I had a discussion with an industry contact last month who argued that “there is nothing new under the sun”—that this current downturn in petrochemicals is just another typical cycle. His conclusion? All we need to do is wait, and the good times will return.
I beg to differ.
The end of a unique Supercycle
History tells a different story. The 1992–2021 Chemicals Supercycle, driven by China, was an exceptional period of rapid demand growth. Accelerating globalisation, favourable demographics in both China and the West, and a massive, debt-fuelled Chinese property and infrastructure boom created conditions we are unlikely to see again.
During this period, the global economy faced far fewer climate-related disruptions than we will encounter between now and 2050. Sustainability pressures on chemicals companies were also minimal in comparison to today, where climate change and the plastics-waste crisis are forcing fundamental shifts.
Companies cannot afford to sit back and wait for a rebound of the same magnitude. We have now entered a phase of significantly lower consumption growth than most forecasters expect.
Trade wars and protectionism: a new reality for chemicals
Equally, we need to learn to navigate much more complex market conditions. How will today’s trade war, presaging maybe a drift towards a more regionalised world, effect chemicals trade flows?
Don’t just think here of the Trump tariffs. Also consider that as China struggles long-term with s weaker-than-expected domestic economy, how China might continue to push exports very hard to compensate for this weaker growth.
How will the rest of the world respond in terms of increased antidumping actions on Chinese chemicals and polymers? Last year, we saw a record number of such actions in response to China moving into major net export positions in PTA, phenol, styrene and PVC etc. I believe it won’t be long before China becomes a net exporter in PP.
And how will the rest of the world respond to China continuing to push-hard to grow it exports of finished goods in high, medium and low-value manufacturing chains? A close reading of the news tells you that pressure from such exports grew in 2024 on manufacturers in Southeast Asia, Europe and elsewhere.
Finished goods are of course made from chemicals and polymers. So, to what extent will trade protectionism against Chinese exports of finished goods work its way upstream to impact the operating rates of plants across different regions?
How will chemicals pricing patterns be affected by the degree of downstream protectionism? And ultimately, how many plants will be forced to shut down or will be able to carry on operating in response to the levels of new antidumping and other duties against Chinese exports of manufactured goods?
Climate change, mass migration, and the chemicals industry
For a long time, a good contact kept recommending that I read Gaia Vince’s Book, Nomad Century. I finally got round to it during the last Christmas break. Here is a summary of the book, courtesy of ChatGPT 4’s Brainstormer service (more on AI later):
Vince’s book argues that climate change will force billions to migrate from the tropics and equatorial regions to more habitable northern areas. By 2050—just 25 years away—up to 1.5 billion people may be displaced by rising temperatures, extreme weather, and sea-level rise. That’s not a problem for the distant future; it’s already unfolding.
And, of course, 1.5 billion people won’t all suddenly need to move in 2050. This crisis will build year by year as more regions become uninhabitable.
We have a lesson from history here. China’s birth rate fell below the 2.1 replacement level in 1992 and has remained there ever since. And yet, even in recent years, some forecasters insisted that China’s shrinking population was a problem for the distant future. They ignored mounting evidence—until the demographic crisis became impossible to deny.
We cannot afford to make the same mistake with climate-driven migration.
What Nomad Century tells us about migration and chemicals demand
Vince highlights that large parts of the world will become too hot for human survival. The tropics and equatorial regions—including much of South Asia, Africa, and Central America—will face extreme heat stress. Coastal cities like Jakarta, Miami, and Dhaka will be among the first to experience mass displacement due to rising sea levels.
The entire southern region of Vietnam—home to 37% of its population—is expected to be below sea level by 2050. Much of central and northern Vietnam will also be affected.
This has major implications for chemicals demand:
- Consumption will shift northwards, but the extent of this shift will be dictated by immigration policies.
- If migrants remain poor, their purchasing power will be limited. But if they are economically supported, their demand for goods—and the chemicals that make them—will rise.
- The types of chemicals in demand will change. Vince discusses how dense urban living will become essential in northern regions, replacing long-distance food supply chains with hydroponic high-rise farms. This could reduce the demand for plastic food-packaging films as more food will be made locally, requiring less long-distance preservation.
- Cities will need to become energy-positive, generating more power than they consume. This will create higher demand for solar panels, insulation materials, and climate-control systems—all reliant on chemicals and polymers.
- As millions are forced into temporary shelters, demand for PET bottles, plastic-based housing materials and sanitation products will surge.
The standard way of estimating chemicals demand is thus: GDP constantly increases with the rates of GDP growth dependent on whether an economy is developed or developing. As developing economies are predominantly on the equator or in the global south, climate change provides a challenge to this methodology.
AI: a game-changer for chemicals and climate adaptation
Anyone dismissing AI as just another overhyped investment bubble risks being on the wrong side of history. AI is already reshaping the chemicals sector in ways that will determine the winners and losers over the next 25 years.
- AI will enhance climate adaptation strategies, from better flood defences to more efficient drought management.
- It will transform demand forecasting, helping us account for migration, climate effects, and shifting trade flows.
- AI-driven materials science will enable faster and more accurate testing of new polymers, creating materials suited to extreme climate conditions.
- It will also revolutionise recycling and carbon emissions monitoring, allowing chemicals companies to comply with increasingly stringent sustainability regulations.
Time to think again
Still convinced this is just another downcycle that you can ride out?
To quote Flower of Scotland: it’s time to go “homeward” and “think again.” The chemicals industry is not simply facing another downturn—it is navigating an era of fundamental transformation. Those who fail to adapt will not prosper.