192 --> 00:17:16.362 / Rahul: /We 00:17:16.382 --> 00:17:19.772 should expect to see that, but you have to take the cost up front. 00:17:20.162 --> 00:17:23.892 Right, so the challenge is the green methanol or green ammonia, right, 00:17:23.892 --> 00:17:25.262 so those are very expensive today. 00:17:25.262 --> 00:17:27.752 The capacities have to come in and the industry, particularly in the 00:17:27.752 --> 00:17:30.887 supply chain side, is dealing from that chicken and egg situation, right? 00:17:30.997 --> 00:17:35.027 Whether you will get that alternative fuel today or whether you'll get it 27 and 33. 00:17:35.027 --> 00:17:35.247 Right? 00:17:35.557 --> 00:17:37.327 So the capacities have to be set up. 00:17:37.427 --> 00:17:39.117 The initial cost is going to be higher. 00:17:39.147 --> 00:17:42.457 And as it works in the free market, all of that should settle down. 00:17:42.577 --> 00:17:42.827 Victoria: Yeah, 00:17:43.127 --> 00:17:43.467 awesome. 00:17:43.487 --> 00:17:47.677 So if we think about just three trends that as it relates to Shipping and 00:17:47.677 --> 00:17:49.597 decarbonization, what are the big three? 00:17:49.597 --> 00:17:50.047 What would should we 00:17:50.047 --> 00:17:50.767 be looking for? 00:17:50.827 --> 00:17:53.497 Rahul: I think the first one would be supply chain resiliency. 00:17:53.707 --> 00:17:56.467 I think the three events which we've seen over the last in, in a 00:17:56.467 --> 00:17:59.407 matter of three to four years, have shown you that supply chains being 00:17:59.407 --> 00:18:01.177 resilient is very important, right? 00:18:01.177 --> 00:18:04.327 So the companies are talking about that and we continue to talk about, right? 00:18:04.687 --> 00:18:09.007 You will see some of that, uh, diversification of supply chains, right? 00:18:09.007 --> 00:18:12.487 So the industry is very dependent on a certain regions in that sense. 00:18:12.817 --> 00:18:16.537 A bit of that coming back to, I would say the Americas a bit on the Europe side. 00:18:17.032 --> 00:18:17.702 That would be one. 00:18:18.012 --> 00:18:21.122 Second is everybody would take a part, or stakeholders will be 00:18:21.122 --> 00:18:22.662 in order decarbonization, right? 00:18:22.992 --> 00:18:23.972 So it's a process. 00:18:24.012 --> 00:18:26.922 We have to be patient, but it will take some time, but we'll get there. 00:18:27.582 --> 00:18:28.592 / Victoria: Rahul, thank you for this. 00:18:28.612 --> 00:18:28.842 / Rahul: /Thank you, 00:18:28.842 --> 00:18:29.742 Victoria, for having me. 00:18:31.852 --> 00:18:36.492 / Victoria: The second theme that's really come through is the need 00:18:36.592 --> 00:18:39.672 for alignment and collaboration. 00:18:40.112 --> 00:18:44.981 Um, and this is really around, , standards, right? 00:18:44.981 --> 00:18:46.646 So at the moment, Right? 00:18:46.646 --> 00:18:47.286 We know this. 00:18:47.356 --> 00:18:51.346 Every country has its own set of standards as it relates to reporting, 00:18:51.686 --> 00:18:55.726 um, as it relates to sustainability and decarbonization, which those are 00:18:55.726 --> 00:19:00.236 key big things that are driving us, but it also relates to products and 00:19:00.246 --> 00:19:01.876 how we sell and how we don't sell. 00:19:02.206 --> 00:19:07.236 And the industry groups have done a great job when we think about harmonization 00:19:07.326 --> 00:19:11.856 It's to chemical products and I think about REACH as an example, um, while 00:19:11.856 --> 00:19:16.186 it started in Europe, it certainly got global implications and the industry 00:19:16.186 --> 00:19:22.916 groups have been very effective in driving standardization, um, and alignment and 00:19:22.916 --> 00:19:28.276 creating a system that works, uh, across the industry and across the globe. 00:19:29.376 --> 00:19:34.516 Not true today when we think about sustainability and ESG measurements. 