The global chemical industry struggled in 2023. The year was marked by rising inflation rates and low demand from major markets. With China still in recovery, the growth the industry was hoping for never came to fruition. In 2024 we expect things to stay the course and see no drastic changes up or down in the coming year. Key trends to look out for in 2024 are as follows:

  1. The global economic slowdown will continue with GDP growth expected to fall to 2.7% year-on-year (yoy) in 2024 down from 3.5% yoy in 2023 significantly impacting the chemical industry. Inflation and interest rates remain high as we head into 2024. Both the U.S. and Europe are at a high risk of entering recessions this year. As mature markets, this will have significant impact on demand for chemicals.
  2. Lower growth rates than expected in China could result in a muted demand for petrochemicals. China’s petrochemical consumption dominates global demand and influences the trajectory of the market at large. Faced with a declining birthrate and an aging population China’s economy is slowing down quicker than expected. Many recent polyolefin capacities were built with the expectation of 6-7% growth in demand from China, but growth rates for 2024 and beyond are only expected to be 3% or less.
  3. After a downturn in 2023 the chemicals industry is expected to bounce back slightly in 2024. The American Chemistry Council (ACC) estimates a 1.5% increase in U.S. chemical output in 2024 after an estimated 1.0% decrease in 2023. Realized growth will likely be determined by how the industry adapts to energy transition and capitalizes on the growing market. With several projects in clean energy, electric vehicles, biomanufacturing, and semiconductors 2024 represents a chance for the chemical industry to capitalize on energy transition trends.
  4. Oversupply will likely overshadow any rebound in polymer demand we see this year. Oversupply of PE and PVC is expected due to decreased global demand. New PE and PVC start-ups in the U.S. and China that were originally expected in 2022 have been delayed to early this year and could be delayed even further if demand stays low. China and the U.S. could both be net exporters of PE and PVC in 2024. Operating rates are expected to only be 80% of global capacity. With slight growth expected in both automotive and construction, PP will see increased demand in 2024.
  5. U.S. capex is expected to slow down to 1.1% growth in 2024 from the 4.3% we saw in 2023. We expect a capital spending of $25-$30 billion in the U.S. chemical industry in 2024. The U.S. chemical industry will stay relatively flat in capital spending from 2023 to 2024. Capex is expected to pick back up in 2025 and beyond.
  6. Geopolitical tensions will likely continue to impact supply chains in Europe while U.S. chemicals stay cost advantaged. Continued strain on supply chains caused by the war in Ukraine may result in price instability for NGLs, naphtha, and other feedstocks. While European naphtha and NGL prices are currently down compared this time last year they still have not cooled down to pre-war levels. U.S. chemicals are expected to stay cost advantaged due to relatively cheap natural gas and ethane feedstocks. As a result, we are seeing a new wave of polyolefins investment in the U.S.
  7. Regulations on packaging and plastic products are tightening in 2024. Governments are cracking down on plastic waste including post-consumer recycled (PCR) content laws and single-use plastic bans. This will drive demand plastic circularity and plastic alternatives. Italy joins other European nations with its own tax on consumption of single-use plastic products being implemented this year. Many U.S. states including California, Maryland, and Minnesota have implemented bans on intentionally added PFAS in food packaging among other products.
  8. Look for majors to continue investing in decarbonizing their operations. A major driver to decarbonizing the chemicals industry is having access to clean hydrogen whether it be blue or green. Progress is expected on several blue and green hydrogen projects this year many of which are also driven by increased demand from the fertilizer industry for low-carbon ammonia. Dow will break ground soon on the company’s net-zero steam cracker in Canada that utilizes blue hydrogen. IRA initiatives could drive investment into similar projects in the U.S. BASF, SABIC, and Linde are also hoping to have their joint electric steam cracker furnace ready for commercialization by the end of the year.
  9. Expect a focus on circular economies in key markets including polymers. Advanced plastics recycling capacity is expected to increase in 2024 as polymer producers aim to reach their recycled content commitments. Several plastic pyrolysis projects are expected to come online this year including plants from Plastic Energy and New Hope Energy. Mura is also expected to start delivering from their advanced recycling facility this year that utilizes a novel hydrothermal process. Recyclers are looking to cut costs by tailoring their feedstocks and improving efficiency and yields. The largest bottleneck advanced recycling will face in 2024 is feedstock sourcing and availability, particularly in the U.S. Expect recyclers to partner with packaging companies and local waste management services as they look to source feedstock for their expanded capacities.
  10. Mergers and acquisition (M&A) activity was moderate in 2023 but is expected to pick up in 2024. A favorable valuation environment for sellers will drive deal activity as acquirers get accustomed to higher capital costs. Well-capitalized strategics will make up most of the buyer pool as transaction financing will continue to be difficult in 2024. Some recent M&As to keep an eye on include INEOS acquiring LyondellBasell’s ethylene oxide and derivatives business; Borealis is set to acquire Integra Plastics, an advanced mechanical recycler in Bulgaria; and India’s Epsilon has acquired a German battery laboratory from Johnson Matthey. We expect to see similar acquisitions throughout 2024 as companies look to shift their focus and invest in sustainability.

ADI Analytics is a prestigious, boutique consulting firm specializing in oil & gas, energy transition, and chemicals since 2009. We bring deep, first-rate expertise in a broad range of markets including refining and fuels, where we support Fortune 500, mid-sized and early-stage companies, and investors with consulting services, research reports, and data and analytics, with the goal of delivering actionable outcomes to help our clients achieve tangible results.

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