The year 2022 has ended and we are now in 2023 with so many things ahead of us in our industry. Join Victoria and Trey Hamblet, the Vice President of Research at Industrial Info Resources (IIR), as they talk about the 2023 outlook on chemical investment, how that affects the chemical industry, and what people are expecting this year. 

In this episode, he’s going to give us some insights into capital spending, economic outlook, and many other interesting topics that we should be dealing with. We know that there are a lot of rumors in the investment world and capital spending world maintenance. But Trey was able to shed light on this as he shares his thoughts about his matter. He also mentioned in the interview that growth in demand for the chemical industry is very dependent on consumer consumption, global growth, and global markets. To learn more about that, join his interview with Victoria Meyer as they further discuss all of these in detail. 

To hear Trey’s 2022 Outlook, check out Episode 33 of The Chemical Show.


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2023 Chemical Investment Outlook with Trey Hamblet

This week, I am speaking with Trey Hamblet, who is the Vice President of Research in the chemicals petroleum refining, and alternative fuel industries of Industrial Info Resources. In this position, he manages research teams that identify and track project spending in all segments of these industries globally. He actually is coming on today to give us some insights about capital spending, economic outlook, etc. Trey also did this for us last year. So he was previously on Episode 33 of The Chemical Show. Anyway, we’re looking forward to a great conversation. 

Trey, welcome to The Chemical Show. 

Thanks for having me again. 

Yeah, absolutely! Glad to have you here. So tell us a little bit first about IIR for those who might not know. 

Sure! We’re approaching our 40th anniversary in global headquarters here in Texas and have research operations around the world. We’re known most for providing market intelligence on the industrial space, everything from power generation, through chemical refining oil, and gas, and all the traditional industrial markets. I think as of probably this week, we’re currently tracking about 270,000 plus individual capital projects.

When you track hundreds of thousands of projects in very granular detail, every last one of those has been verified with a phone call and person-to-person confirmation. You can extrapolate from that some very powerful statistics. So analytics in the industrial space, spending in an industrial space, those are the things we’re known for.

Awesome! You guys do a lot of great work. And it is interesting, just trying to figure out what the truth is. It’s because there are always a lot of rumors in the investment world and capital spending world. I think your ability to get in and get the real answers is critical.

On that point, the world has become a very large digital place. It has become a very large, digital complex world. And we’ve kept up with those complexities of the different digital world. We monitor tens of thousands and millions of URLs around the world from trade journals and other things. 

2023 Chemical Investment Outlook: The world has become a very large digital place. 
It has become a very large, digital complex world. And we've kept up with those 
complexities of the different digital world.


But we still do the very old-school traditional means of when we hear something, we see something. We have one of our hundreds of researchers around the world that pick up the phone and communicate with an individual to determine what’s the reality of this investment, what’s the reality of this project, or this capacity addition. And what’s the real timetable and the technology that might be used and the capacity to be generated, etc? So we’re mixing technology and old-school telephone calls.

That’s really interesting. That’s almost how to digitize and be successful in balancing digital and human is probably a whole other topic we could discuss at some time. 


From an economic outlook perspective, if you look at what IIR was projecting, what was the biggest surprise of 2022 versus where the year started? 

When I started thinking about this question a couple of days ago, I guess, in reality, one of the biggest surprises has been how quickly the market has embraced some of the ESG initiatives and how quickly some of that has progressed. Over the last couple of years, when the pandemic started, out of every sentence and every conversation, ESG was one of those next subjects. 

In 2023, the chemical industry is very consumer-concentric. So growth and demand for the chemical industry are very dependent on consumer consumption and global growth and global markets. Click To Tweet

It was gonna be a regular topic. I just didn’t expect it to mature quite quickly. We’ve got roughly $20 billion worth of ESG initiatives in just the chemical space on the near-term horizon that have quite potential. And we’ll talk a bit more about that maybe later in our conversation. 

Also, when I look at some of the spend for 2022, we actually did end up achieving a slight increase over 2021, despite inflation and the continued supply chain constraints. So while we didn’t knock it out of the park and round all the bases at record speed, we did have a fairly successful year in an overall spin for CapEx and maintenance in 2022. So those were surprises. It’s a little more than what we expected with the challenges we had, and a lot more on the ESG movement progressing. 

I think that’s interesting. In fact, you’ve mentioned the supply-chain issues and how they affect things. On the surface, you would say prices were strong and demand was strong. Of course, people would be investing. If you can’t get the equipment and the physical things that you need to actually build that plant and make that investment, it’s hard to progress it along as quickly as you’d like. I think that’s just good news for the industry that we’re able to see some of that growth. So let’s turn to 2023. What’s your outlook on 2023? And how does that affect the chemical industry? What are you guys predicting and expecting?