00:19:34.791 --> 00:19:40.911 It's the targets that are, countries and companies are expecting us to hit. 00:19:41.231 --> 00:19:44.911 Marine Schroeder, who's managing director of Stolt Tankers, she 00:19:45.041 --> 00:19:50.421 expressed on stage, she said, "I wish we could turn all of the people 00:19:50.421 --> 00:19:52.401 that we've got working on reporting. 00:19:52.471 --> 00:19:56.491 Um, and the complexities of reporting because the reporting requirements are 00:19:56.521 --> 00:19:59.271 different in every single jurisdiction. 00:19:59.631 --> 00:20:03.441 If we could turn all of those people and that money, that investment 00:20:03.481 --> 00:20:06.781 into those people and their time and resources into innovation. 00:20:07.111 --> 00:20:11.621 Into innovations to figure out how to become, uh, sustainable and decarbonized." 00:20:12.021 --> 00:20:18.091 And, um, Developing the future platform for the industry, both from a product 00:20:18.091 --> 00:20:21.771 perspective, from a supply chain and logistics perspective, and more. 00:20:22.021 --> 00:20:25.471 And so that is, you know, a source of real frustration that I've certainly 00:20:25.471 --> 00:20:31.491 heard the theme coming through from stage is, um, that currently we 00:20:31.491 --> 00:20:35.011 don't have a lot of great alignment, um, on some of these standards. 00:20:35.506 --> 00:20:37.286 across the globe and we need to get there. 00:20:37.556 --> 00:20:42.996 The second piece that goes with that is really the request that we are 00:20:42.996 --> 00:20:50.706 less prescriptive in terms of how we get to carbon and greenhouse gas 00:20:50.706 --> 00:20:55.876 reductions and instead be and instead of being prescriptive about the 00:20:56.086 --> 00:20:59.116 how be prescriptive about the what. 00:20:59.676 --> 00:20:59.986 Right. 00:21:00.016 --> 00:21:05.256 And so allow the chemical industry and the creative minds across the industry 00:21:05.256 --> 00:21:12.626 to identify the best and the optimal products and technologies and solutions 00:21:12.976 --> 00:21:22.096 to get us to a more circular, lower carbon, um, profitable and world that 00:21:22.096 --> 00:21:23.756 we're all looking to grow and be part of. 00:21:23.756 --> 00:21:28.456 The third piece of that and the third theme that really comes through 00:21:28.536 --> 00:21:32.676 throughout the conference again, both from on stage and off stage as I talk to 00:21:32.706 --> 00:21:38.076 people across the conference is the fact that the chemical industry is a really 00:21:38.086 --> 00:21:40.306 vital part of the energy transition. 00:21:40.306 --> 00:21:46.696 And in fact, I spoke with Tony Potter from S& P Global and I'm going to include a 00:21:46.696 --> 00:21:49.046 clip with Tony, so stay tuned for that. 00:21:49.046 --> 00:21:57.676 But Tony, um, talked about how we actually need more chemicals in a low carbon 00:21:57.996 --> 00:22:01.286 energy transition world when we think about moving away from our traditional 00:22:01.286 --> 00:22:07.056 energy sources like oil and into energy sources like solar and wind and 00:22:07.066 --> 00:22:10.166 hydrogen We need more chemical products. 00:22:10.166 --> 00:22:17.785 Hi, I'm here talking with Tony Potter, who is the head of 00:22:17.785 --> 00:22:20.280 chemicals for S&P Global so, Great. 00:22:20.630 --> 00:22:24.100 Tony, we're, we seem to be living in a world of oversupply. 00:22:24.100 --> 00:22:26.190 That's certainly a concern when we talk to people. 00:22:26.530 --> 00:22:31.180 Um, there's been a big discussion around decarbonization and 00:22:31.190 --> 00:22:32.920 what it means for chemicals. 00:22:32.920 --> 00:22:37.460 And I think some people see the pros of it and others perhaps see the cons of it. 00:22:37.780 --> 00:22:41.480 Um, but what do you see as the role of chemicals in the energy 00:22:41.480 --> 00:22:43.880 transition and in decarbonization? 