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Petrochemical makers fret over their future

Credit: LyondellBasell Industries

LyondellBasell Industries—its Channelview, Texas, plant is shown above—aims to derive more of its sales from recycled and renewable plastics.

It is facing its worst business downturn in a generation because producers overbuilt capacity just as the global economy stalled during the COVID-19 pandemic. The problem is particularly bad in Europe, where nearly every major petrochemical producer is reviewing assets for closure.

At the same time, the industry is navigating the energy transition away from fossil fuels, carefully deciding which low-carbon projects to take on, which to shelve, and which raw materials to bet on for the future. Complicating the process is a new US administration that is creating volatility over trade and decarbonization policy.

These were themes at the 40th World Petrochemical Conference, hosted by S&P Global and held in Houston March 17–21. The event drew nearly 1,500 attendees from the petrochemical industry and from adjacent sectors such as plastic products, trading, energy, and finance.

A dramatic moment came early in the conference. “Is green hydrogen dead?” Mark Eramo, copresident of S&P Global Commodity Insights, asked Bob Patel, a former CEO of LyondellBasell Industries and W. R. Grace. Patel is a current director of Air Products & Chemicals, which recently pulled out a pair of projects to make green hydrogen via water electrolysis powered by alternative energy.

“It’s difficult to see a business model today without subsidies,” Patel said. For all sustainability projects, he said, factors like technology, subsidies, and regulations create uncertainties, and investments should be able to stand up to them. “If you can’t see a path to a clear, self-sustaining economic model over—let’s say over 5–10 years, maybe not 0–5—then likely it is not something you should be doing.”

Later, Eramo said in an interview that blue hydrogen—which refers to hydrogen made by reforming hydrocarbons and capturing and storing the resulting carbon dioxide emissions—makes more sense than green hydrogen as a low-carbon feedstock and fuel because it is much less expensive to produce. He pointed to the ethylene cracker complex Dow is building in Alberta, which will use hydrogen instead of natural gas as a furnace fuel. “It's just a question of, you know, what is fit for purpose,” Eramo said.

John Roberts, a stock analyst with Mizuho Americas, said in a presentation at the conference that Wall Street has soured on sustainability. He brought up four plastics sustainability start-ups—Danimer Scientific, Loop Industries, Origin Materials, and PureCycle Technologies—that raised nearly $3 billion in total when they went public at the beginning of this decade. “Wall Street can throw a lot of money at something very quickly when they get excited about it,” Roberts said.

The stock prices of all four companies have since dropped to a small fraction of their peak values—an indication that they were unable to meet Wall Street’s lofty expectations. Danimer even filed for bankruptcy in March.

“Part of what is going on with these recycling, circular sustainability plastics companies is just a lack of enthusiasm for sustainability broadly,” Roberts said, pointing to dismal stock performance for solar and lithium firms. Wall Street is now focused on artificial intelligence and data centers, he said.

A few speakers at the conference maintained that their sustainability projects are, as Eramo put it, fit for purpose. “We will only invest in things that generate value,” said Kim Foley, executive vice president of global olefins, polyolefins and refining at LyondellBasell. That includes its own plastics pyrolysis process and the German mechanical recycler APK, which Lyondell bought as part of its push to offer 2 million metric tons per year of recycled or renewable plastic resins by 2030.

In 2024, LyondellBasell’s sales of such plastics increased by 65%. Foley maintained that some are more profitable than conventional resins. “There is clearly market demand for these solutions,” she said.

Braskem CEO Roberto Ramos is in the same camp. The Brazilian company has been making polyethylene from ethanol for more than a decade. It has positioned the green polyethylene as a prestige product for high-end applications like packaging for cosmetics and personal care products. “It appeals to a client that would buy the green polyethylene but would not buy the fossil fuel polyethylene,” Ramos said.

The firm has been expanding capacity for the polymer but is cautious about its next steps. In 2023, Braskem said it was considering a US project to make polypropylene from ethanol. “I am not convinced this can work and one can make money off of it,” Ramos said at the conference. Instead, Braskem is pursuing biobased glycols and acetone.

