2026 Regional Chemical Processing Outlook
Video Language
In this episode, Shaheen Chohan sits down with Trey Hamblet (Senior VP of Chemical Processing Research) and Jean-Baptiste Mauduit (EU Research Manager for Alternative Fuels & Chemical Processing) to break down what's really happening beneath the surface. From the Gulf of Mexico's ongoing offshore buildout to Europe's structural cost disadvantages, they explore where capital is flowing and where it's stalling.
[Intro] (00:00):
To some extent, we are now seeing something of a step change in the current outlook for chemical processing capital spending, and much of this is driven off the broader outlook for global economic growth and end-use consumption across the chemicals product value chain. So the big question is: are we now seeing a recalibration in the type and the location of chemical spending for the next 24 months? And what does that longer-term picture look like for ESG-related commodity capacity development?
Shaheen Chohan (00:50):
Welcome to Navigating the Currents of Change. My name is Shaheen Chohan and I lead Global Analytics here at Industrial Info Resources. For over 40 years we have been providing market intelligence, data, analytics and geospatial solutions to those companies involved in the design, construction and maintenance of plants and facilities across energy and heavy industrial sectors across the world. Now, to help me unpack some of the trends that we are seeing, I am delighted to be joined by two of our subject matter experts. We have Trey Hamblet, who is global head of chemical processing and petroleum refining research. And also in the hot seat is Jean-Baptiste Mauduit, who is our European head of research for chemicals and alternative fuels. Welcome, gentlemen.
Now, Trey, each time we start a new calendar year, everybody really wants to know what's so different about the road or the landscape ahead — certainly for the year compared to how we closed out back in 2025. Big question for me really is: are we in for a big or fundamental change this year that we haven't possibly faced in those market conditions last year?
Trey Hamblet (02:08):
Yeah, it's a great question. And you're correct — when we start the year, everyone's trying to measure up their success or their failures, or their shortcomings or their exceeding expectations, whatever their position might have been in 2025. And they're trying to figure out what's going to change this year and where do I go. On a global scale, obviously the US market — particularly tariffs and things, tools and instruments that have been used in our markets — have influenced other global markets. And that's something that it's a tool we saw used quite regularly last year by our current administration. And it had its impacts on many shores around the world. We've seen that tool used once this year already, so I do anticipate we'll see more of that in this upcoming year.
So there's a constant probably — but I think the market has more or less understood or interpreted how it's going to be used and to what extent they're being used for longer periods of time than maybe they have been traditionally in the past. And so the market is trying to figure that out. Here domestically — and I say domestically, where I'm physically in the US and Canadian market — we see the changes in some of the tax incentives making a significant change. Some might have viewed the revisions as being a constraint in some cases because it increased the hurdle, it increased development percentages for some projects. I see it as more clearing the road in some respect, because some of the less likely, overly opportunistic spending has probably been peeled back, and we see which projects have a higher probability.
Globally, there's certainly an increased risk of project cancellations — again something we faced in 2025, we saw that last year. So that's not a fundamental change. And when I say we see an increased risk in cancellations, it's because the longevity for some of these projects — when we look at the pipeline of projects that have a potential construction start at this moment, we've got projects that we've been tracking for 5, 6, or even 8-plus years in some cases. And any time you have a project that's been delayed for that extremely long period of time, the dynamics, the cost factors behind some of those projects change. Look at what Dow had to do in Western Canada — they had $6.5-plus billion worth of investment, they were starting construction back in 2024. And in 2025, they said, gosh, when we look at the dynamics of the commodity and the pricing of this commodity when it's expected to come online currently, it's not at all what it was when we were developing that project in the years 2022, 2023 and leading up to 2024. So they've slow-played the startup of that capacity. And we're seeing that in other markets around the world as well — whether it be in China, even Southeast Asia to some extent — because we've seen some of the demand not materialize at the pace that we thought it would.
Shaheen Chohan (05:08):
Well, actually, I want to kind of stay with that theme a little bit. But actually I want to push this question over to you, Baptiste. Obviously, what we've just heard from Trey — we've got the two big chemicals markets, we've got the Middle East and the US sitting pretty smugly with still very strong cost of production advantage. Would it be right to say, Baptiste, that Europe is sitting on the other side of that kind of positive outlook, and are you starting to also experience and see some of these big structural weaknesses in the market now manifesting themselves as — as Trey alluded to — higher levels of project fallout, certainly project slippage?
Jean-Baptiste Mauduit (05:50):
Yes, I think that's right. Europe is structurally at a disadvantage versus the US and Middle East, mainly because of higher energy and fiscal costs, tougher regulation and weaker demand visibility. That doesn't mean the industry is collapsing, but capital is being deployed much more selectively — with a focus on protecting competitiveness and managing risk rather than chasing growth. And lower-cost imports, particularly from regions like the Mercosur, are adding extra pressure in several commodity chains.