00:22:43.880 --> 00:22:44.140 / Tony Potter: Okay. 00:22:44.140 --> 00:22:46.050 Well, thanks for the opportunity to talk with you. 00:22:46.050 --> 00:22:46.370 Okay. 00:22:46.510 --> 00:22:52.700 Um, I think chemicals are absolutely essential in the path to decarbonization. 00:22:52.700 --> 00:22:55.880 We no longer just talk about the energy transition. 00:22:55.880 --> 00:22:58.630 We talk about an energy and materials transition. 00:22:59.430 --> 00:23:03.360 That's a reflection that to get to net zero All materials of 00:23:03.360 --> 00:23:08.360 fabrication of construction need in themselves to, to decarbonize. 00:23:08.720 --> 00:23:13.200 Um, thermoplastic start off as a relatively low energy intensive 00:23:13.210 --> 00:23:18.680 product relative to iron, steel, aluminum, glass, uh, whatever. 00:23:19.155 --> 00:23:24.285 Um, and, uh, whilst the chemical industry needs to decarbonize 00:23:24.285 --> 00:23:29.535 its processes, um, chemicals and thermoplastics play a key role in that. 00:23:29.955 --> 00:23:34.935 And in most scenarios that we look at, uh, we see people substituting these 00:23:34.935 --> 00:23:37.695 higher energy materials, uh, for plastic. 00:23:38.025 --> 00:23:41.235 Uh, you can't lightweight any form of transportation. 00:23:41.570 --> 00:23:42.570 Without plastic. 00:23:42.570 --> 00:23:44.230 No one's invented a paper car yet. 00:23:44.560 --> 00:23:48.620 Um, you don't build wind turbines without plastic and you don't 00:23:48.620 --> 00:23:50.780 build solar panels without plastic. 00:23:51.420 --> 00:23:52.540 / Victoria: That's a great perspective. 00:23:52.560 --> 00:23:56.420 Uh, and I think, you know, the general public doesn't understand much of that. 00:23:56.450 --> 00:24:01.050 Even, uh, I've had conversations recently in the recent past about, 00:24:01.050 --> 00:24:02.700 you know, uh, fuel tanks, right? 00:24:03.070 --> 00:24:04.950 Fuel tanks today are all made out of plastics. 00:24:05.430 --> 00:24:09.945 Um, which is why we're Nobody has rusted out fuel tanks in their cars anymore. 00:24:10.095 --> 00:24:13.465 Whereas, you know, probably two decades ago, that was a major issue for, you know. 00:24:13.600 --> 00:24:15.440 Especially if you are working on an old car. 00:24:15.930 --> 00:24:19.080 Tony Potter: And of course as we move to EVs, you don't need that fuel tank. 00:24:19.270 --> 00:24:19.640 That is true. 00:24:19.860 --> 00:24:25.920 But as we study the transition to EVs, uh, maybe the composition of 00:24:25.920 --> 00:24:31.750 the plastics changes slightly, but net we think, uh, we think that more 00:24:31.750 --> 00:24:33.770 plastic is used in an EV than in an I. 00:24:33.770 --> 00:24:34.220 C. 00:24:34.230 --> 00:24:34.240 E. 00:24:34.330 --> 00:24:34.690 / Yeah, that's 00:24:34.870 --> 00:24:36.340 Victoria: really, that's really interesting. 00:24:36.340 --> 00:24:40.020 There's a lot of conversation when I talk with people wondering about are we ever 00:24:40.020 --> 00:24:42.170 going to reinvest in chemicals, right? 00:24:42.170 --> 00:24:45.100 So we feel that we're overbuilt certainly in the commodity 00:24:45.100 --> 00:24:46.810 chemicals and in plastics. 00:24:46.860 --> 00:24:49.090 Um, operating rates are low. 00:24:50.000 --> 00:24:52.730 We've built for a world that's not this current cycle. 00:24:52.750 --> 00:24:55.210 Of course, we also know that our, you know, we tend to be very 00:24:55.210 --> 00:24:59.920 cyclical and we like to, um, in some cases, buy high and sell low. 00:24:59.920 --> 00:25:02.290 It seems like when we're talking about investments in 00:25:02.290 --> 00:25:03.170 the chemical industry, right? 00:25:04.350 --> 00:25:05.450 Are we going to be investing again? 00:25:05.450 --> 00:25:05.710 What do you see? 00:25:06.780 --> 00:25:08.290 / Tony Potter: Yeah, I mean, I think it's inevitable. 