When the Petrochemical Sector’s Green Dream Meets Harsh Reality

The global petrochemical industry is grappling with its worst downturn in decades. Overcapacity—caused by aggressive investment in production just as COVID-19 slowed economic growth—has collided with the growing pressure of transitioning to low-carbon energy sources. The situation is especially dire in Europe, where major players are reviewing their operations for possible closures.

These challenges were front and centre when nearly 1,500 chemical industry professionals gathered at the 40th World Petrochemical Conference in Houston, Texas. There it became evident from discussions that chemical firms are being forced to navigate complex decisions around sustainability, regulation, and market viability.

One of the major themes was the uncertainty surrounding the future of green hydrogen produced using renewable electricity. Bob Patel, director at Air Products & Chemicals, which recently cancelled two green hydrogen projects, emphasised that such ventures lack economic viability without substantial subsidies. Instead, blue hydrogen—created from hydrocarbons with captured emissions—is now being viewed as a more realistic low-carbon option due to lower costs.

Wall Street's enthusiasm for sustainable tech is also waning. Chemical industry analyst John Roberts noted the dramatic fall in stock prices of four recycling startups that raised nearly $3 billion earlier this decade. This trend reflects a broader cooling toward sustainability-related investments, as financial markets shift their focus to other tech areas which are deemed to have a brighter future, such as artificial intelligence and data centres.

“It’s difficult to see a business model today without subsidies,” observed Bob Patel, a former CEO of LyondellBasell Industries. Newer technology, changing government subsidies and regulations create uncertainties for all sustainability projects, meaning that investors in them will need to consider carefully before giving the green light. “If you can’t see a path to a clear, self-sustaining economic model over—let’s say over 5–10 years, maybe not 0–5—then likely it is not something you should be doing.”

“We will only invest in things that generate value,” explained Kim Foley, executive vice president of global olefins, polyolefins and refining at LyondellBasell. Before noting that LyondellBasell had reported a 65% increase in sales of recycled and renewable plastic resins in 2024. “There is clearly market demand for these solutions,” she concluded.

Similarly, Braskem has found niche success outperforming traditional resins with green polyethylene made from ethanol, targeting high-end packaging markets for products such as luxury cosmetics. The company has been making polyethylene from ethanol for more than a decade, explained CEO Roberto Ramos. “It appeals to a client that would buy the green polyethylene but would not buy the fossil fuel polyethylene,” he said.

Despite promising projects, chemical industry leaders acknowledged that sustainability won't fix today’s deeper problems. From 2019 to 2034, chemical industry analysts predict that capacity for six key chemicals will grow by 23.4 million metric tons annually, while demand will rise by just 17.2 million metric tons. This imbalance is devastating margins—with ethylene cracker utilization having already dropped from 90% in 2019 to 80% in 2023, leaving little profit for facilities using expensive feedstocks like naphtha, common in Europe and Asia.

Dow CEO Jim Fitterling said the situation marks only the third extended downturn since the 1970s. He blamed not only feedstock overcapacity but also global economic stagnation and collapsing demand, especially in Europe. Since the pandemic, Fitterling notes, European industrial chemical demand has fallen 20% due to high costs and regulatory burdens. “Europe had a thriving chemicals industry, but what happened is that you had downstream customers leave,” in what he called a “wave of deindustrialization.”

Ilham Kadri, CEO of Syensqo and president of the European Chemical Industry Council, highlighted how Europe’s energy crisis worsened after Russia’s invasion of Ukraine. Losing access to cheap Russian gas pushed energy prices 4–4.5 times higher than in other regions. She also criticized excessive regulation—1,400 pages added since 2019—and warned that trade tensions, particularly those heightened by Trump 2.0, are complicating operations further.

In the US, the petrochemical sector is bracing for a volatile future. Chris Jahn of the American Chemistry Council stressed the need to shield the industry from retaliatory tariffs and protect access to key raw materials amid possible trade conflicts.

Longer-term, the US advantage—cheap ethane from the shale boom—may be fading. S&P’s Kurt Barrow projected that US natural gas liquids production, which grew 95% from 2005 to 2025, will increase only 12% in the following decade. By the 2030s, ethane output may plateau, leading to cost pressures and possibly forcing a return to less efficient feedstocks like naphtha.

As the petrochemical industry confronts one of its most turbulent eras, leaders are being forced to reconcile long-term sustainability goals with the urgent need for economic survival. The conference made clear that innovation alone cannot resolve fundamental imbalances in supply and demand, nor can green initiatives thrive without supportive policy and market conditions. While certain niche solutions show promise and companies remain committed to generating value through more sustainable chemical products, the road ahead will require strategic recalibration.

For, while low-carbon projects remain critical for the future, the chemical industry is in immediate crisis—driven by oversupply, weakening demand, regulatory challenges, and an uncertain global trade environment.

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