What does the delayed Dow project in Alberta tell us about the state of the chemicals industry?

A project executive would rather eat a bag of rusty nails than announce a delay of a multi-billion-dollar mega-project. However, that is what was announced by Dow’s CEO last week as part of the Q1 earnings call. Reason provided was to preserve cash. Along with the project delay, Dow announced an initiative to save cash cost amounting to 300 M$/y in 2025 and an additional 700 M$/y in 2026.

A day later, LyondellBasell announced weak Q1 earnings along with its own Cash Improvement plan for 2025 amounting to 500 M$/y.

To put these results into perspective and draw the “so what” conclusions for the resin buyer, BIC Advisory Group compared the Q1 results to the last 5 years (Chart below). Indeed, the softening earnings are a bad omen for chemical suppliers and another sign of a deepening Bottom-Of-Cycle in the industry.

So what to expect if you are on the #polyethylene #polypropylene resin buying side in 2025?

Casualty # 1 of these cash preservation plans is typically the quality of Customer Service provided as that service is now delivered by less people that are in a sour mood with reduced travel budgets for customer visits.

Casualty # 2 is the pragmatic approach that “it takes money to make money”. Look for chemical producers to watch every penny and be very strict on “auxiliary fees” from truck delivery upcharges to rail car dwell demurrage and to paying out un-earned rebates. 

The Chemicals business has always been cyclical where supply and demand is rarely in balance. It is feast or famine! Unfortunately, the lack of supplier investment discipline in the last 7 years is now combining with a softening demand from a slowing economy. This brew will be hard to digest for many!

Contact BIC Advisory Group for assistance in unlocking the opportunities coming out of a deepening Bottom-Of-Cycle in the #chemicalindustry.