LyondellBasell identifies numerous European petchem sites for "strategic review"

US chemical producer LyondellBasell's announcement of the locations of its European assets that are under strategic review is likely to rekindle discussions and focus on regional competitiveness within the European petrochemical industry, as market sentiment has been dominated in 2024 by concerns surrounding the long-term viability of European assets.

Having previously announced the "strategic review" of its European assets across its Olefins & Polymers and Intermediates & Derivatives sectors on May 8, much market speculation had been directed towards which of the sites would be considered by LyondellBasell, and what the procedure of the review would entail.

Detailing the nuances of the review in an earnings call on Aug. 2, the company's CEO Peter Vanacker said "Our goal is to reshape our European business portfolio in alignment with our long-term strategy for lasting success ... Europe remains a core market for LYB".

O&P segment dominates assets subject to review

LyondellBasell outlined six of its European assets for review, with six under the company's Olefins & Polymers business segment. These include the company's chemicals park in Berre, France, Muenchmuenster, Germany, Tarragona, Spain and Carrington, UK.

The fifth site in Brindisi, Italy, had previously seen one of its polypropylene facilities rationalized at the end of 2023, due to challenging market conditions and a poor outlook.

The only facility named in the review not under the O&P business segment is the propylene oxide and styrene monomer production site in Maasvlatke, the Netherlands, part of the company's Intermediates & Derivatives division.

LyondellBasell had previously divested its global ethylene oxide and derivatives business to competitor INEOS in February, with the facility was "not providing LYB with a leading position and fitting our criteria for growth", in line with the criteria of the wider strategic review of facilities, Vanacker said during the earnings call.

"Our analysis determines that the 6 assets ... in their current configuration do not meet LYB's criteria for our core business" he added. "At this point, all options are on the table ... Just like our ethylene oxide and derivatives business, these assets could well have a strategic fit and profitable future with another owner".

With regards to the future of the reviewed assets, LyondellBasell delineated three options: profitability improvement, alternative owners and rationalization.

European industry competitiveness in full focus

The clarity surrounding the sites under review and the terms of the procedure will provide increased certainty to players across the European petrochemicals industry, as speculation was rife regarding which assets would be under review.

Despite this, market reaction is likely to continue to call into question the long-term viability and competitiveness of the European industry when compared to its Asian and US competitors and reflects the need for a structural realignment of European chemical production to ensure its longer term profitability.

Additionally, sources are likely to question whether any potential rationalization initiated as a result of the review will significantly mitigate ongoing issues surrounding structural market length in Europe, with broad market consensus suggesting that significantly more capacity needs to be taken offline to realign the continent's supply and demand balance.

"The assets subject to review only represent about 13% of our global capacity for these product lines" Vanacker said.

Polypropylene, a material produced at four of the named sites in Lyondell's review, is particularly exposed to such pressures, with substantial capacity expansion both domestically and in Central and East Asia cementing structural oversupply across the continent.

PP market players will, as a result, be careful not to overstate the positives to market fundamentals brought by any rationalization initiated as a result of the review.