Shaheen Chohan (06:24):
Now, Baptiste, if I could actually just stay with you a little longer — apologies, I do want to stay with this theme. Do you expect to see any further rationalization of current production capacity across Europe, or do you think enough has already been done now to kind of right-size the European market? Do you expect to see any new capacity therefore come from grassroots developments or new capacity coming from new additions? And if so, where do you expect to see the biggest risk or potential rationalization, and where, if any, is any of the new production capacity coming online over the next few years?
Jean-Baptiste Mauduit (07:08):
We do expect more rationalization, especially in petrochemicals. Over the past 18 to 24 months, about 8 olefin steam cracking capacity lines have already been taken out across France, Italy, the Netherlands and the UK, and in some cases it has extended downstream as well. Ineos in France is a good example, where both the cracker and polymer units closed — which shows this is structural rather than cyclical. As a result, there is very little appetite for new grassroots petrochem capacity. Investment is focused on bottlenecks, revamps and efficiency or compliance work at existing sites. Overall, Europe is reshaping its footprint rather than expanding it.
Shaheen Chohan (07:54):
Now, Trey, obviously over the last several years, the potential ESG-motivated spending has been pretty enormous and has consistently grown year over year, and certainly accounted for an increasing share of the overall capital project spending that you've been seeing. You have just recently presented your 2026 annual outlook for North America, and in there there were some really interesting key messages that you shared. What I picked up was that you were talking about this potential shift in some of the green and blue spending. Can you share a little bit more with folks who've joined us for this discussion?
Trey Hamblet (08:44):
Sure. And so probably one of the better illustrations of that is the shift in the probability scoring of the projects that we're tracking. If I think back to a year ago — to your question a moment ago, how are we starting this year versus last — when I think to a year ago and I look at the probability of the spending that we had identified: high, medium and low. Every project that we include in our database has been validated by a researcher and scored with a high, medium or low probability — what are the odds this project will actually materially become a reality? When I think a year ago, a significant majority of the future spend had a medium probability score. And when I now sit here and look at the year ahead, a significant portion of that has a low probability. And the change is the fact that a lot of these ESG projects, particularly in North America, are becoming less likely. I'm not saying that the ESG spend is going to come to its end, but we're now getting to a point where we're going to see the reality of what proportion of those can actually make it to a shovel in the ground. So that's been the fundamental shift in the ESG strategy and spending that we've seen — it's been somewhat regional in nature.
Shaheen Chohan (10:02):
So what you're saying is there is an expectation now that we're going to see a big swing in momentum in ESG projects. What does that mean for the industry as a whole, since these projects did account for a fairly sizable proportion of your overall spending? Are we potentially seeing a swing away from the ESG and back into what I could call maybe just business as usual — the kind of standard type of capital projects that we've been seeing?
Trey Hamblet (10:39):
So you're absolutely correct. When I started getting ready for this year and looking at what's ahead, I started separating what's a traditional chemical industry spend versus what is an ESG spend. Because think back — probably 2019, certainly before 2020 — we were looking at carbon capture and we were looking at some of these blue and green commodities, but we were not looking at it as intensely as we were in the years since then.
And so I peeled back the ESG spend just to show what the traditional industry spend is. And it yields that a lot of the traditional sectors — industrial gases, petrochemicals — those are the sectors that have building block commodities, and there's a significant portion of the spend still in those categories that is a non-ESG spend. And then it also differs globally. I talked about tax incentive changes here in our domestic market in the US — that's certainly representing a significant pullback in some of that ESG spending. And I say pullback — maybe I phrased that incorrectly. It's really just a further deferment in some cases and a cancellation. And then there are regions like Europe where Baptiste is, where there's still very much embracing that, and it represents a significant portion of their future spend.
Shaheen Chohan (12:12):
Baptiste, I would like to bring you into the discussion again. Similar to what Trey said about the US — Europe obviously had a lot of planned ESG-related spending being baked into your future midterm pipeline. With the big swing in momentum in ESG projects, and in particular I think from a discussion that we had very recently, it was really a lot of pressure on the green hydrogen projects — certainly from a cost of production perspective and I guess a tepid demand outlook. Are you seeing two types of market? What does the swing away from green hydrogen spending mean potentially for the blue hydrogen spend?