In 2023, the chemical industry is very consumer-concentric. So growth and demand for the chemical industry are very dependent on consumer consumption and global growth and global markets. When you look at predictions on population growth and demand growth on a global level, we do anticipate that we’ll continue to see investments geared towards long-term demand. 

2023 Chemical Investment Outlook: When you look at predictions on population growth 
and demand growth on a global level, we do anticipate that we'll continue to see 
investments geared toward long-term demand.


As I mentioned in the ESG initiatives about that 20 billion, we’ve got nearly a billion dollars in plastic recycling, the circular recycling of plastics plans to begin construction in 2023, which is quite significant. Only a couple of years ago, those projects were very small in nature, but now you’ve got Exxon, Eastman, and the big companies producing and planning hundreds of millions of dollars in post-consumer plastic recycling. That has the potential for being a big spend next year.

Again, some of those same names Exxon, Dow, and others with Air Products, planning carbon capture as either reducing greenhouse gas emissions and existing plants or constructing new units, some of these blue and green commodities. So the ESG initiatives in 2023, we’re going to be very significant. 

The downside is that these ESG projects take a little longer to develop. So we’re hoping we’ll see some of those plans actually stay true to the calendar of 2023. But these projects are complex. They’re still somewhat new in the industrial space in many cases. Lastly, with the mega projects, we’re not going to go back to the period that we saw from 2013 through, let’s say 2018 or 2019, where we had six or seven ethylene crackers all under construction, simultaneously, where we had tens of billions being spent in tandem and on in the same year. 

The ESG initiatives in 2023 are going to be very significant. The downside of that is these ESG projects take a little longer to develop. So we're hoping we'll see some of those plans actually stay true to the calendar of 2023. Click To Tweet

However, we will see the construction progress quickly with Chevron’s project, OCIS project, or a blue ammonia project enterprise products is planning an ethylene unit. So there will be some world-scale capacity and in the Petrochem Bill, it’d be in the case of one or two units here, instead of the multiple that we’ve seen during the big NGL revolution.

I think that was an interesting time, the whole of 2011 to 2014 when everyone announced a mega project. Most of which have actually come to fruition. Some of it probably is not, but I think there’s a tempering a little bit of some of those mega projects. How about small to mid-sized companies? I know you reference these $20 billion in ESG-motivated projects. They’re big names, big companies, and big projects. Do you see similar activity at mid-sized companies or smaller companies focusing on ESG?

It’s not in the same quantities. In reality, these projects are very costly, and it’s a game for those that can capitalize on it with building block commodities, hydrogen, ammonia, ethylene, and the building block commodities that have scale. There are ESG initiatives down to the smallest producers where they’re converting lighting and the plant eat to LED for the credits that might do. 

So greenhouse gas reductions, if my memory serves me right, of the $19 billion that we have on the target for 2023, about half a billion of that was in emission reduction projects. So it’s $500 million, which is a drop in the bucket compared to the 20 billion, but it’s out there. But the projects are very small. 

When you talk about spending in the small to medium-sized chemical companies, that’s actually where we saw some of the increase in 2022 that I mentioned early on. Seeing more in plant capital improvements, those projects and that’s $10 million to $25-million investment level. 

2023 Chemical Investment Outlook: Talking about spending in the small to 
medium-sized chemical companies, that's where we saw some of the increase 
in 2022. We're seeing more in plant capital improvements, those projects 
and that's $10 million to $25-million investment level. 


Then we saw a high watermark from planned maintenance spending. When I say maintenance spending and industrial info, we recognize you have day-to-day maintenance budgets. But when we talk about the planned turnaround events where a plant is going to be offline for seven days, 10 days, or two weeks, we report those individual maintenance events. 

And when you look at those events, specifically, we exceeded $3 billion a year in the US and Canada in the chemical industry and planned maintenance plant turnarounds in the previous year. It was like two and a half billion. So we’ve seen a very sharp increase, a continued increase in plant maintenance spending, which is encouraging.

Absolutely! I do think that’s interesting. Your point about the smaller to the mid-sized companies focusing on emission reductions, smaller projects that they can make their own individual impacts to their numbers to their effect from an ESG and an emission perspective versus the really big projects with new and novel technology that you need a bigger company to steer and run those investments. 


Absolutely! So, this ties into something we saw certainly in 2022. There were several big investment startups at the time. We had a good investment plan for 2022. There’s a lot of spends. Are you still seeing strong investment plans going forward across the industry, given what we’re facing currently? 

Quickly on the CP Chem project, yes, we’re encouraged that’s moving forward. We’ve been reporting to our clients since back in the summer that civil construction was underway and the project’s advancing, but it’s interesting to note that they still do not have a permit for that plant. Physically, they do not have the application for the permits around that plant.

So there’s an interesting backstory there. But when you look back in the past to some of the other big crackers that were built here in Texas, a number of years ago, we saw construction started on those while some of their permits are being contested, and I don’t think that we’re in a period we’re going to be contesting permits anymore in Texas. But it’s just kind of an interesting backstory there.

