Listen to Victoria and Steve Discuss the Uncertainties of the Chemical Market in 2024:

Recorded from a live episode of The Chemical Show, host Victoria Meyer interviews Steve Lewandowski, VP of Olefins for Chemical Market Analytics by OPIS, a Dow Jones Company. Victoria and Steve discuss the complex outlook for the 2024 chemical market, exploring challenges and strategies present in the petrochemical industry. The discussion reflects on the uncertainties of the current economic and geopolitical climate and its significant impact on regional and global chemical markets. 

Steve highlights the oversupply in the industry, regional strategies for export and domestic growth, and the complexities involved in managing market conditions amidst shifting economic challenges. The episode provides insights into cost competitiveness, sustainability practices, and the hurdles faced by the chemical industry in response to government regulations, helping to bring understanding to the intricate dynamics of the chemical market in the coming year.


Join Victoria and Steve to learn more about the following:

  • Chemical Industry Outlook in 2024: Foggy
  • Carbon Reduction Efforts
  • Economic and Geopolitical Uncertainties
  • Oversupply and Cost Competitiveness
  • Carbon Emissions and Sustainability


Killer Quote: “The challenge ahead is not just to navigate the market’s fog, but it’s also about steering the industry towards a sustainable future, balancing cost competitiveness with the imperative of reducing our carbon footprint.” – Steve Lewandowski


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Watch Victoria and Steve Talk About the Foggy Outlook for the 2024 Market:

2024 Chemical Market Outlook with Steve Lewandowski of Chemical Market Analytics

Welcome to The Chemical Show. This is Victoria Meyer. Today, I am here with Steve Lewandowski, who is the VP of Olefins for Chemical Market Analytics by OPIS, a Dow Jones Company. And more importantly, Steve is an expert in chemical markets and is here to share some of his and CMA’s insights into what’s going on in the global markets today. So Steve, welcome to The Chemical Show.

Well, glad to be here. Thanks for the invite.

Absolutely. So I’m going to start out this way. In one word, how would you describe your expectations for 2024?

One word, I would say foggy. Why do I say that? Normally when we get into cycles, and you know, this is a long chain in petrochemicals. We start with energy, we go all the way through demand on the consumer side. It seems normally in the chain, someone’s doing okay. The pie is a certain size and it just gets split in different ways and the pie has been growing for a long time. Coming out of COVID, all the logistics issues, everything in our space, it seems like the pie has really shrunk.

So no matter which part of the chain you’re in, it seems, there’s some level of not so pleasant news that’s really causing you to have some struggles. When I say struggle, I’m talking about margin and what ultimately the shareholders want. It just seems it’s still a bit of a battle across the board.

Yeah. So as opposed to the pie growing and everybody being able to find their share, if I take a bigger piece of the pie, somebody else is losing.

Yeah, exactly.

So let’s go ahead and just start out at the high level and talk about the general state of economy as we enter into 2024. What is it that you and your team are observing and reflecting on in 2024? What are the key things that we should be looking at?

Yeah, I think the only consensus from an economic standpoint is there’s no consensus.

Back to that “foggy”.

You can listen to the news and one view is, “Yeah it’s going to get better. It’s not as bad as we thought and demand is going to come back.” You hear others saying, “You know, I’m looking at factors and this is going to be in a bad place for a long term.” And, we thought it was going to happen in 2023, but it’s definitely going to happen in 2024. This is why it’s foggy. How do you really assess the health of the consumers? At the end of the day, the consumer is going to be willing to buy widgets of any form or fashion.

That’s the key. I’ve read a report on looking at money in circulation, M1, M2. A guy quoted, “Look the trends today are aligned with some of the biggest, pullbacks in the economy that we’ve ever seen.” And how do you argue with that? But there’s more controls, the fed’s there, there’s World Bank and all these different regions have different control mechanisms. Maybe they can tone that down a bit. We still see a lot of headwinds in China. It’s been a growth engine for many years and the shutdown, the COVID issues, young people not having jobs, the aging population. There’s a lot of challenges coming out of China, which, again, they sneeze and everyone else is going to catch a cold because they’re such a big economy. So we’re watching the banks. We’re watching the interest rates.