Jean-Baptiste Mauduit (12:58):
Yes. Very clearly the market has moved away from the earlier narrative of rapid growth in green hydrogen. What we are seeing now is more of a plateau. We track around 783 hydrogen and hydrogen-based projects in Europe, representing over $318 billion USD in announced CapEx, and that number has barely changed since last summer. New announcements are increasingly offset by delays or cancellations, and the main issue isn't technology — it's demand, especially the lack of long-term offtake and price certainty. So the market is becoming much more selective and commercially driven.
Shaheen Chohan (13:41):
So, Trey, actually if I could ask you also — are you seeing two types of dynamics or trends between the green and the blue? Because I guess most of these clean commodities have been stimulated and supported by tax incentives. And I think in the US, there's been a Trump administration that's really applied a lot of pressure and taken away a lot of the incentives for the green side of the supply chain. Is there still momentum and support for the blue side?
Trey Hamblet (14:04):
So I think the answer is yes, but it's going to be on probably a different scale than what it had originally been envisioned. When you think about hydrogen, I don't think it's far-fetched to say that the next world-scale hydrogen unit that's built here in the US — I would anticipate it will have carbon capture and be a blue hydrogen. I say that because the 45Q changes made the tax incentives for carbon capture at parity with the higher rates that other applications are getting. So I do anticipate that we'll continue to see developments from some of the blue commodities.
However, no different than on the green side, there had been an abundance of overly optimistic plans made for the blue commodities. And so we've seen some of that spending pull back. And a lot of that was in anticipation that we would have just this very robust global demand for our building block commodities — ammonia, hydrogen, ethylene. And of course we're in a phase where we're not seeing the global demand be as rosy as we'd hoped it would be now, five years post-restart from the pandemic.
Shaheen Chohan (15:19):
And likewise for you, Baptiste — are you also seeing, in the blue hydrogen space and the subsequent blue commodity space, a better outlook for blue hydrogen in Europe? Bearing in mind cost of production economics are still slightly on the high side.
Jean-Baptiste Mauduit (15:38):
Blue hydrogen remains a much smaller market than the green. We are tracking only a couple of dozen projects, representing around $10.6 billion USD in CapEx. While production economics can be slightly better, there are still questions around policy clarity and long-term demand. As a result, we see blue hydrogen more as a selective bridge solution in certain locations and value chains, rather than a major growth engine on its own.
Shaheen Chohan (16:10):
So back to you, Trey. If we could look at now where — I'm going to use the phrase — where you see a little bit more certainty or indeed positivity. Is there a particular sector or commodity class that you're seeing as emerging and showing a lot more, higher volumes of planned spending for this year and possibly into next year? And why is that? What's contributing to that?
Trey Hamblet (16:35):
There's nothing that I would say new and emerging at this point, because obviously the blue and green varieties were a step change for the industry and that was emerging. I would say that chances are we get back to some of our roots. And by that — in our earlier conversation of separating the ESG from the non-ESG — we've got a couple of small unit additions and capacity additions here for ethylene in the US, we have a few small ones still planned in Southeast Asia and other parts of the world. So I think we're going to get back to seeing some of the commodity construction for ammonia, ethylene, some of those building block commodities — in a smaller scale than the world-scale capacity that we saw come online between, say, 2015 and 2019. We're not at that level, but I think it's going to be more of the traditional building block commodities on a smaller scale until we see the level of geopolitical uncertainty start to relieve itself — whether it be Iran, Ukraine, other corners of the world. The chemical industry is very consumer-centric, and those things are kind of weighing on the forward movement for a lot of investments.
Shaheen Chohan (17:48):
Trey, I mean, the reality of it is the base chemical market, the petrochem side of the supply chain, it's kind of overbuilt. And we're seeing very moderated levels of end-consumer or end-segment demand growth — automotive, the manufacturing sectors are not really firing on all cylinders yet. Yet we continue to see large-scale increases in capacity production, certainly on the petrochem side in China, the Middle East to some extent, a little bit in Southeast Asia. Even with the US having quite a strong cost advantage of your shale and ethane supply chain, is there any kind of pressure on having to rationalize US production capacity — maybe at the older kind of fleet level? Is there any pressure on US producers in that way?
Trey Hamblet (18:46):
No. I mean, to your point about the low-cost feedstocks, but also our energy costs — there's not any capacity in the domestic US or Canadian market that's looking to be rationalized. The activity that we've identified in Asia, particularly China, has slowed compared to what it was. If you look at the number of new unit additions for PDH — propane dehydrogenation and others — we saw a significant build-out years ago. And yes, there's new capacity being planned, but if you look at the scale of what's being planned even in China compared to a few years ago, I think it matches the lack of momentum in global demand and consumption.
Shaheen Chohan (19:37):
So Baptiste, similar question to you specific to non-ESG. I know we've talked a little bit about the potential or continuation in production capacity rationalization. Are you actually seeing any particular hotspots that are related to the non-ESG related spending?