This is speculation, but do you think part of that is by making that announcement, puts a little bit more pressure to get that permit approved? It’s because being permitted is a heavy-duty process and a critical one, obviously.

It is quite the process. Again, we’re in the state of Texas, where we’re pretty aggressive on investments and things that equal jobs, and doing with the most modern technologies and friendly technologies certainly makes it an easier pass. There’s a race out there as there is for any commodity who can get there first, and you want to be not only announced, you’re going to be first you want to put your shovel in the ground first. 

But I think the question was what’s the level of investment activity outside of that? Because in tandem with that, you have OCI who’s got a billion-dollar-plus blue methanol project and there are several projects out there right now that are in the billion-dollar-plus. When you get outside of those, there has certainly been some hesitation around when the recession that seems apparent is looming on the horizon. 

When will we formally enter that? How deep does it go? How long does that last, end up a stagflation environment, etc? And as I mentioned early on in our conversation, the chemical industry is very consumer-concentric. So the impacts of when, how long, and how deep the recession makes it, and when inflation gets under control will continue to influence decisions, I think, through 2023 at the least. 

The chemical industry is very consumer-concentric. So the impacts of when, how long, and how deep the recession makes it, and when inflation gets under control, will continue to influence decisions through 2023 at the least. Click To Tweet

How does this look geographically around the world? I think we know that North America is in a really solid position and we’re seeing a lot of investment here. Europe has been significantly impacted by energy prices, the Russia-Ukraine war, and other things. Asia and China, in particular, has impacted significantly by COVID policies. What are you seeing in terms of the balance of where these investments are taking place? Are there geographical shifts? Are people investing in other regions to the same level that they used to?

You mentioned several world regions. I don’t know if this question is really about the world or the US, in our backyard here. But domestically, very little will change here in the US and Canada as it relates to where we will get the big building block commodities. It’s Western Canada and the US Gulf coast, as a western Canada because you have the down-at-zero project. OCI, Chevron, and some of those we already mentioned, additional investments by Air Products, Exxon, etc. that are world-scale capacities are all here in Texas and Louisiana. 

It is interesting. As I sat through some of the data yesterday evening, preparing for our discussion today, there’s this market up in the Northeast where we have our traditional specialty chem investments. But I was surprised to see there were a dozen or so pretty significant investments in Arizona and in the Rockies and such,  specific to Solvay and Kanto and others hydrogen peroxide, some green commodities. Some of the niche markets or the niche commodities do seem to have a little less concentric association with the Gulf Coast, which is encouraging that chemical industries now have a geographical spread.

Why do you think that is? It’s interesting because it’s either where the feedstock is or good tax and regulatory regimes. It’s where the customers are. What’s driving Arizona and Colorado?

It’s semiconductor industry and electronic grade chemicals. So there are a lot of big investments in electronics and electronic chemicals are a big part of that process. So it’s again being in the backyard of your customer.

Okay, that makes sense. So it is driven by customer location. What are you seeing happening in China from an investment perspective? It seems quiet because we’re just talking about COVID. The effects of COVID in China, and they’re changing policies, but what do you see happening investment-wise?

We’ve definitely seen in the projects that we’re tracking, we’ve seen China’s spending plateau to come off a little bit in comparison to the previous continued growth rate it might have shown. We have a significant office in China and our employees there are still under the impact of quarantines and reduced work schedules, etc. So it’s certainly gonna continue to weigh on productivity and investments going forward into 2023 as it seems certain that I don’t think you just flip that around as quickly as someone likes.

Trey, how do you see the current economic environment? We’re seeing high inflation around the globe and high energy prices, how is this affecting the industry and its plans?

The energy prices for the chemical industry really become more about feedstock cost. The cost of natural gas, the cost of NGLs, and certainly, energy prices and any form of electricity in our significant group, we’re one of the larger consumers of power. But, again, when you look at where the majority of the spin comes from the chemical industry is the building block commodity where we’re competing against energy prices in Europe.  

2023 Chemical Investment Outlook: The energy prices for the chemical 
industry really become more about feedstock cost.


We’re competing against feedstock availability in Europe and Asia, which is challenging. We just talked about China and its challenges. You look at the challenges in Europe right now because of the Ukraine conflict and their ability to get natural gas and core products. And you compare all those problems with what we have here at home, and it’s just a very different conversation. We have access to these things. And certainly, their cost is significantly more than what it was a year or more ago. But again, when you compare that to the input cost of those that we’re competing with on a global market, we still have the upside in that. 

I guess that sets the US up to be the exporter of choice.

