Chemicals

• Spread over feedstock

  The product price minus the cost of the feedstock needed to make it: the first line of a commodity producer's profit.

• Plant utilization (operating rate)

  Production divided by capacity. Fixed costs are spread over fewer tonnes when it falls, so commodity plants need to run close to full to earn good margins.

  Typical: About 75 percent for EU chemicals in 2025, about 9.5 percent below the 2014 to 2019 level[3]

• Cash cost per tonne and cost curve position

  Feedstock, energy and other running costs for one tonne, and how that ranks against rival plants.

• Energy price versus rivals

  What the company pays for gas and power compared with competitors in other regions.

  Typical: European gas cost about three times the US level in January to July 2025[3]

• EBITDA per tonne

  Profit before interest, tax, depreciation and amortization for each tonne sold.

• Share of sales from new products

  For specialty companies, how much revenue comes from products launched in recent years: a sign that innovation works.

• Working capital days

  How many days of sales are tied up in stock and unpaid customer bills. Chemicals hold a lot of stock, and its value falls when prices fall.

• Process safety incidents

  Fires, leaks and other serious events. One major accident can close a plant.

1. 1Is this product commodity or specialty: do customers buy on price or on performance?
2. 2What feedstock and energy do we use, and what do our competitors pay for theirs?
3. 3How full are our plants, and how much new capacity is being built by others?
4. 4Where are we in the cycle: is today's spread high, low or normal?
5. 5For a plant decision: what else on the site depends on this plant?

1. 1

   Step 1: Feedstock: naphtha from crude oil, ethane and propane from natural gas, salt and minerals

   Margin varies

   National oil companies, gas processors, refiners such as Saudi Aramco, ADNOC and Reliance

   Gulf producers often buy gas feedstock from the national oil company at government-set prices, a large cost advantage.

2. 2

   Step 2: Base chemicals: steam crackers and large plants make ethylene, propylene, methanol and ammonia

   Thin margin

   SABIC, Dow, INEOS, Sinopec, LyondellBasell

   Swings with the cycle; US basic chemical companies averaged under 3 percent operating margin in January 2026 data.

3. 3

   Step 3: Intermediates and polymers: polyethylene, polypropylene, PVC, PET, fertilizers such as urea

   Thin margin

   Borouge, LyondellBasell, Reliance, Formosa Plastics, Yara

   Earns the spread over feedstock; strong only when plants run near full.

4. 4

   Step 4: Specialty chemicals: additives, adhesives, catalysts, coatings, electronic and water treatment chemicals

   Fat margin

   BASF, Evonik, Clariant, Croda, Pidilite, Ecolab, Shin-Etsu

   US specialty chemical companies averaged about 12 percent operating margin, about four times the basic chemicals level.

5. 5

   Step 5: Distribution: store, repack and deliver chemicals to many smaller customers

   Thin margin

   Chemical distributors such as Brenntag and Univar Solutions

   A volume and logistics business with strict safety rules.

6. 6

   Step 6: Converters and end markets: films, bottles, pipes, fibres, paints, fertilizers applied on farms

   Margin varies

   Packaging makers, paint companies such as Asian Paints and Akzo Nobel, carmakers, farmers

   Brand owners with strong brands, such as paint makers, keep more of the value than the converters.

In commodities the profit sits with the producers that have the cheapest feedstock and the largest integrated sites, such as ethane-based plants in the Gulf and the United States. In specialties it sits with companies whose products are designed into customers' products and hard to replace. Producers with expensive feedstock, such as many naphtha crackers in Europe, earn little at the bottom of the cycle.