Jean-Baptiste Mauduit (19:57):
Non-ESG spending in Europe is holding up, but it's largely defensive. The focus is on maintenance, compliance, reliability and targeted efficiency upgrades rather than new capacity. In our database, we see around 2,600 to 2,700 projects with total announced CapEx in the mid $200 billion USD, but a significant share of that is linked to power transition projects. So green hydrogen and those remain uncertain. As those ESG projects are delayed and or canceled, the spend that actually goes ahead is increasingly non-ESG — aimed at keeping existing assets competitive in a tough cost environment.
Shaheen Chohan (20:37):
Now, Trey, most of our conversation so far has been on the capital spending side of project activity. We haven't really talked much about maintenance and turnaround. I know that you track both plant-wide maintenance and also maintenance for the specific units and the processing units in particular across the plant. Is there anything now remarkable or that has changed compared to last year about the maintenance outlook? I guess globally, but also for the US — is that changing? Have we seen any new trends emerging?
Trey Hamblet (21:16):
Yes. So we've seen a continued stair-step increase in both spending and the number of maintenance opportunities — maintenance projects, planned unit turnarounds, planned maintenance turnarounds and plant-wide turnarounds — for a number of years. And we attribute this to a couple of things. The size of the chemical fleet has continued to grow — I've made reference at least once today about the new construction boom we saw between 2015 and 2019. That fleet is operational, and maintenance is required, so by default maintenance spend went up.
Also, I think we've seen the adoption of AI to some extent into the maintenance planning and scheduling. If you think back to the industry 15 or 20 years ago, we were in discussions about predictive and preventative maintenance. And then 5 to 10 years ago, it was all about collecting so-called big data. Well, the results of that predictive and preventative maintenance from a couple of decades ago turned into big data — they put it into large language models, and now you've got AI solutions that can do some very robust identification of potential solutions. And I think the influence of big data, large language models and AI into the maintenance planning has certainly attributed to the increase in maintenance budgets, because they can identify things that have greater cost efficiencies and lower risk.
And then even to some extent, when we went through some of the bottoms of our spending cycle over the last 3 or 4 years, I think there's even been the trend to kind of cannibalize some very small capital projects that could be integrated into some of these maintenance solutions — probably again on the back of some of the automated solutions specific to the unit by unit. You're right — there are 77 different commodities that we track at a very granular, unit-by-unit level. We track the specific downtime down to the day when those units — whether it be ethylene dichloride, ethylene oxide, methanol, ammonia, hydrogen, etc. — we track down to the specific day when they start and they stop. And we've got a period of time in late 2026, the fourth quarter of this year, through the middle of 2027, where we see a new kind of high-water mark in the individual unit turnaround.
Shaheen Chohan (23:57):
So you're seeing 2026 is potentially a good, strong year for maintenance and turnarounds compared to last year — because obviously there's been a bit of a catch-up right during COVID, maintenance got held back, then it kind of came back, and everybody got operational maintenance numbers lifted again. This year is looking strong.
Trey Hamblet (24:14):
Yeah. So we actually saw the fourth quarter of this year being kind of an anomaly, if you will. A significant portion of the planned plant maintenance and unit-level maintenance takes place in the second and the third quarter. When we looked at the full year, the fourth quarter of this year was actually quite a bit stronger than we have in prior years, thanks to several pretty large events. And then going into 2027, we see a pretty strong start as well.
Shaheen Chohan (24:41):
So Trey, in summary — even with the continued push towards making greener chemical end-use products and obviously efforts by us all to reduce our daily plastics consumption, do you see any material change in some of those big macro long-term drivers and trends?
Trey Hamblet (25:02):
Yeah. So I guess in closing, the ESG spend at some level is going to stick with us — you've got ESG strategies baked into our financial markets, our consumers want those solutions, Wall Street wants those solutions for ESG strategies, etc. On a macro level, everything is still plastic. Most of everything that surrounds us in this room has a plastic ingredient in it somewhere. The world is still becoming a much larger place — population growth, the needs for plastics in everything from cell phones to automobiles, those things just continue to increase their weight in plastic. So long term, plastic is still going to be a driver in the chemical industry spend. And of course with plastic you have to have ethylene and you have to have chlorine, you have to have all the other things to produce the catalyst to get there. So the long-term fundamentals remain in check — just when we start that climb rapidly again, that's the unknown.
Shaheen Chohan (26:07):
So that brings us to the end of our discussion, and leaves me to say only a couple of big thank yous. Firstly, to both you, Trey and Baptiste — very big thanks to you both for sharing your insights and your perspectives today. If anyone out there has any further questions about any of the points that were discussed today, then please do reach out to myself, Trey, or indeed Baptiste via our contact details that you can see here. And finally, a big thanks to all of you who've taken time out to join us. I hope we have helped you all better navigate some of the currents of change that we're seeing.