Indeed, and that’s why you still have plans to potentially enter energy transfer partners or enterprises, that don’t have currently installed ethylene capacity in the US continuing to look at investments because that’s now an export commodity. If we can convert that to polyethylene, and we know the world, our society did an almost about-face on our opinion of single-use plastics in the wake of the pandemic. So the demand for plastics is very robust, long-term because we want safe, secure solutions, not just the increase in packaging, but safety products as well.   

That’s an interesting conundrum. It’s because I think now that we’re past the peak of the pandemic, I’m seeing some of those single-use plastic bans coming back in place and pressures, which also, again, tied to the investment in recycling and circularity and reuse. So I think we’re in an interesting evolution as we get with that.

A lot of those producers are working and did provide a green angle to those. So sustainably sourced feedstocks or some of the plastic recycling I mentioned earlier, when we thought about plastic recycling a decade ago, simply washing shredding, and making fibers or something out of the plastic.  

Now they’re actually taking that plastic back to base oil and material that they can put in as a feedstock into an ethylene plant. Then they get polyethylene which has its origin from waste plastics to some degree. So it allows them to put another label on that package. It shows where it came from. 

If you listen to some of the majors, the complexity in which we built some of our plastics is being changed in that we built some of the plastics so complex that can’t be reused, and they’ve come out with industry and technology now to where they can make these plastics a little more amicable to being repurposed and not so difficult to dispose of up.

Absolutely! As I’ve talked with various people and just an understanding of what’s going on in the industry, even things like plastic film packaging bags that you might get with food or other products, it’s not a single-plastic. They’re multi-layer. They’re very complex, which makes it also harder to recycle and reuse. I think there are solutions coming and this whole concept of designing sustainability upfront is becoming a much bigger theme and trend across the industry, both the chemical industry and the plastics, but also its customers and the end-users. 

In 2023, we’re publishing this episode. It’s the beginning of the year. We’re hoping we made it through the freeze in Texas. We’re in a seamless fashion. We won’t know. For a couple more weeks, we might have to just add in a quick update at the end here. But what should we be looking for as we look out ahead into 2023?

As you mentioned the freeze, as we’re proceeding here in December, we’re getting ready for the storm. I think they’re gonna name the storm Elliot if I heard it right. The storm in URI impacted refining and petrochemical units. Some of those units were down for months because of the storm.  

2023 Chemical Investment Outlook: We do anticipate maintenance 
spending being significant in this upcoming year. 


So we could very much be sitting in January with some refineries of petrochem plants offline. I’m hoping not. But the big thing I think we’ve touched on probably during the short conversation here and one of those is the continued advance in carbon capture and the green and blue commodities.   

When I say blue, I mean the building block commodities of methanol, ammonia, and ethylene built with a carbon capture component to it. I think it’s unlikely we’re going to see Germany’s world-scale production units built from this point forward. They do not have a carbon capture component to them in the financial community and consumers alike are both embracing the CCS carbon capture sequestration project.    

So I think that’s something we’ll see continue to advance prominently in the upcoming year. We touched on the fact that we’re getting some additional ethylene capacity. I think there are probably some announcements by others to join that race next year, which would help a three to five-year outlook for overall spending.

We touched on China. You know how quickly they resume. We get a lot of products from China, but they’re also consumers of a lot of our commodities. We shipped quite a few of our chemical and petrochemical commodities to China, methanol in particular. So how fast does China restart its engine, so to speak, will be a big thing.    

Then, on the maintenance front, I mentioned that we reached a new high watermark and planned maintenance turnaround spending this year. The stage seems to be set for a similar investment level and maintenance in 2023. And that’s simply because in many cases, particularly in the refining industry, the fleet is smaller, but it’s running everything longer and harder. It just makes maintenance even more important in the chemical fleet. 

Despite all the ethylene plant additions that we’ve seen come online, and you mentioned the Shell project in the Northeast, and the Exxon project in South Texas, and that’s all and others that have completed those, despite all those additions, that industry is running at 90 plus percent utilization levels. That would run plants that hard, that long. It certainly drives maintenance. So we do anticipate maintenance spending being significant in this upcoming year. 

Trey, thank you so much for taking the time and sharing these insights and the conversation. I appreciate having you on The Chemical Show. 

I enjoyed being here. Thanks!

Thank everyone for listening and reading. Keep listening. Keep following. Make sure you’re subscribing so that you get every episode delivered straight to you. We’ll talk again soon. Thanks!


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About Trey Hamblet

Trey Hamblet is the Vice President of Research for the Chemicals, Petroleum Refining & Alternative Fuels industries of Industrial Info Resources. In this position, he manages research teams that identify and track project spending in all segments of these industries globally.

Additionally, he manages multiple commodity research teams tracking offline maintenance events, planned capacity additions, and similar activities in chemical, refining, and energy industries. An Industrial Info employee since 1991, Mr. Hamblet also serves as the VP of Research Operations and is a member of Industrial Info’s board of directors.


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