Will construction restart? Our fed said 6 drops over the course of this year in the rate. So we’ll see how that ultimately plays out. These economies getting overheated and consumers, what’s their debt level? Have they pulled their bank accounts down? Do they have money available? Inflation’s been problematic. So, the things you have to spend money on, heating your house, paying your bills, buying food, mobility, all that’s going up in cost. So the extra money you have to buy widgets. That pool of money is decreased.

foggy oil market

So when we look at this, let’s maybe break this down a little bit by regions. We’re sitting here in North America, and 60% of listeners are in North America, 40% are elsewhere, and who’s on the line today is probably a lot of North American folk. It’s easy to be kind of regionally centric, and yet we know that there’s global impacts. So you’ve already referenced China. Europe to me seems like, I was going to call it a mystery. It’s not a mystery. It’s a mess. How about that? From across the pond I think it looks like a mess? We’ve got the conflicts in Russia and Ukraine that are having a significant influence. We now have the conflicts in the Middle East, that are affecting at the very least, the Middle East transportation and supply chain, if not the rest of it.

So how do you look at it when you’re thinking about the regional dynamics and the impact on the global market?

Now, that’s a great question, and it’s not only the Suez Canal that’s having some challenges. They’re getting oil out and the products out and stuff moving around. But even the Panama Canal has an issue because of water levels. And I think shipping is really being selective on who gets to get through at what timing and routes are shipping around South America to go to Asia around Africa to move back and forth. So everything’s being extended. I think during COVID, we went through a window of time where we didn’t have enough containers. Well, I understand they’ve added 50% to the container fleet, so it’s no longer a container issue, but now it’s becoming a ship issue because it takes a lot longer to sail these longer routes.

And we’re seeing freight rates move up because of this. Insurance on ships is one of the problems, but it’s just the time to get around the world. Like it or not, it’s a global petrochemical world and things move from low cost regions to high demand or higher cost regions in this environment. So yeah, the Middle East is definitely a problem. Ukraine, how does that sort out and the implications for Russia and sanctions and oil getting out versus intermediates getting out and gas getting out. There’s a bit more pressure on Russia and less is coming out than they otherwise would have wanted.

Total Base chemical demand by market. update from Chemical Market Analytics by OPIS. Oversupply.

Yeah, which of course brings us to energy, the other big driver across the petrochemical markets and global economies. So both when we think about traditional energy, oil and gas as it ties into the refining markets, as well as green energy, which is a continuing growth target. Although, you look at the news and there’s a lot of investment there that has pulled back. What’s the state of energy? And how is that influencing chemical markets?

Yeah, I think oil, OPEX tried to rein in some of their production, and I think that was rather unsuccessful, probably more because the global demand for transportation fuels has pulled back some. Saudi actually, last week or earlier this week announced we’re just going to lower prices. So this isn’t working for us and we got to make the oil go away. So they’re lowering prices a bit. I think on a gas perspective, it’s been warmer than normal so far this winter, but there’s some cold spurts definitely in parts of the U.S. Definitely there’s a wave coming across Europe that’s colder and then western China and that big cold front moving towards the east. So it’s getting colder and we’ll probably start consuming a bit more gas. It’s getting colder and hotter all at the same time,

We’re dealing with that. I think the biggest thing when I look at energy and petrochemicals is there is the refining capacity additions that are coming and the generic crack spreads when you look at refining operations, there’s a 321 crack and a 211 crack. So 3 barrels of oil, 2 barrels of gasoline, 1 barrel of diesel, or 2 barrels of oil, 1 gasoline, 1 diesel. So it’s a gasoline refinery versus a discipline refinery. If you look at history, and I just did this because I made a presentation yesterday. Prior to 2022, those crack spreads were somewhere around 10 bucks a barrel. If you look at 2022 through 2023, there’s a lot of volatility, but it went as high as 50 or 60 bucks a barrel. And what happened is we lost quite some refining capacity around the world.

The US pulled its capacity back, demand came back and we just couldn’t make the fuels products with the steel that was on the ground. And of course the prices went up. The consequence of those prices going up is some of those less efficient refineries to me made a lot more naphtha. Why is naphtha important? Because it’s a majority of the ethylene that we make and a lot of the propylene and aromatics comes from crackers and naphtha. The naphtha price, which is normally about equal to crude has dropped to as low as 50 bucks a barrel below crude. So it’s important those crackers around the world running naphtha had really low prices.

They were more competitive with the low cost ethane in the Middle East and North America. Why do I say all this? Because going forward, we have a lot of new refining capacity coming. Some 7 to 8 million barrels a day.

Where’s most of that coming in, Steve?

Some is in the Middle East. Some is North Africa. There’s some expansions in North America, and Indonesia, so there’s a lot of refining capacity coming configured for the right slate of the fuels that we need the mix of gasoline. Which means to me there’s going to be less than half the available.

Hang tight though. I’m not following you a hundred percent. So we lost refining capacity. Things were on high demand. We’ve got more of the refiners that are producing, more of them are producing naphtha versus the other refined.

