Market and product

Expert Commentary — The global chemical industry is entering a period of profound economic and environmental adjustment. Once a model of innovation and economic growth, the sector has grown increasingly rigid and outdated. Commoditization, financialization, and deep dependence on fossil fuels have left basic processes and molecules largely unchanged for decades, locking in persistent consequences for the climate, human health, and waste generation. This rigidity poses a fundamental barrier to the industry's long-term viability, both economically and environmentally.

The Current Crisis and Responses That Fall Short

The ongoing global petrochemical crisis — amplified by the armed conflicts in Iran and Ukraine — has exposed the vulnerability of a system built on a narrow set of geopolitically sensitive feedstocks, with concentrated and inflexible infrastructure. Estimates suggest that up to one-third of global production capacity for certain key fertilizer and commodity chemical building blocks faces disruption risk. A growing number of analysts regard this not as a routine cyclical downturn, but as an opportunity for systemic restructuring.

Yet most responses from governments and industry remain tactical and short-term: consolidation, divestiture, plant closures, capacity cuts, subsidized energy and feedstock costs, regulatory rollbacks, and efforts to shore up existing supply chains. These measures may ease near-term pressure, but they do not address the deeper structural challenges.

Lessons from Steel and Energy

The question that needs to be asked is more fundamental: is the chemical industry collapsing under its own weight? Does it need to be rebuilt from the ground up — including its energy sources, feedstocks, molecules, processes, and products?

Similar transformations have already succeeded in other capital-intensive industries. In steel, distributed "minimills" — once dismissed as unviable — now account for nearly 70% of US steel output. In energy, solar and wind power have grown from the margins to the mainstream. The common thread in both transitions was a shift away from concentrated production with singular inputs toward more distributed and flexible systems, driven by technological innovation.

The Case for a Distributed Chemical Industry

There are substantive reasons to pursue a more distributed and regionalized chemical industry.

First, the transition away from virgin fossil carbon toward renewable feedstocks — biomass, captured CO₂, and reclaimed plastics — naturally favors distributed systems, since these inputs are geographically dispersed and costly to transport over long distances.

Second, distributed and adaptable value chains are less exposed to geopolitical shocks, natural disasters, and supply disruptions — a national security advantage already recognized by the US Department of Defense and others.

Third, a more distributed industry can support rural economic development and local job creation by aligning chemical production with locally available raw materials.

Fourth, this model fits the actual structure of the US chemical sector, where more than two-thirds of production facilities are owned by small and medium-sized enterprises — companies that tend to be more agile and innovation-oriented than large incumbents.

Finally, markets are shifting from cost-based competition toward value creation. While bulk commodity chemical segments have stagnated, specialty and high-performance chemicals continue to grow. Companies investing in innovation and customer-tailored flexible solutions — where sustainability drives differentiation — are projected to outperform those focused solely on scale and cost reduction.

What the Transition Requires

The transition will not be without obstacles, given that the chemical industry underpins most sectors of the economy and operates within a deeply entrenched structure. Progress will require breakthroughs across multiple areas: modular manufacturing, biotechnology, and biocatalysis; tunable chemistries such as click chemistry and noncovalent derivatization; and new logistics and cooperative business models. Shared infrastructure, chemical "campuses," and aggregation through distributors could enable flexibility and scale without replicating today's brittle megastructures.

A number of pioneering companies have already shown this to be feasible. Hexion has restructured its 170-year-old business around customer-driven innovation. Solugen combines renewable feedstocks with biotechnology to produce specialty chemicals in compact, efficient plants.

What remains missing is a clear roadmap and the political will to carry it out. The next generation of chemistry requires a coordinated 20-to-30-year industrial transformation strategy — one that places sustainability, safety, innovation, and resilience at the core of economic and social value. Current plans focus too narrowly on decarbonizing the existing structure, leaving toxicity, waste, and systemic vulnerability largely unaddressed.

As with the energy transition, the chemicals transition will require broad public-private collaboration: from early-stage innovators demonstrating what is possible, to an ecosystem of specialty chemical manufacturers, distributors, and financiers scaling new distributed production models; from downstream chemical users generating aligned market demand, to governments providing clear policy signals and the right mix of incentives to mobilize private investment and drive transformation.

The modern chemical industry was built nearly a century ago through innovation, patient capital, and sustained government support. Experience from other sectors shows it can be done again.

Joel Tickner is a professor of public health at the University of Massachusetts Lowell and founder of Change Chemistry. Views expressed are those of the author and do not necessarily represent those of C&EN or ACS.