Shutdowns and Declining Performance: Decoding LyondellBasell's Strategy of Retrenchment and Survival Rules in the Circular Economy Transition

In the first half of 2025, the global chemical industry faced multiple challenges, including weak demand, high energy costs, and changes in policy environments. As a result, LyondellBasell (LYB) saw declines in both revenue and profit. According to the latest announcement released by LyondellBasell, its revenue for the first half of the year was $15.335 billion, down 9.7% year-on-year; net income was $292 million, a significant decrease of 79.1% year-on-year; and EBITDA was $1.261 billion, down 53.1% year-on-year. Although second-quarter revenue of $7.658 billion showed a slight year-on-year decrease, the declines in net income and EBITDA narrowed to 35% and 7.5%, respectively, indicating signs of marginal improvement. However, the company remains in an adjustment cycle overall.

Strategic Adjustment: Focusing on Core Assets and Cash Flow Optimization

Faced with industry downturn pressure, LYB is firmly implementing its three-pillar strategy, reshaping competitiveness through asset divestiture, project delays, and cost management.

The sale of European assets accelerates capacity clearing. The company plans to sell four olefin and polyolefin assets located in France, Germany, the UK, and Spain, with the transaction expected to be completed in the first half of 2026. The divested plants account for 30% of the original assessed capacity, aiming to address the competitive disadvantages caused by high energy costs in Europe (natural gas prices are 3.3 times those in the US) and carbon tax policies (CBAM mechanism). This move aligns with the overall trend in the European chemical industry—11 million tons of chemical capacity have already been closed in Europe during 2023-2024. LYB is optimizing its regional layout by selling non-core assets and concentrating resources on high value-added businesses.

Under prudent capital expenditure management, project delays and a focus on recycling have been implemented. The Flex-2 propylene project in Texas, originally scheduled to commence construction in the third quarter of 2025 with an annual capacity of 400,000 tons, has been postponed to address the current oversupply in the propylene market. Meanwhile, the final investment decision (FID) for the MoReTec-2 advanced recycling project has been delayed until the end of the year to align with market demand and brand commitments. The MoReTec-1 project in Wesseling, Germany, is progressing smoothly and is expected to start production in 2026. Its goal is to convert plastic waste into high-purity raw materials, supporting the company's target of 2 million tons of circular polymer capacity by 2030.

The cash improvement plan strengthens financial resilience. The company plans to achieve incremental cash increases of $600 million in 2025 and $500 million in 2026 through optimizing operational efficiency, cutting non-essential expenses, and asset disposals. It is expected that at least $1.1 billion of the cash improvement will be used for debt repayment and shareholder returns. This plan, combined with the $500 million financial optimization measures initiated in Q1 2025, aims to protect the investment-grade credit rating and maintain dividend stability.

Business Performance: Regional Differentiation and Structural Opportunities

In the second quarter, LYB exhibited differentiated performance in the North American and European markets, reflecting changes in regional supply and demand dynamics.

North American Market: Turnaround Benefits and Demand Resilience Support Improvement

After the completion of maintenance at the Channelview plant, the operating load of the polyethylene unit increased. Coupled with the seasonal rise in demand from the consumer packaging, medical, and construction industries, both the sales volume and profit of the integrated polyethylene business improved on a month-on-month basis. The increase in polyethylene contract prices in June has laid a solid foundation for profitability in the third quarter, while domestic infrastructure investment and export growth are further driving demand. However, downstream polypropylene and other products derived from propylene are still facing overcapacity pressures, and industry profitability recovery will have to wait for a supply-demand rebalance.

European Market: Cost Reduction and Capacity Adjustment in Parallel

The decline in raw material costs has driven profit improvement in polyethylene, and polyolefin sales have benefited from a seasonal recovery in demand. Styrene business margins have improved quarter-on-quarter due to lower raw material costs and price support from industry shutdowns. However, the oxygenated fuels business was dragged down by falling crude oil prices, offsetting the positive effects of increased travel during the summer peak season. Rationalization of European capacity continues, with LYB gradually exiting inefficient capacity by shutting down its propylene oxide plant in the Netherlands and selling assets. Regional supply and demand are expected to gradually balance by 2026.

In the first half of 2025, China’s chemical product price index declined year-on-year, and the industry’s profit margin remained at its lowest level since 2017. Global demand weakness, coupled with overcapacity, has continued to put pressure on the prices of bulk commodities such as polyethylene and propylene. LYB CEO Peter Vanacker pointed out that overcapacity in China and policy changes in Europe are key variables. The company remains cautiously optimistic about China’s “anti-involution” policies and Europe’s chemical industry revitalization initiatives.

LYB regards the circular economy as a long-term growth engine, and the electrification design of the MoReTec-1 project can reduce carbon emissions, aligning with the EU's green transition goals. In North America, the company leverages low-cost shale gas resources and resilient domestic demand, and it is expected that polyethylene margins will rebound with the completion of maintenance and increased exports in the third quarter. In Europe, stable seasonal demand and raw material cost advantages will continue, and the supply-demand balance after capacity clearance is worth anticipating.

Despite performance pressure, LYB continues to return value to shareholders through dividends and buybacks. In the first quarter of 2025, it returned $543 million, with a dividend of $1.34 per share in March, yielding 1.76%. As of July, the company has repurchased over 5% of its total shares, demonstrating confidence in long-term value.

Industry Insights: Paradigm Shift from Scale Expansion to Value Creation

LYB's strategic adjustments reflect the transformation direction of the global chemical industry.

Regional restructuring: European chemical companies are accelerating the transfer of capacity to the Middle East and North America. LYB is building a more cost-competitive global network by selling European assets and establishing joint ventures in the Middle East (such as the Saudi propylene project).

Technological Breakthrough: Advanced recycling and low-carbon technologies have become key differentiators. LYB’s MoReTec technology and APK’s solvent-based recycling technology are complementary, and together are poised to gain an early advantage in the plastic circular economy sector.

Policy Sensitivity: China's "anti-involution" policies (phasing out backward production capacity and strictly controlling new projects) and Europe's Carbon Border Adjustment Mechanism (CBAM) compel enterprises to upgrade. LYB responds to regulatory changes by optimizing its asset portfolio and investing in technology.

During the industry downturn cycle, LYB's strategic adjustments, although under short-term pressure, lay the foundation for long-term value creation. As the global chemical industry enters a new phase of capacity clearing and technological upgrading, the company's layout in the circular economy and regional markets may become key support for navigating through the cycle.