New Delhi: The global petrochemical sector witnessed a significant decline in profitability, with EBITDA margins falling to 12per cent in 2024 from 17per cent in 2019, prompting a surge in merger and acquisition activity, according to a report by Boston Consulting Group (BCG).
The report stated that more than 300 M&A deals were announced globally in 2024 as companies faced persistent overcapacity, weak demand growth, and mounting geopolitical and climate-related challenges. Return on capital employed (ROCE) dropped from 8per cent in 2019 to 4per cent in 2024.
Shareholder returns also fell, with the annualised total shareholder return (TSR) of petrochemical companies standing at –1per cent, compared to the S&P 500’s 15.3per cent.
BCG estimated that global cracker utilisation rates will remain below historical averages, and a further 10 million tonnes per annum (mtpa) of cracker capacity needs to be rationalised to restore viable operating rates.
Since 2023, nearly 14 mtpa of cracker capacity has been closed in Europe. This includes closures by Sabic in the Netherlands, ExxonMobil in France, and Dow in the Netherlands.
BCG said the three primary drivers of M&A in the sector are access to feedstock, entry into new markets, and acquisition of proprietary technology.
It cited the acquisition of Rongsheng Petrochemical by Saudi Aramco to expand its downstream footprint in China, and Celanese’s acquisition of DuPont’s Mobility & Materials division to strengthen its engineered polymers portfolio.
The report noted that consolidation levels vary by region and product. While Europe, North America (excluding polyethylene), and India (excluding aromatics) are relatively consolidated, China remains fragmented and could significantly influence global consolidation trends.
Major transactions expected in 2025 include the merger of Borealis and Borouge into Borouge Group International, which will acquire Nova Chemicals for USD 13.4 billion. Orlen’s acquisition of Azoty’s polyolefins business and Ineos’ buyout of TotalEnergies’ stakes in Naphtachimie, Appryl, and Gexaro were also highlighted.
The report outlined three potential future scenarios for the industry: dominance of feedstock-rich exporters, M&A-driven integration by national oil companies, and increased protectionism leading to regional consolidation.
BCG said petrochemical companies must prepare for all roles in consolidation—acquirers, acquirees, or bystanders—based on their product portfolio and regional position.
It recommended that potential acquirers focus on synergy assessment, financial diligence, and post-merger integration, while acquirees build a clear value narrative and address operational and financial risks.
