TheChemical_Industry generated ~USD57billion in net profits and invested ~USD73billion in CAPEX in YR2024, yet TSR remains structurally weak. WHY?
Dr. Anju Sharma
KtalystInsights™ MrsSustainability
KtalystKlues
This is not a DemandParadox; it is a ValueCapture problem.
1) The industry is still profitable
✓ Global Top-50 chemical companies reported #~USD57billion net profit in 2024
✓ Average sector EBITDA margins ~12–15% for large integrated players
✓ A majority of listed chemical companies remained cash-positive despite margin pressure
KtalystInsights:
Profitability exists; this is not a demand-led downturn.
2) Capital investment has not stopped
✓ Global chemical CAPEX in 2024: ~USD73billion (Top-50 companies)
✓ R&D spend grew ~2–4% YoY in 2024 despite earnings pressure
KtalystInsights:
Industries facing structural demand decline do not sustain this level of investment.
3) Volumes are growing faster than pricing
✓ Global chemical market size grew from #~USD6.18trillion (2024) to #~USD6.32trillion (2025E)
✓ Packaging, electronics, mobility & construction chemicals showed #~1.5–3% volume growth
✓ Real pricing power across bulk and semi-specialty chains remained flat to negative
KtalystInsights:
Demand growth exists, but value per unit has diluted.
4) TSR is weak because capital intensity has risen
✓ Chemical sector 5-year TSR ~2–3% p.a. vs #~8–9% for MSCI World
✓ Average CAPEX-to-sales ratio increased ~150–250 bps vs pre-2015 levels
✓ Energy transition and ESG CAPEX raised fixed costs without near-term pricing upside
KtalystInsights:
Returns compress when each dollar of profit requires more capital.
5) Overcapacity is real—but uneven
✓ China accounted for #~40%+ of global new petrochemical capacity additions (2019–2024)
✓ Utilisation in multiple commodity chains remains #~70–80%, below mid-cycle norms
✓ Specialty chemicals show #~40–50% lower EBITDA volatility vs commodity chemicals
KtalystInsights:
McKinsey’s conclusion fits commodity and aging specialty chains, not the entire sector.
6) Segment data shows divergence, not uniform decline
✓ Regulation-linked chemicals often sustain ROIC in the high-teens to low-20% range
✓ Application-embedded specialties outperform sector TSR by ~300–500 bps
✓ Commodity chemicals trend at or near cost of capital
KtalystInsights:
The issue is business-model selectivity, not sector weakness.
7) What McKinsey measures vs what boards must decide
✓ McKinsey evaluates relative investor returns (TSR)
✓ Boards must manage absolute cash generation and capital efficiency
✓ Demographics support demand; strategy decides economic rent
KtalystInsights:
Chemicals are essential—but not all are equally rewarded.
> This is not a low-demand cycle.
It is a high-capital, low-pricing-power environment.
Dr. Anju Sharma
KtalystInsights™ MrsSustainability Chemicals Strategy ValueCapture TSR BoardroomLens DataComa
Originally published on LinkedIn on 2025-12-28 10:35:57: https://www.linkedin.com/feed/update/urn%3Ali%3Ashare%3A7410991894211543040
NamasteGreenIndia’s Ethanol Revolution: Achieving 20% Blending with a Sustainable Edge
India is on the brink of achieving a 20% ethanol blending target, a transformative step towards energy independence, environmental sustainability, and agricultural empowerment. Here’s how this revolution is shaping up:
📈 The Progress So Far
🟢 2014: Ethanol blending in petrol was just 1.53%.
🟢 2024: Achieved 15%, with 4.62 million metric tonnes (MMT) of ethanol produced.
🟢 2025 Target: Projected to produce 10.2 MMT annually to meet blending and industrial needs.
🌍 Economic & Environmental Wins
💰 USD 4 Billion Saved: Annual savings on crude oil imports.
🌎 10 MMT CO₂ Reduced: Emissions cut significantly with 20% ethanol blending.
👷 500,000 Jobs Created: Boosting rural employment through distilleries and supply chains.
🚢 USD 300 Million Export Potential: Surplus ethanol positioned for international markets.
🚗 Automotive Industry’s Ethanol Push
🔧 Flex-Fuel Vehicles: Tata Motors, Mahindra, Maruti Suzuki, and Hyundai to launch 100% bio-ethanol vehicles within six months.
🛢️ Fossil Fuel Demand Cut: Flex-fuel vehicles to reduce reliance on fossil fuels by 5.5 MMT annually.
🏭 Toyota’s Commitment: Investing ₹20,000 crore (USD 2.4 billion) in ethanol-compatible vehicle production.
🌾 Agricultural Boost
🌱 8-9 MMT of Sugar: Diverted annually for ethanol production, stabilizing prices and supporting farmers.
🌾 1.5 MMT of Surplus Grains: Utilized for ethanol, ensuring sustainable revenue for agriculture.
⚡ Challenges & Opportunities
📊 Feedstock Demand: India needs an additional 2 MMT of sugarcane and 1.5 MMT of surplus grains for sustainable production.
🏗️ Infrastructure Gaps: Only 30% of fuel pumps are ready for E20 blending.
🌍 Global Leadership: Scaling production and refining distribution could position India as a leader in ethanol exports.
💡 Why This Matters
India’s ethanol revolution is more than a blending target—it’s about energy self-reliance, cutting carbon footprints, and empowering rural economies. This initiative showcases India as a global benchmark for sustainable energy transitions.
💬 Let’s discuss how India’sEthanolJourney is driving SustainableEnergy, AutomotiveInnovation, and RuralEmpowerment! 🚀
Originally published on LinkedIn on 2025-01-16 09:51:29: https://www.linkedin.com/feed/update/urn%3Ali%3AgroupPost%3A12538632-7285594503120347137