00:25:08.320 --> 00:25:12.670 Every, uh, every cycle, someone says this is the end of cycles, and it never is. 00:25:13.070 --> 00:25:17.245 Um, look, this downturn will End some point. 00:25:17.295 --> 00:25:21.145 It is a long, slow downturn, something like ethylene 00:25:21.145 --> 00:25:23.505 operating rates are down to 80%. 00:25:23.795 --> 00:25:28.505 It's a long, slow haul back to reinvestment type margins until 00:25:28.505 --> 00:25:32.385 capacity utilization tightens, you know, towards the end of the decade. 00:25:32.925 --> 00:25:38.150 But beyond that, Look, we see a world where oil demand peaks, uh, 00:25:38.190 --> 00:25:42.400 around the end of the decade and then slowly starts to go into decline. 00:25:42.720 --> 00:25:45.230 We see no such peak for petrochemicals. 00:25:45.490 --> 00:25:47.840 We're doing forecasts out more than 30 years. 00:25:47.840 --> 00:25:51.040 We've never found anything that we could describe as peak polymer. 00:25:51.420 --> 00:25:54.600 Petrochemical demands will keep on growing as long as the 00:25:54.600 --> 00:25:58.830 population grows and as long as the wealth of that population grows. 00:25:59.400 --> 00:26:01.760 / Victoria: That seems a little bit contrarian. 00:26:01.780 --> 00:26:04.930 I mean, I, I agree with you on the fact that we all seem to like to use 00:26:04.930 --> 00:26:10.270 plastics, and yet there are so many, um, you know, I think about the plastics 00:26:10.280 --> 00:26:13.970 treaty, which was really around, it went from, in fact, we heard Jim Fitterling 00:26:13.980 --> 00:26:17.950 talk this morning about it going from being about reducing plastics pollution 00:26:18.240 --> 00:26:24.120 to reducing plastic, and now we're back to reducing plastics pollution, um, I 00:26:24.130 --> 00:26:28.170 think there's some people that would say that's a big, uh, that this continued 00:26:28.170 --> 00:26:30.565 growth pattern Maybe cannot continue. 00:26:33.355 --> 00:26:37.205 / Tony Potter: Cannot, but what do you grow with if you don't grow with plastic? 00:26:37.245 --> 00:26:42.225 Okay, so, uh, there's no doubt the world has a plastic waste problem and 00:26:42.225 --> 00:26:46.205 it needs dealing with and legislation is likely to be passed to deal with that. 00:26:46.205 --> 00:26:50.765 Whether it's international treaty or individual governments, uh, plastic 00:26:50.765 --> 00:26:52.565 in the wrong places is a problem. 00:26:53.350 --> 00:26:59.530 Um, uh, there's no doubt that the, as part of the energy and materials transition, 00:26:59.540 --> 00:27:04.040 we need to build a more circular economy and plastics recycle is part of that. 00:27:04.620 --> 00:27:07.740 But at the moment, if I take polyethylene as an example, probably 00:27:07.760 --> 00:27:13.050 seven or eight percent of polyethylene globally is, uh, mechanically recycled. 00:27:13.080 --> 00:27:13.350 Okay? 00:27:13.790 --> 00:27:17.560 Um, we see that number almost tripling in the next ten years, but the 00:27:17.610 --> 00:27:22.605 underlying demand growth for polyethylene is still such that we see virgin 00:27:22.615 --> 00:27:24.755 polymer demands continuing to grow. 00:27:25.025 --> 00:27:28.825 And one of the issues is actually building out the supply chain to 00:27:28.855 --> 00:27:33.915 collect, to sort, to clean waste, which in itself is carbon intensive. 00:27:34.265 --> 00:27:38.695 Um, you know, unless you build a green supply chain, there's actually a danger 00:27:38.695 --> 00:27:40.465 you expend more carbon than you save. 00:27:41.415 --> 00:27:44.775 / Victoria: Right, because it is intensive to get the recycling and the mechanical 00:27:44.775 --> 00:27:49.125 piece of it, and it, it doesn't exist in many places, and even where it does, 00:27:49.970 --> 00:27:51.630 It's not always fully utilized, right? 00:27:51.630 --> 00:27:55.740 I certainly know that in my own community, many people don't recycle, recycle, even 00:27:55.740 --> 00:27:57.910 though we have curbside recycling, right?