To some extent, we are now seeing something of a step change in the current outlook for chemical processing capital spending, and much of this is driven off the broader outlook for global economic growth and end-use consumption across the chemicals product value chain. So the big question is: are we now seeing a recalibration in the type and the location of chemical spending for the next 24 months? And what does that longer-term picture look like for ESG-related commodity capacity development?
Shaheen Chohan (00:50):
Welcome to Navigating the Currents of Change. My name is Shaheen Chohan and I lead Global Analytics here at Industrial Info Resources. For over 40 years we have been providing market intelligence, data, analytics and geospatial solutions to those companies involved in the design, construction and maintenance of plants and facilities across energy and heavy industrial sectors across the world. Now, to help me unpack some of the trends that we are seeing, I am delighted to be joined by two of our subject matter experts. We have Trey Hamblet, who is global head of chemical processing and petroleum refining research. And also in the hot seat is Jean-Baptiste Mauduit, who is our European head of research for chemicals and alternative fuels. Welcome, gentlemen.
Now, Trey, each time we start a new calendar year, everybody really wants to know what's so different about the road or the landscape ahead — certainly for the year compared to how we closed out back in 2025. Big question for me really is: are we in for a big or fundamental change this year that we haven't possibly faced in those market conditions last year?
Trey Hamblet (02:08):
Yeah, it's a great question. And you're correct — when we start the year, everyone's trying to measure up their success or their failures, or their shortcomings or their exceeding expectations, whatever their position might have been in 2025. And they're trying to figure out what's going to change this year and where do I go. On a global scale, obviously the US market — particularly tariffs and things, tools and instruments that have been used in our markets — have influenced other global markets. And that's something that it's a tool we saw used quite regularly last year by our current administration. And it had its impacts on many shores around the world. We've seen that tool used once this year already, so I do anticipate we'll see more of that in this upcoming year.
So there's a constant probably — but I think the market has more or less understood or interpreted how it's going to be used and to what extent they're being used for longer periods of time than maybe they have been traditionally in the past. And so the market is trying to figure that out. Here domestically — and I say domestically, where I'm physically in the US and Canadian market — we see the changes in some of the tax incentives making a significant change. Some might have viewed the revisions as being a constraint in some cases because it increased the hurdle, it increased development percentages for some projects. I see it as more clearing the road in some respect, because some of the less likely, overly opportunistic spending has probably been peeled back, and we see which projects have a higher probability.
Globally, there's certainly an increased risk of project cancellations — again something we faced in 2025, we saw that last year. So that's not a fundamental change. And when I say we see an increased risk in cancellations, it's because the longevity for some of these projects — when we look at the pipeline of projects that have a potential construction start at this moment, we've got projects that we've been tracking for 5, 6, or even 8-plus years in some cases. And any time you have a project that's been delayed for that extremely long period of time, the dynamics, the cost factors behind some of those projects change. Look at what Dow had to do in Western Canada — they had $6.5-plus billion worth of investment, they were starting construction back in 2024. And in 2025, they said, gosh, when we look at the dynamics of the commodity and the pricing of this commodity when it's expected to come online currently, it's not at all what it was when we were developing that project in the years 2022, 2023 and leading up to 2024. So they've slow-played the startup of that capacity. And we're seeing that in other markets around the world as well — whether it be in China, even Southeast Asia to some extent — because we've seen some of the demand not materialize at the pace that we thought it would.
Shaheen Chohan (05:08):
Well, actually, I want to kind of stay with that theme a little bit. But actually I want to push this question over to you, Baptiste. Obviously, what we've just heard from Trey — we've got the two big chemicals markets, we've got the Middle East and the US sitting pretty smugly with still very strong cost of production advantage. Would it be right to say, Baptiste, that Europe is sitting on the other side of that kind of positive outlook, and are you starting to also experience and see some of these big structural weaknesses in the market now manifesting themselves as — as Trey alluded to — higher levels of project fallout, certainly project slippage?
Jean-Baptiste Mauduit (05:50):
Yes, I think that's right. Europe is structurally at a disadvantage versus the US and Middle East, mainly because of higher energy and fiscal costs, tougher regulation and weaker demand visibility. That doesn't mean the industry is collapsing, but capital is being deployed much more selectively — with a focus on protecting competitiveness and managing risk rather than chasing growth. And lower-cost imports, particularly from regions like the Mercosur, are adding extra pressure in several commodity chains.
