Feature article - Survival of the fittest: Weathering downturns and transition in the chemical industry

4th August 2025

Submitted by:

Andrew Warmington

Stephen Ottley, head of the Chemical and Pharmaceutical practices for global supply chain and operations consultancy Maine Pointe, looks at the key questions chemical CEOs need to ask right now

In May and June, most listed Chemical companies announced their Q1 2025 results. While some fared better than others, there were several common threads, notably:

Uncertainty created by trade tariffs, with the true impact unknown
Softening demand varied by region and commodities, most notably in Europe
Modified or removed year-end guidance

At the same time, multiple chemical CEOs cited the prospect of a longer-term downturn. Peter Vanacker of LyondellBasell called the current downturn “the longest … I have seen in my career”, while Phillips 66’s Mark Lashier, said it was “one of the longest downturns that we’ve seen in 30 or 40 years”.

Dow Chemical just announcing its first Q2 major results: a $800 million loss, 9% drop in share price in pre-trading, and its dividend halved. CEO Jim Fitterling said that the additional cost reduction actions it is taking “are focused on reinforcing our long-term competitiveness as we continue to navigate this prolonged economic downturn”.

With other chemical company earnings likely to follow suit, all this is indicative of more than an industry downturn. Companies need to embark on a strategic transformation to evolve and remain competitive.

Changing winds: The post-Covid years

When Covid-19 virtually initially killed consumer demand in 2019 and 2020, government reaction was to pump money into the economy to boost demand, as many consumers were still employed and receiving stimulus checks. The result was a boom in consumer spending, reflected in the inflated earnings of many chemical companies during that period.

By 2022, company margins exploded to over 20%, but the inflation had to be tamed. As interest rates rose and disposable income had been spent, demand waned. During this time, ethane and propane exports had been rising as the US shale industry continued to grow.

Between 2019 and 2025, ethane exports grew from 100,000 barrels/day to over 600,000. Similarly, US exports of LPG have quadrupled, giving a second source of advantaged feedstock to the global petrochemical industry.

New competition has also been growing in China, as the country became a net exporter of petrochemicals. Consequently, the ample supply and the proliferation of cheap feedstock has led to the current situation, with margins at their weakest in over 15 years.

Downturn or transition?

This in turn led to several common mitigating action plans from almost all major chemical companies in Q1 2025:

Continued restructuring (layoffs)
Significant one- to three-year cost reduction plans
Multiple internal ‘self-help’ initiatives
Supply chain restructuring (buy local for local, onshoring)
Footprint consolidation and plant closures (particularly in Europe)
Disposal of non-core and less profitable assets
Non-strategic capex plans and projects placed on hold

There are multiple recent examples of chemical companies mothballing or selling off European assets, including:

Westlake: Closing Pernis facility in the Netherlands
Dow: Closing three upstream plants in Europe (an ethylene cracker in Böhlen, Germany, chlor-alkali & vinyl assets in Schkopau, Germany, and a basics siloxanes plant in Barry, UK will be shuttered in the next two years)
LyondellBasell: Selling under-performing European assets and paying cash to buyers
ENI: Closing Italian ethylene crackers

Global chemical companies are also feeling the pressure to reassess strategies, given the EU’s increasing production costs, lacklustre demand, and stringent environmental regulations.

Survival of the fittest

Over the next eight weeks or so from the time of writing (early August) large chemical companies will be announcing Q2 results. What should we expect? Key themes and upbeat messaging expected include:

Continued demand uncertainty
Progress on existing cost saving and rationalization plans
Incremental cost savings targets
Accelerating restructuring and footprint consolidation
Tariffs: Uncertainty remains, with one step forward, two steps back
Adjusted or lowered FY 2025 guidance

On their own, the expected Q2 announcements are normal courses of action in a downturn. However, for the downturn cycle to turn upward, the industry must first transition from oversupplied to undersupplied.

Ordinarily, capacity rationalizations are just the way to do that. However, in 2026, there will be plenty of new low-cost capacity entering the market. Three large-scale facilities in Russia, Qatar and the US Gulf Coast are expected to enter operations by year-end.

These facilities will add over 8 million tonnes/year of mainly ethylene and polyethylene capacity, while leveraging regions with access to low-cost energy supplies. China is also adding capacity at an impressive rate. It currently plans to bring over 20 million tonnes/year of mostly propylene capacity online by 2030.

Combining these factors, the market appears well supplied. This statement is supported by Dow Chemical’s recent decision to postpone the proposed Path2Zero ethane cracker in Fort Saskatchewan - hence the need for strategic transformation across the industry.

Outlook

So what now? The critical question is whether chemical companies are doing enough now to reposition themselves for this transition - and more importantly, are they doing enough quickly enough? Critical questions for chemical CEOs to consider now:

Are our initiatives truly strategic and transformational?
Are our cost reductions substantive enough?
What incremental opportunities are there?
How can we move quicker?
Do my teams have the needed skills and capacity?
What opportunities does transformation offer (acquisitions, disposals, agility, etc.)?

In a downturn, discretionary spend (including consultant spend), is usually one of the first cuts to be made. However, fewer than 50% of internal cost reduction measures fail to reach their objectives in the required timelines. Questions also always remain whether these initiatives are actually cost-cutting or cost-avoidance.

Now is the time to consider selectively deploying third party resources that can work with your team to provide horsepower to your strategic initiatives, deliver real savings, and accelerate and find incremental value four to six times quicker than internal initiatives alone. Skin in the game is also becoming more critical, and clear year one returns on investment are crucial.

As the industry faces a pivotal time marked by transition, the question is no longer ‘How do we survive?’ but ‘How do we evolve? Chemical companies must respond with agility, bold decision-making, rapid execution and openness to strategic change.

Contact:

Stephen Ottley

Managing Director & Head of Chemical and Pharmaceutical Practices

Maine Pointe

[email protected].