/ 00:27:57.920 --> 00:28:03.500 Tony Potter: And in, in the U S there are over 80 different types of legislation, 00:28:03.500 --> 00:28:08.640 not even consistent at the state level, but from municipality to municipality, 00:28:08.830 --> 00:28:10.860 what can and can't be recycled. 00:28:11.180 --> 00:28:11.710 It's crazy./ 00:28:11.870 --> 00:28:12.980 It's, it's complicated. 00:28:13.200 --> 00:28:14.160 It's very complicated. 00:28:14.160 --> 00:28:15.670 Well, Tony, thank you for joining us. 00:28:15.670 --> 00:28:16.950 I appreciate your perspective. 00:28:17.800 --> 00:28:18.280 / You're welcome. 00:28:18.280 --> 00:28:19.600 Victoria: So that's one factor of it. 00:28:19.640 --> 00:28:24.850 And just the continued evolution of products, innovation, 00:28:25.735 --> 00:28:27.095 Lifestyles, et cetera. 00:28:27.095 --> 00:28:29.765 So I think, you know, there's no doubt that, and this was a theme 00:28:29.765 --> 00:28:32.505 that came through is that the energy transition and the chemical 00:28:32.505 --> 00:28:35.335 industry are clearly hooked together. 00:28:35.795 --> 00:28:38.265 And we're going to be seeing more of that. 00:28:38.275 --> 00:28:40.355 So I think there's an opportunity for innovation. 00:28:40.355 --> 00:28:44.135 We've heard from a number of people across on stage, Karen McKee from Exxon Mobil, 00:28:44.555 --> 00:28:47.925 others about the innovation that's going to be coming through from the industry, 00:28:48.285 --> 00:28:51.025 In order to enable the energy transition. 00:28:51.325 --> 00:28:55.945 So to sum it up, I would say, you know, the, the pulse and the theme 00:28:55.945 --> 00:28:58.665 of the week is the future is bright. 00:28:59.155 --> 00:28:59.675 There is an upturn. 00:29:00.025 --> 00:29:01.885 There is a lot of positivity. 00:29:02.265 --> 00:29:06.215 There is a concern about how are we paying for it and who is paying for it. 00:29:06.465 --> 00:29:12.405 And are the experts in the industry, um, scientists, engineers, technologists, to 00:29:12.415 --> 00:29:21.305 really develop optimal solutions for us, for the world, as it relates to energy, 00:29:21.345 --> 00:29:23.745 greenhouse gas emissions reductions, etc. 00:29:24.065 --> 00:29:26.235 And, clearly a theme of who's paying for it. 00:29:26.595 --> 00:29:31.555 Right, so I think everyone, um, is clear that the economics have to work, and 00:29:31.555 --> 00:29:36.655 that's maybe a big shift, this fact that we actually need to have, we're shifting 00:29:36.655 --> 00:29:38.615 to where this has to make economic sense. 00:29:38.665 --> 00:29:40.325 It just can't make theoretical sense. 00:29:41.135 --> 00:29:45.785 Sustainability, um, our reduction in greenhouse gas emissions by 00:29:45.785 --> 00:29:49.475 2050 makes perfect sense in theory. 00:29:50.075 --> 00:29:50.655 However. 00:29:51.080 --> 00:29:55.460 It also has to make economic sense for companies, for governments, 00:29:55.470 --> 00:30:00.060 for individuals, um, in order to support the drive where we're going. 00:30:00.060 --> 00:30:05.910 So anyway, um, that's my summary from WPC 2024. 00:30:05.910 --> 00:30:06.860 I hope you've enjoyed it. 00:30:07.130 --> 00:30:11.290 If you attended, send me a note, let me know what you heard, what 00:30:11.290 --> 00:30:13.030 other themes came through for you. 00:30:13.050 --> 00:30:15.770 And I'd love for you to share that with me. 00:30:16.120 --> 00:30:16.510 Thanks. 00:30:18.479 --> 00:30:20.259 We've come to the end of today's podcast. 00:30:20.669 --> 00:30:23.219 We hope you enjoyed your time with us and want to learn more. 00:30:23.628 --> 00:30:25.888 Simply visit TheChemicalShow. 00:30:25.898 --> 00:30:28.648 com for additional information and helpful resources. 00:30:29.338 --> 00:30:33.388 Join us again next time here on The Chemical Show with Victoria Meyer.