Shaheen Chohan (06:24):
Now, Baptiste, if I could actually just stay with you a little longer — apologies, I do want to stay with this theme. Do you expect to see any further rationalization of current production capacity across Europe, or do you think enough has already been done now to kind of right-size the European market? Do you expect to see any new capacity therefore come from grassroots developments or new capacity coming from new additions? And if so, where do you expect to see the biggest risk or potential rationalization, and where, if any, is any of the new production capacity coming online over the next few years?
Jean-Baptiste Mauduit (07:08):
We do expect more rationalization, especially in petrochemicals. Over the past 18 to 24 months, about 8 olefin steam cracking capacity lines have already been taken out across France, Italy, the Netherlands and the UK, and in some cases it has extended downstream as well. Ineos in France is a good example, where both the cracker and polymer units closed — which shows this is structural rather than cyclical. As a result, there is very little appetite for new grassroots petrochem capacity. Investment is focused on bottlenecks, revamps and efficiency or compliance work at existing sites. Overall, Europe is reshaping its footprint rather than expanding it.
Shaheen Chohan (07:54):
Now, Trey, obviously over the last several years, the potential ESG-motivated spending has been pretty enormous and has consistently grown year over year, and certainly accounted for an increasing share of the overall capital project spending that you've been seeing. You have just recently presented your 2026 annual outlook for North America, and in there there were some really interesting key messages that you shared. What I picked up was that you were talking about this potential shift in some of the green and blue spending. Can you share a little bit more with folks who've joined us for this discussion?
Trey Hamblet (08:44):
Sure. And so probably one of the better illustrations of that is the shift in the probability scoring of the projects that we're tracking. If I think back to a year ago — to your question a moment ago, how are we starting this year versus last — when I think to a year ago and I look at the probability of the spending that we had identified: high, medium and low. Every project that we include in our database has been validated by a researcher and scored with a high, medium or low probability — what are the odds this project will actually materially become a reality? When I think a year ago, a significant majority of the future spend had a medium probability score. And when I now sit here and look at the year ahead, a significant portion of that has a low probability. And the change is the fact that a lot of these ESG projects, particularly in North America, are becoming less likely. I'm not saying that the ESG spend is going to come to its end, but we're now getting to a point where we're going to see the reality of what proportion of those can actually make it to a shovel in the ground. So that's been the fundamental shift in the ESG strategy and spending that we've seen — it's been somewhat regional in nature.
Shaheen Chohan (10:02):
So what you're saying is there is an expectation now that we're going to see a big swing in momentum in ESG projects. What does that mean for the industry as a whole, since these projects did account for a fairly sizable proportion of your overall spending? Are we potentially seeing a swing away from the ESG and back into what I could call maybe just business as usual — the kind of standard type of capital projects that we've been seeing?
Trey Hamblet (10:39):
So you're absolutely correct. When I started getting ready for this year and looking at what's ahead, I started separating what's a traditional chemical industry spend versus what is an ESG spend. Because think back — probably 2019, certainly before 2020 — we were looking at carbon capture and we were looking at some of these blue and green commodities, but we were not looking at it as intensely as we were in the years since then.
And so I peeled back the ESG spend just to show what the traditional industry spend is. And it yields that a lot of the traditional sectors — industrial gases, petrochemicals — those are the sectors that have building block commodities, and there's a significant portion of the spend still in those categories that is a non-ESG spend. And then it also differs globally. I talked about tax incentive changes here in our domestic market in the US — that's certainly representing a significant pullback in some of that ESG spending. And I say pullback — maybe I phrased that incorrectly. It's really just a further deferment in some cases and a cancellation. And then there are regions like Europe where Baptiste is, where there's still very much embracing that, and it represents a significant portion of their future spend.
Shaheen Chohan (12:12):
Baptiste, I would like to bring you into the discussion again. Similar to what Trey said about the US — Europe obviously had a lot of planned ESG-related spending being baked into your future midterm pipeline. With the big swing in momentum in ESG projects, and in particular I think from a discussion that we had very recently, it was really a lot of pressure on the green hydrogen projects — certainly from a cost of production perspective and I guess a tepid demand outlook. Are you seeing two types of market? What does the swing away from green hydrogen spending mean potentially for the blue hydrogen spend?
Jean-Baptiste Mauduit (12:58):
Yes. Very clearly the market has moved away from the earlier narrative of rapid growth in green hydrogen. What we are seeing now is more of a plateau. We track around 783 hydrogen and hydrogen-based projects in Europe, representing over $318 billion USD in announced CapEx, and that number has barely changed since last summer. New announcements are increasingly offset by delays or cancellations, and the main issue isn't technology — it's demand, especially the lack of long-term offtake and price certainty. So the market is becoming much more selective and commercially driven.