Sustainable investments, while important for the future, will do little to help the industry today. It is facing a historic downturn because of overinvestment in new capacity. Tony Potter, vice president of chemicals, derivatives, plastics, and materials at S&P, told the audience that producers of six major chemicals will add a combined 23.4 million metric tons (t) per year of capacity worldwide from 2019 through 2034. Over the same period, demand will increase by only 17.2 million t per year.

The effects have been devastating for some chemical businesses. For example, ethylene cracker operating rates declined from a high of 90% in 2019 to 80% in 2023. At such levels, Potter said, there is “little to no margin” in making ethylene from naphtha, as producers in Europe and Asia do.

“It’s only the third time since the 1970s we have seen a trough this long,” said Dow CEO Jim Fitterling. The downturn isn’t due only to overbuilding. Global economic growth has been below 3% annually for the past 3 years as key markets such as housing construction have slumped, he said.

Fitterling also touched on a topic that is increasingly frustrating for petrochemical makers: Europe. Dow is on a growing list of firms, including LyondellBasell, Eni, and Shell, that are reviewing European plants for possible closure or divestiture.

“Europe had a thriving chemicals industry, but what happened is that you had downstream customers leave,” Fitterling said. In what he called a “wave of deindustrialization,” industrial chemical demand in Europe has declined 20% since the COVID-19 pandemic. “Companies have left, and they are not coming back, so the industry has to rationalize and rightsize around that new footprint.”

In addition, Fitterling said, Europe is hamstrung by higher costs than in other regions. It relies on naphtha as a feedstock, versus cheaper natural gas in North America and the Middle East, and has a steep regulatory burden.

Ilham Kadri, CEO of the Belgian specialty chemical maker Syensqo and president of the European Chemical Industry Council, a trade group, said Russia’s invasion of Ukraine had been a “wake-up call” for European industry because it cut off the supply of cheap Russian natural gas. “The chemical industry—the mother of all industries—has been facing some of the highest energy costs, up to 4–4.5 times compared to other regions,” Kadri said.

Kadri added that since she joined Syensqo’s predecessor company, Solvay, in 2019, the European Union has added 1,400 pages of regulation on the chemical industry. “We need to eliminate red tape,” she said.

Kadri was asked about the tariffs that the Donald J. Trump administration has threatened to impose on European goods, in addition to similar rates on Canadian and Mexican products. The threat is not the first one. For example, the Mexican and Canadian tariffs were supposed to go into effect in February and then in March before they were pushed to April. The uncertainty is complicating Syensqo’s efforts to get ready for trade barriers, Kadri said: “The stop and go is where the market gets a bit anxious.”

We need to make sure we are not collateral damage in a trade war.

Chris Jahn, CEO , American Chemistry Council

Chris Jahn, CEO of the American Chemistry Council, said the role of his trade group is to educate the Trump administration about the importance of the chemical industry, particularly its position as a major exporter. Jahn seeks to exempt duties on raw materials that the US industry needs and to prevent retaliatory tariffs on US chemical products. “We need to make sure we are not collateral damage in a trade war,” he said.

As it weathers the current downturn and braces for a possible trade war, the US petrochemical industry also is confronting longer-term threats. Since the early 2010s, the US has had a cost advantage predicated on the shale oil and gas boom and the resulting abundance of cheap ethane extracted from natural gas liquids.

At the conference, Kurt Barrow, vice president of oil, fuels, and chemicals research at S&P, said production of natural gas liquids should soon plateau. From 2005 to 2025, US supply rose by 95%. He forecast that the next decade will see only a 12% increase.

By the 2030s, ethane production will peak—particularly in areas that supply the petrochemical industry with feedstock, such as the Permian basin in Texas. If ethane ability does indeed level, the impact could be profound.

Firms will locate fewer projects in the US and will have to pay more for ethane to keep previously exported material from leaving the country. Eventually, the US will have to again start cracking naphtha, from which it draws no advantage. As hard as this downturn has been, future ones may hit the US industry even harder.

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