A Plan For Europe: Cluster Opportunities Emerge From The Overall Mess

With billions of dollars erased from chemical company valuations last week, and tariffs in full swing, some “left field” corporate strategy options may start to look less crazy
Even if the Administration had a “just kidding” moment and tried to walk back recent trade orders and immigration hard lines, the damage is done, global consumers are holding back.
Layoff risk is rising everywhere as companies take more cautious views – this is not just happening in transition – orders are shrinking and in our view a recession is now likely.
Contagion in the US should spread elsewhere, and global economic growth in 2025 could disappoint meaningfully. Chemical industry surpluses will look much worse than expected.
Lower than expected earnings in 2025 will drive faster failures in the transition space, and maybe some in chemicals where leverage is high. Rationalization for chemicals will follow.

• The smarter clients that we deal with at Pentant are those who look to the horizon rather than those who base their views on what they have experienced in the past.
• Today, those looking to the horizon see a future that they struggle to understand, except to know that it does not look good, some facing backwards do so because it is less stressful.
• What to do next requirespulling back to: “what do you believe”? Whether on demand, tariffs, transition, the competitiveness of China, circularity, oil and gas prices and demand.
• It is very hard to identify any scenario that is good for the European industry, but almost equal challenges exist in South Korea, Japan, Taiwan, and many others, but not China.
• At Pentant we focus on themes that we believe will drive profitability and behavior in chemicals and related industries. As themes play out, we will introduce new ones.