Shaheen Chohan (13:41):
So, Trey, actually if I could ask you also — are you seeing two types of dynamics or trends between the green and the blue? Because I guess most of these clean commodities have been stimulated and supported by tax incentives. And I think in the US, there's been a Trump administration that's really applied a lot of pressure and taken away a lot of the incentives for the green side of the supply chain. Is there still momentum and support for the blue side?
Trey Hamblet (14:04):
So I think the answer is yes, but it's going to be on probably a different scale than what it had originally been envisioned. When you think about hydrogen, I don't think it's far-fetched to say that the next world-scale hydrogen unit that's built here in the US — I would anticipate it will have carbon capture and be a blue hydrogen. I say that because the 45Q changes made the tax incentives for carbon capture at parity with the higher rates that other applications are getting. So I do anticipate that we'll continue to see developments from some of the blue commodities.
However, no different than on the green side, there had been an abundance of overly optimistic plans made for the blue commodities. And so we've seen some of that spending pull back. And a lot of that was in anticipation that we would have just this very robust global demand for our building block commodities — ammonia, hydrogen, ethylene. And of course we're in a phase where we're not seeing the global demand be as rosy as we'd hoped it would be now, five years post-restart from the pandemic.
Shaheen Chohan (15:19):
And likewise for you, Baptiste — are you also seeing, in the blue hydrogen space and the subsequent blue commodity space, a better outlook for blue hydrogen in Europe? Bearing in mind cost of production economics are still slightly on the high side.
Jean-Baptiste Mauduit (15:38):
Blue hydrogen remains a much smaller market than the green. We are tracking only a couple of dozen projects, representing around $10.6 billion USD in CapEx. While production economics can be slightly better, there are still questions around policy clarity and long-term demand. As a result, we see blue hydrogen more as a selective bridge solution in certain locations and value chains, rather than a major growth engine on its own.
Shaheen Chohan (16:10):
So back to you, Trey. If we could look at now where — I'm going to use the phrase — where you see a little bit more certainty or indeed positivity. Is there a particular sector or commodity class that you're seeing as emerging and showing a lot more, higher volumes of planned spending for this year and possibly into next year? And why is that? What's contributing to that?
Trey Hamblet (16:35):
There's nothing that I would say new and emerging at this point, because obviously the blue and green varieties were a step change for the industry and that was emerging. I would say that chances are we get back to some of our roots. And by that — in our earlier conversation of separating the ESG from the non-ESG — we've got a couple of small unit additions and capacity additions here for ethylene in the US, we have a few small ones still planned in Southeast Asia and other parts of the world. So I think we're going to get back to seeing some of the commodity construction for ammonia, ethylene, some of those building block commodities — in a smaller scale than the world-scale capacity that we saw come online between, say, 2015 and 2019. We're not at that level, but I think it's going to be more of the traditional building block commodities on a smaller scale until we see the level of geopolitical uncertainty start to relieve itself — whether it be Iran, Ukraine, other corners of the world. The chemical industry is very consumer-centric, and those things are kind of weighing on the forward movement for a lot of investments.
Shaheen Chohan (17:48):
Trey, I mean, the reality of it is the base chemical market, the petrochem side of the supply chain, it's kind of overbuilt. And we're seeing very moderated levels of end-consumer or end-segment demand growth — automotive, the manufacturing sectors are not really firing on all cylinders yet. Yet we continue to see large-scale increases in capacity production, certainly on the petrochem side in China, the Middle East to some extent, a little bit in Southeast Asia. Even with the US having quite a strong cost advantage of your shale and ethane supply chain, is there any kind of pressure on having to rationalize US production capacity — maybe at the older kind of fleet level? Is there any pressure on US producers in that way?
Trey Hamblet (18:46):
No. I mean, to your point about the low-cost feedstocks, but also our energy costs — there's not any capacity in the domestic US or Canadian market that's looking to be rationalized. The activity that we've identified in Asia, particularly China, has slowed compared to what it was. If you look at the number of new unit additions for PDH — propane dehydrogenation and others — we saw a significant build-out years ago. And yes, there's new capacity being planned, but if you look at the scale of what's being planned even in China compared to a few years ago, I think it matches the lack of momentum in global demand and consumption.
Shaheen Chohan (19:37):
So Baptiste, similar question to you specific to non-ESG. I know we've talked a little bit about the potential or continuation in production capacity rationalization. Are you actually seeing any particular hotspots that are related to the non-ESG related spending?