Today they’re producing more naphtha. Exactly.

But tomorrow the new assets coming on are actually producing less naphtha.

They’re going to produce more gasoline, jet, and diesel and less coproduct naphtha because they’re going to have the steel that makes sense for. So my thought is that naphtha prices will go up. Once naphtha prices go up, and we’ve already seen this, so I’m watching this closely as these refineries start up. We’re seeing the price increase, it was 25 bucks a barrel in July and today it’s 5. So naphtha has already gone up relative to crude, which means the cost structure is going up. All of these operators are going to have to raise their prices, or they’re going to have to shut down. They can’t run forever in negative cash flow.

And if the rest of the world goes up that’s going to benefit the Middle East and North America because our net gas and ethane prices aren’t really moving. So it’s going to be regional. Maybe the margins aren’t going to improve in Europe, Latin America, probably not in Asia, but they definitely have room to improve in North America because the whole cost structure is going to go up around the rest of the world.

Base chemical capacity utilization. updated Jan 2024. Demonstrates significant oversupply.

Okay. So I think this takes us into our next topic here, which is what do we think about what’s going on in petrochemical markets? My 1st observation with that Steve, is some of the feedstock costs are going up, but we’re in such a dramatic oversupply that it doesn’t matter when you think about the ethylene cost curve.

Yeah, it doesn’t matter. We’ve definitely overbuilt the last four or five years, ethylene, propylene, and most of the derivatives. I think the only value chain that really didn’t overbuild was chloride vinyls, and that’s because they went through a big overbuild in 2008 through 2015. They’re just kind of absorbing what they built in, their margins aren’t very good either because constructions off and interest rates are up and government spendings down and no new housing start. So they’re struggling more from a demand perspective. But, yeah, the rest of the industry we’ve overbuilt. But this is why it becomes important. It’s a regional story.

Then if you have low valued feed and why did everyone build in the Middle East? Why did everyone build new assets in North America? Even in a downturn, I should be the survivor. Not someone else. That’s why I’m pushing the story on naphtha prices going up because that will benefit operators, especially in this region, all of the steel that we’ve installed, as long as the logistics are available we should be able to run, to make PE, make glycols, if we have to make some polypropylene as well, we should make that clear.

In which we still require the export markets, in order to be effective with this, or can we be really a regionally balanced market?

No, all this was invested in North America, no different than the Middle East market. We have cost advantage on feeds, and we’re going to build to service the rest of the world on ethylene. Propylene is a bit more regional, maybe it’s the Americas that balance more so than using the rest of the world, but ethylene is really global. We built here because the feed was going to be cheap, oil and naphtha were going to be higher cost. We could have an advantage in exports were a majority of the offtake from all those new investments. Yeah, there was supposed to be some domestic growth, which hasn’t been the case really since covid.

I quoted the P. E. demand domestically is about equal to what it was in 2019. We dipped and it’s been kind of flat. So we’ve had no growth in the space. On that point, petrochemicals in general have been growing very small, not at the rates we’ve seen before, but we still have growth. It feels bad and everyone says, “Well, this is a demand driven issue.” It’s a supply issue. We do have some growth, even if growth was at historical levels.

We would still have an oversupply, just take a little less time to absorb what we’ve overbuilt.

So Steve, I know you work and talk with a lot of different companies. How are they responding to these markets? Because at the end of the day, it’s fine for us to know that we’re foggy when we think about petrochemicals in particular, we’re in a state of oversupply and demand is flat. So, I’m with you. I don’t think it’s necessarily declining. I think it’s flat. I think it’s growing and it’s ebbing and flowing, let’s just say in different markets at different times. But what are the strategies that you see companies employing to deal with this?

They’re always are benchmarking their assets. Are we cost competitive? Europe’s really going to have some issues on cost with the carbon tax, the burden for carbon emissions is going to grow. It’s not tracking those, those grandfathered allocations are decreasing and the price is going to ebb and flow with that. So, they’re going to have to really assess. What’s the consequence of this to save me? Is that kind of like a trade barrier? That’s going to raise import prices and if it raises import prices, I’m going to raise my price. Maybe covers the cost of investments or trading that I have to do on the cover. I probably don’t make a lot more money, but at least I can survive because I’m not chewing into my cash flow. I’m just breaking even on that point.

