🏭 The Column: March 28, 2025

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Good morning. Last week I went to the World Petrochemical Conference by S&P Global in Houston (it was great!) and got up to speed on the latest vibes. In short: nobody is loving the fact that China has overbuilt capacity for virtually every petrochemical, which squeezes margins for pretty much everyone. It’s a broad generalization, but I gathered that most of the plants in China are hardly covering their variable costs, many plants in Europe are operating at a loss, and US producers are still profitable thanks to cheap US natural gas. So to stay on theme, today we’re talking about a plant closure in Europe!

Things Happened:

Making less propylene oxide and styrene

In the grand scheme of things, plant closures are pretty rare—even though the chemical industry is susceptible to overbuilding capacity, it’s a lot more common to just run at lower utilization rates until demand catches up. But high energy prices in Europe and a huge overbuild in China has made the situation dire for many western producers, and for western PO producers in particular: global PO capacity has increased 40% in the last 6 years, and all of that additional capacity was built in China. And while PO imports from Asia into Europe aren’t common (PO is dangerous to handle), it is common to import cheap PO derivatives from Asia, like polyether polyols (which are combined with isocyanates like MDI to make polyurethanes), and that’s what has caused PO demand in Europe to shrink over the last few years. So after deciding to shut down a year ago, LyondellBasell and Covestro are now going to permanently close their joint propylene oxide and styrene monomer (PO/SM) plant outside the Port of Rotterdam in the Netherlands. It’s one of many plant closures we’re seeing across the globe, but it’s notable because the plant is so large (315 KTA) and new (it was built in 2003). And while it sounds insane to demolish a $0.5-1 billion plant built just 20 years ago, it’s what makes the most sense: newer plants aren’t fully depreciated and have higher fixed costs per pound of material produced—so unless the new plant enables dramatically lower variable costs, it’s the new one that will be on the chopping block. (For what it’s worth, the plant shut down doesn’t mean LyondellBasell is doomed—cheap natural gas in the US has given them the confidence to expand propylene production at their site in Channelview, Texas.) [LINK]

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Other Things Happened:

BASF started up its first recycled polyamide 6 plant, expanded their polyester and polyurethane resin production in China, and expanded their aminic antioxidants production in Mexico. Kemira and IFF formed a joint venture to produce bio-based materials (I’m not sure what they are making). Braskem will be supplying SGCC with ethanol for SGCC’s bio-based ethylene plant in Thailand. Agilyx formed a joint venture with the founder of Plastic2Oil called Plastyx. Ecovyst acquired Cornerstone’s sulfuric acid assets from their recently shut down site in Louisiana. Röhm started up their new ethylene-based MMA plant in Bay City, Texas. OQ Chemicals plans on starting up its new heptanoic acid plant in Germany this summer.