Jean-Baptiste Mauduit (19:57):
Non-ESG spending in Europe is holding up, but it's largely defensive. The focus is on maintenance, compliance, reliability and targeted efficiency upgrades rather than new capacity. In our database, we see around 2,600 to 2,700 projects with total announced CapEx in the mid $200 billion USD, but a significant share of that is linked to power transition projects. So green hydrogen and those remain uncertain. As those ESG projects are delayed and or canceled, the spend that actually goes ahead is increasingly non-ESG — aimed at keeping existing assets competitive in a tough cost environment.
Shaheen Chohan (20:37):
Now, Trey, most of our conversation so far has been on the capital spending side of project activity. We haven't really talked much about maintenance and turnaround. I know that you track both plant-wide maintenance and also maintenance for the specific units and the processing units in particular across the plant. Is there anything now remarkable or that has changed compared to last year about the maintenance outlook? I guess globally, but also for the US — is that changing? Have we seen any new trends emerging?
Trey Hamblet (21:16):
Yes. So we've seen a continued stair-step increase in both spending and the number of maintenance opportunities — maintenance projects, planned unit turnarounds, planned maintenance turnarounds and plant-wide turnarounds — for a number of years. And we attribute this to a couple of things. The size of the chemical fleet has continued to grow — I've made reference at least once today about the new construction boom we saw between 2015 and 2019. That fleet is operational, and maintenance is required, so by default maintenance spend went up.
Also, I think we've seen the adoption of AI to some extent into the maintenance planning and scheduling. If you think back to the industry 15 or 20 years ago, we were in discussions about predictive and preventative maintenance. And then 5 to 10 years ago, it was all about collecting so-called big data. Well, the results of that predictive and preventative maintenance from a couple of decades ago turned into big data — they put it into large language models, and now you've got AI solutions that can do some very robust identification of potential solutions. And I think the influence of big data, large language models and AI into the maintenance planning has certainly attributed to the increase in maintenance budgets, because they can identify things that have greater cost efficiencies and lower risk.
And then even to some extent, when we went through some of the bottoms of our spending cycle over the last 3 or 4 years, I think there's even been the trend to kind of cannibalize some very small capital projects that could be integrated into some of these maintenance solutions — probably again on the back of some of the automated solutions specific to the unit by unit. You're right — there are 77 different commodities that we track at a very granular, unit-by-unit level. We track the specific downtime down to the day when those units — whether it be ethylene dichloride, ethylene oxide, methanol, ammonia, hydrogen, etc. — we track down to the specific day when they start and they stop. And we've got a period of time in late 2026, the fourth quarter of this year, through the middle of 2027, where we see a new kind of high-water mark in the individual unit turnaround.
Shaheen Chohan (23:57):
So you're seeing 2026 is potentially a good, strong year for maintenance and turnarounds compared to last year — because obviously there's been a bit of a catch-up right during COVID, maintenance got held back, then it kind of came back, and everybody got operational maintenance numbers lifted again. This year is looking strong.
Trey Hamblet (24:14):
Yeah. So we actually saw the fourth quarter of this year being kind of an anomaly, if you will. A significant portion of the planned plant maintenance and unit-level maintenance takes place in the second and the third quarter. When we looked at the full year, the fourth quarter of this year was actually quite a bit stronger than we have in prior years, thanks to several pretty large events. And then going into 2027, we see a pretty strong start as well.
Shaheen Chohan (24:41):
So Trey, in summary — even with the continued push towards making greener chemical end-use products and obviously efforts by us all to reduce our daily plastics consumption, do you see any material change in some of those big macro long-term drivers and trends?
Trey Hamblet (25:02):
Yeah. So I guess in closing, the ESG spend at some level is going to stick with us — you've got ESG strategies baked into our financial markets, our consumers want those solutions, Wall Street wants those solutions for ESG strategies, etc. On a macro level, everything is still plastic. Most of everything that surrounds us in this room has a plastic ingredient in it somewhere. The world is still becoming a much larger place — population growth, the needs for plastics in everything from cell phones to automobiles, those things just continue to increase their weight in plastic. So long term, plastic is still going to be a driver in the chemical industry spend. And of course with plastic you have to have ethylene and you have to have chlorine, you have to have all the other things to produce the catalyst to get there. So the long-term fundamentals remain in check — just when we start that climb rapidly again, that's the unknown.
Shaheen Chohan (26:07):
So that brings us to the end of our discussion, and leaves me to say only a couple of big thank yous. Firstly, to both you, Trey and Baptiste — very big thanks to you both for sharing your insights and your perspectives today. If anyone out there has any further questions about any of the points that were discussed today, then please do reach out to myself, Trey, or indeed Baptiste via our contact details that you can see here. And finally, a big thanks to all of you who've taken time out to join us. I hope we have helped you all better navigate some of the currents of change that we're seeing.
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*This episode is brought to you by Industrial Info's Latin American Office in Argentina.