So, they have one dynamic in that region. I think it really depends on the global footprint of companies, if you’re in a lot of different regions, and, I’ve heard Dow say this for years and rightly so, we kind of diversified our steel on the ground so that we can pick and choose where to run and not run in these kind of markets. Which could imply, Dow’s going to say, “Maybe I run harder in North America and less hard in Europe and move the pounds and make it work that way.” There’s others that can do the same on a lot of different derivatives. So I think if you’re one guy with one client making one set of products, it’s more difficult for you because if you can’t really shut down, you can reduce rates to your minimum.

Then the next decision is, okay, if I’m still losing money, I’ve got to shut down and I’m just basically giving up and I’m losing my market share because I’m not making anything or do you make commercial arrangements where you buy the cover and keep your market share? That’s always possible. Is that the answer they want to do? I don’t know. The consumers will say, “Well, why am I buying from the other guy anyway through you?” So I think those guys that are more independent are going to have a bit more of a challenge.

Yeah, we’re certainly starting to see some some deals being made, not in chemicals so much, but certainly as we look at energy. I have to believe that at some point that’s going to trickle down to chemicals to help create some of that diversification in the case of some companies and to reduce some of it in the case of others.

The oversupply is an issue. We have a pause in builds in most of the stuff the next couple years but what we see already under construction, is there’s another big wave coming by 2026 or 2027, China’s building. I was telling people that, and they go, “Why are they building in this oversupplied world?” Well A, they’re very short contained, ethylene and contain propylene. Then B, they can install capacity much cheaper than anyone else and they want people working. So strategically, you’re building things, you’re making things and people are working and it works for them, because some of the dynamics that they have in their favor help them along that path. I think the Middle East is kind of in the same boat. There’s rumblings about some big projects coming out of there before 2030.

So we’re not really going to get out of this past wave of overbill. We got a little bit of a breather, but then boom, it’s going to start again. So these companies are going to have to start making decisions. Someone is going to have to idle for a longer period of time, extended turnarounds, demand isn’t going to be the solution in this case. The economy would really have to take off in a big, big, big way to absorb all this excess.

Yeah. And I think the last big wave of industry-wide shutdowns was probably in early 2000s when we saw rationalization? 


So we may be seeing that again.

I think there’s less than 2 million tons of small units in China that are going to shut down. The problem is with all these little sites is that they’ve already announced, we’re going to shut this one down and we’re going to build a bigger one right next to it. That’s the criteria. So they’re just displacing the old inefficient and bringing on new stuff.

We’re looking at the cost curves and we’re trying to assess who’s at risk, but shutting down comes complicated too. If you’re a cracker petrochem complex next to a refinery, you kind of have to work together. And if the petchem shuts down, the refinery is going to be in a bind and vice versa.

Back in my Shell days, there was a few sites that almost every other year, it seems like we assessed it. Like boy, this doesn’t seem economic. Should we be shutting it down? But ooh, no, we need it for offtakes and other reasons. When you look at the network effects they were really critical.

So let’s talk a little bit about sustainability and the role of carbon, as we look across the value chain. We’re not slowing down. So nobody’s changing government regulations at this point around net zero targets and carbon targets. Now, the solutions to get there seem to be varying. Dow just announced their final investment decision on their net zero ethylene cracker in Fort Saskatchewan. I’ve got to believe everybody’s got a strategy of some sort in the works. What are you seeing and how is this influencing markets today?

So I’m kind of pragmatic on this front. I’m not a climate denier, but I’m also a climate realist. When you look at carbon emissions today in the sources there’s power generation, there’s mobility, there’s industrial uses and residential, commercial and greenhouse gas. You also have some emissions just from agriculture. I think the problem is when you look at just electricity production on a global basis, it’s 60 percent fossil fuels. It’s the base electricity today, so we have a growing population and we want mobility to go to electricity and we want industry to go to electricity. I mean, I just can’t circle that square and make that work because we’re already struggling to backfill the base load of power, let alone the growing appetite for green power.

Now, that’s not to say there’s not clever folks looking to solve this. I get it, there’s hydro. I think hydro is, it’s a function of rivers and rain and it has an environmental footprint when you put the dams in. So that’s maybe not the solution. Is it nuclear? I mean, Dow’s also announced their nuclear joint venture on the Gulf coast.

So that’s a solution, but being pragmatic, I would say we balance it in our business tons, not ideas. So there’s a lot of thoughts about doing things, but at the end of the day, until the technology catches up, it’s hard. We will adapt once we see that it’s realistic, but when we look at carbon in general, we look at 4 pillars. It’s about policy. It’s about the ultimate price. It’s about your process emissions, whether that’s the scope 1 from your side, scope 2 from the power you buy, scope 3 is more difficult. And then I look at pathways, what materials can solve similar problems, plastic versus papers, plastic versus aluminum.

