260,000 tons of PP to shut down by year-end! Why is LyondellBasell—the world’s largest PP producer—cutting back in Europe?

LyondellBasell’s Dual-Pronged Strategy If one looks only at the Brindisi move, LyondellBasell appears to be retreating step-by-step across Europe. Yet zooming out to the global level reveals the company is playing a much larger, more strategic game. In 2024, LyondellBasell generated $41.1 billion in chemical sales—making it the world’s top polypropylene (PP) producer, third-largest polyethylene (PE) producer, and a leader in propylene oxide and its derivatives. However, its deepest moat lies not in raw production capacity, but in its vast portfolio of proprietary technologies. Spheripol, Spherizone, and Hostalen ACP—polymerization process technologies developed or owned by LyondellBasell—are deployed in hundreds of plants worldwide. In the PP catalyst segment, LyondellBasell commands approximately 25% of the global market share—ranking first globally. In other words, roughly one out of every four PP production lines worldwide relies on LyondellBasell’s technology and catalysts. This creates a striking paradox: while LyondellBasell is shutting down its own PP plant in Europe, its technologies are being widely licensed across emerging markets such as China and India. Take China as an example: numerous newly built PP units adopt LyondellBasell’s licensed Spheripol process. The more China expands its PP capacity, the more robust LyondellBasell’s technology licensing revenue and catalyst sales become. On one hand, its captive manufacturing facilities close amid losses; on the other, its technology licensing business grows steadily as others expand. This strategy—retreating from manufacturing while safeguarding technological leadership—is essentially about divesting low-efficiency assets while reinforcing its high-margin, technology-driven monopoly position. From an asset-allocation perspective, LyondellBasell’s direction is crystal clear. In May 2026, the company completed the sale of multiple European assets to Velogy, a newly established European petrochemical firm. Concurrently, it expanded propylene production capacity at its Channelview facility in Houston, USA—shifting its manufacturing focus toward North America, where feedstock costs are significantly lower. The Brindisi shutdown is merely another calculated move within this broader global reallocation of assets. The Mirrored Divergence in Global PP Capacity Brindisi’s fate can only be fully understood against the backdrop of a dramatic global reshuffling of PP capacity. Today, the global polypropylene industry is undergoing an unprecedented shift: Europe is contracting, while China is surging. In Europe, roughly 11 million tons/year of chemical capacity was shuttered between 2023 and 2024—including about 2.86 million tons/year of ethylene and propylene (olefin) capacity, accounting for 26% of the total closures. SABIC permanently closed its Olefins III cracker unit in Herne, the Netherlands; BASF, Dow Chemical, and other industry giants have likewise scaled back their base chemical operations in Europe. Three interlocking forces drive this retreat: First, energy prices—European industrial natural gas costs have remained three to five times higher than those in North America. Second, carbon costs—the EU’s Carbon Border Adjustment Mechanism (CBAM) officially takes effect in 2026, imposing additional levies of dozens of euros per ton of product. Third, weak demand—Europe’s manufacturing PMI has lingered near the 50-point expansion-contraction threshold for extended periods. Under this triple pressure, commodity-grade polyolefins—products highly sensitive to cost—have effectively lost their economic viability in Europe.

Massive losses, layoffs, asset sales! How dire is the situation for global chemical giants in 2025?

Specialized Plastics Vision has compiled 2025 financial data for major global chemical companies—a single table revealing the full industry picture: Note: ① LG Chem’s figure represents operating profit; all others report net profit. ② PPG’s figure reflects adjusted earnings per share (EPS). ③ Companies headquartered in the Eurozone report in euros; all others use U.S. dollars. The Hardest-Hit: Who Fell the Furthest? Dow Chemical reported full-year 2025 net sales of $40.0 billion, down 7% year-on-year; GAAP net loss of $2.4 billion; operating EBIT fell sharply from $2.6 billion in 2024 to just $0.4 billion—a decline exceeding 80%; operating cash flow dropped from $2.9 billion to $1.1 billion, nearly halved. Saudi Basic Industries Corporation (SABIC) posted 2025 revenue of SAR 116.5 billion (approx. USD 31.1 billion), down 1% year-on-year—but recorded a net loss of SAR 24.7 billion (approx. USD 6.6 billion). Such massive losses stem not primarily from operational deterioration, but from large-scale asset impairments. SABIC disclosed in its financial statements that it took substantial write-downs on certain assets, while average selling prices for key products also declined—severely compressing profitability. Nevertheless, the company generated free cash flow of SAR 7.2 billion, up 17% year-on-year, providing ample financial headroom for future transformation. Covestro reported 2025 sales of €12.942 billion, down 8.7% year-on-year; EBITDA of €740 million, down 30.9%; and a net loss of €644 million—worsening from a €266 million loss in 2024. As the world’s leading polyurethane producer, Covestro is navigating a challenging transition. CEO Markus Steilemann stated the company is advancing its “Winning with Purpose” strategy, implementing cost reductions and business restructuring to weather the industry downturn. Additionally, LyondellBasell reported 2025 sales of USD 30.153 billion, down 10% year-on-year; and a net loss of USD 738 million. In its financial statement, the company candidly noted that 2025 marked one of the longest downturns ever recorded in the chemical industry—with weak global demand for polyethylene and polypropylene, especially in China, where inventories remain persistently high—driving sharp declines in both product prices and margins. Notably, LyondellBasell exceeded its 2025 cash improvement target, delivering USD 800 million in cash improvements (vs. an original target of USD 600 million), and raised its cumulative 2026 target to USD 1.3 billion. Even under extreme adversity, the company achieved positive operating cash flow of USD 2.3 billion, with a remarkable cash conversion rate of 95%. Defying the Odds: Who Grew Amid the Winter? Against the backdrop of widespread losses among global chemical giants, BASF delivered a comparatively strong performance. In 2025, its sales totaled €59.657 billion, down 3% year-on-year—but net income attributable to shareholders reached €1.313 billion, up 118% year-on-year—more than doubling from €602 million in 2024. BASF’s resilience stems from two pillars: first, its global leadership in MDI confers significant pricing power; second, sustained investment in emerging markets like China. In its financial report, the company emphasized that structural adjustments and cost-cutting initiatives at its Ludwigshafen site are progressing well, with expected cumulative savings of €2.1 billion by end-2026.

Analysts Offer Insights on Materials Companies: LyondellBasell (LYB) and Vulcan Materials (VMC)

1 day ago

Wells Fargo and UBS analysts maintained Buy ratings on LyondellBasell and Vulcan Materials, setting price targets at $70.00 and $326.00 respectively, signaling bullish sentiment in the materials sector.

The Globe and Mail

2026-10-10

Analysts Offer Insights on Materials Companies: LyondellBasell (LYB) and Vulcan Materials (VMC)

Analysts Offer Insights on Materials Companies: LyondellBasell (LYB) and Vulcan Materials (VMC)

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