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Victoria Meyer returns solo to examine a pivotal question for chemical industry leaders: Does bigger still mean better when it comes to company and asset scale? With restructuring, capacity additions, persistent margin pressure, and changing global dynamics reshaping the industry, Victoria challenges longstanding assumptions about economies of scale and explores whether “economies of fit” are more relevant for the industry’s future.
She draws on recent trends in prices, asset closures, geographic investment shifts, and customer preference changes to invite business leaders to reconsider how advantage is created and what to prioritize as you position for the next 20 years, not just the next cycle.
Key topics Victoria covers:
- The Pricing Paradox: Rising chemical prices alongside squeezed margins and ongoing overcapacity issues.
- Do We Have the Right Capacity? Exploration of global utilization trends, China’s continued build-out, and the drivers behind new investment decisions.
- Rethinking Asset Lifecycles: Why asset retirements in Europe tell a bigger story about geographic shifts and changing demand patterns.
- Is Bigger Still Better? Direct examination of scale economics versus the need for flexible, locally optimized assets and supply chains.
- The Shift from Scale to Fit: How customer needs, regionalization, and the demand for supply security are changing asset and investment strategies.
- What This Means for Leaders: The challenge of aligning engineering, operations, and capital markets around new models of “fit” over traditional “scale.”
Killer Quote: “The industry that we need to build today and reshape today for the next 20 years is going to look very different than the one that we’ve built over the last 20, 30, 40 years.” – Victoria Meyer
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INSIGHT: Chemical Industry Paradox: Is Bigger Still Better
The chemical industry has long been built on a few fundamental assumptions that guided investment and competitive strategy: bigger plants mean better economics, global supply chains create efficiencies, and steady demand growth absorbs capacity. But as Victoria Meyer explores in this episode of The Chemical Show, these foundations are shifting. Today, leaders are forced to ask: Is bigger still truly better? Or is the next era defined by something new, an “economy of fit” rather than just “economies of scale”?
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Pressures on the Old Model
For decades, the drive was to build ever-larger, more efficient assets. The logic was clear: world-scale plants meant lower unit costs and global competitiveness. Victoria points out how ingrained this thinking is, even investment cases routinely assume 20-25 year asset lives, sometimes expecting those assets to run for far longer.
Yet today, we see cracks in this foundation. Prices are rising, but margins remain under pressure, higher costs outpace what producers can pass through. Plants are operating at low rates, old assets are closing, all while new capacity, particularly in China, keeps coming online. These aren’t isolated challenges; they signal that the old scale-based advantages are no longer as effective in a world changed by geopolitics, supply constraints, and shifting consumer patterns.
The Pricing Paradox and Overcapacity
Victoria describes the “pricing paradox”: prices increase due to feedstock and energy volatility, supply disruptions, and shifting trade flows, but these don’t translate to healthy margins. Instead, rising costs outpace achievable price increases and margins get squeezed.
Compounding this, the sector faces questions about capacity. The industry has been littered with talk of overcapacity, particularly in commodities, but even specialties aren’t immune. Recent data from ICIS anticipates ethylene utilization rates to remain well below historical averages for the next decade, a sign that imbalance is the new normal. But is this strictly a problem of too much capacity? Or do we simply have the wrong kind in the wrong places for current and future demand?
Investment Motives are Splintering
One striking change is a divergence in investment motives. While Western, publicly listed companies typically require clear financial returns, state-linked competitors, especially in China, are driven by a broader set of objectives. National policy, energy strategy, and even carbon reduction targets (with different start dates and benchmarks) shape decisions as much as return on capital.
As a result, China continues to add vast amounts of capacity, well beyond its domestic growth rate, while Western firms retrench or shutter older assets. The logic underpinning global buildout is less uniform than ever.
Europe’s Lessons: Asset Aging and Shifting Demand
Europe offers a telling window into these shifts. Once optimistic about new mega-projects, the continent has instead seen multiple major closures in recent years, especially among older crackers. It’s not just feedstock economics, it’s also the natural aging of assets that were built for a different era and different customer needs.
What replaces these assets, and whether the new mix of products matches fast-evolving customer and societal needs, is the new strategic frontier. As Victoria highlighted, the rise of sectors like data centers creates new, localized chemical demands that assets from 40 years ago weren’t built to serve.
The Real Question: Economy of Scale or Economy of Fit?
So, is bigger actually better? Victoria makes the case that the answer is much more nuanced today. Scale still matters, but only when matched precisely to demand, operating at 70% capacity doesn’t deliver world-scale economics. Instead, industry leaders must consider what “fits”: capacity that matches demand, products tailored to local needs, production aligned to geography and resilience.
Sometimes, this fit will mean large consolidated sites (as Evonik is doing in Germany); other times, it’s about regional flexibility or supply chain resilience (as seen with CF Industries shifting sourcing toward the US). The point: the right answer to scale versus fit depends deeply on market, product, and customer.
The chemical industry isn’t disappearing. Scale advantages remain, but “fit”—the right product, in the right place, at the right time—may be even more critical going forward. Now more than ever, leaders must reevaluate assumptions, push capital markets to appreciate new models, and stay flexible to shifts in technology, society, and geopolitics.
As Victoria concludes, the central challenge for the next era is clear: not how big can we build, but how well can we fit our resources and capability to what the world actually demands. It’s a new frontier and it requires a new kind of leadership.