Then what are the relative challenges both of those have on the carbon front. The most challenge is really on policy. Europe’s pushing policy hard. Canada has some policies. California has some policies, but it’s more ambitions today for a lot of these politicians versus truly enacting firm laws to push this. Even California said, “Okay, we’re going to defer reverse.” This elimination of natural gas to generate power in California. “In the UK, they said, “We’re going to defer the time window that you got to have an ed and no internal combustion engines for cars.

The reality is coming into play and saying, I can’t make this work yet. Someday we will, but today the technology is still evolving and we gotta find a way.

So I think one of the challenges that we all see is balancing this pragmatism versus the chatter that comes out of the media and social media, as well as politicians and influencers and regulators. You guys, Chemical Marketing Analytics, are now owned by a media company, Dow Jones, which of course is the Wall Street Journal and many other great publications. I’m a longtime Wall Street Journal reader, so I love that publication. But now that you’re part of a bigger group and a media company at that, how are you guys influencing or able to influence the storylines? Because at the end of the day, I see this as a bit of a symbiotic relationship between media and government and industry. Are you seeing any changes in that way? Are you influencing anything, Steve? Should we be counting on you?

I think the Wall Street Journal and Barron’s, their goal and one of the visions of our CEO is, they have four main pillars, but one is about honesty and telling the truth and what they put in print or electronic versions of their own publications. Part of the reason they acquired us was to get a better understanding, not from all the other chatter as you say, but really a technical perspective on how this stuff really fits together. Again being pragmatic, they have some clever journalists. I spent some time in New York at the news core office and sat down and talked to them about different parts of the space. I think at that time, we’re talking about circularity, but they know biofuels. These folks really are with the resources they have, they’re pretty smart and they figured out things and they try to write as best they can from the information they have.

Our interaction with them is growing for sure. We have some initiatives across the board we’re still getting settled on, platforms and just getting ingested into the bigger organization. We’re just figuring out who do we talk to? How do we talk to them? We finally got into a similar platform where we can actually go and find everyone’s email address. So we can find people now. That’s a win, but it’s a process.

They desire us to give them that guidance and be the technical perspective and understand all the other implications. It’s easy just to say I want 0 emissions or net 0. What are the steps to get there? And technology wise, where do we stand? Is it going to be possible with the pace that some people want?

Saving stack coins money with Charts and Graphs. Finance, Account, Statistics, Analytic research data economy, Stock exchange trading and Business concept market

Yeah. So Steve, you started out saying that your word for the year is foggy. My question is what’s our lighthouse that we should be looking for? What are the indicators that you are watching and that we should be watching to help navigate the year?

I don’t think this fog will lift this year. It’s all the economic issues. It’s the geopolitics. We have an election coming in the U.S., how is that going to play out? Everything in Washington DC is going to go at a slower pace if that’s even possible.

Just because who knows who the next leader is going to be. Maybe it’s not going to be even the 2 front runners as they are calling it today. You never know. So, from a U.S. perspective, that’s going to have some implications. But we’ve overbuilt. It’s just until you get firm announcements of some shutdowns, until you get confidence in the economy and consumers start really buying again at a pace they used to buy. Those are really the things to watch for or, what’s the debt level of private citizens? Are their credit cards maxed out and now they’re just paying credit card bills and are just going to have to pull back from from anything else?

I think it’s just going to be tough. Our worry is the window of time that we don’t add capacity is small. And if that next wave is real and those people build for the reasons they feel are strategic, and look, CP Chem’s building, they’re erecting in the US.. They’re moving dirt and putting up towers. Dow said they’re gonna be started up by 2027 on two thirds of the plant and the other third by 2029. I mean, we’re building and we’re adding to that.

That’s right around the corner really, in the grand scheme of things. Interesting. All right well, Steve, this has been good. Thanks for joining us today on The Chemical Show.

About Steve Lewandowski:

Steve Lewandowski, Vice President – Olefins at Chemical Market Analystics by OPIS, a Dow Jones Company, boasts over 30 years in the refining and chemical industry, with prominent roles at top-tier firms. Before joining IHS Markit, he served as Senior Manager of Base Chemicals at TOTAL Petrochemicals & Refining, overseeing the P&L and strategic initiatives for olefin and aromatic monomers. Steve’s international experience includes leading the Global aromatics commercial business from Brussels, as well as managing the US aromatics sector for TOTAL. Earlier in his career, he held diverse positions at FINA Oil and Chemical and Star Enterprise. Steve holds a Bachelor of Science in Chemical Engineering from Michigan State University and an MBA focusing on finance and economics from the University of Texas at Dallas.