The first quarter of 2025 brought significant challenges for polyether polyol producers, with weak demand, regional imbalances, and cost pressures creating a tough environment. Industry leaders like Covestro, BASF, and Dow are navigating these difficulties through strategic adjustments.

Covestro's Struggles and Strategies

Covestro experienced a sharp decline in EBITDA to €137 million, halving from the previous year. The Performance Materials segment was particularly affected, with polyol-related earnings dropping 87% to €13 million. Regional issues compounded challenges: European operations faced margin compression due to energy costs despite price increases, while Asia-Pacific volumes fell 12.7% amid China's construction slowdown. In response, Covestro closed its Maasvlakte plant and accelerated its STRONG transformation program, aiming for annual savings of €150-200 million.

BASF's Balancing Act

Despite a modest 0.9% dip in overall sales to €17.4 billion, BASF's Materials segment saw EBITDA decline 18% to €469 million. Negative free cash flow of €44 million reflected ongoing pressures from high energy costs and tepid demand. BASF is maintaining its full-year EBITDA guidance at €8.0-8.4 billion, showcasing confidence in navigating current challenges through disciplined cost management and a diversified geographic footprint.

Dow's Paradoxical Position

Dow reported six consecutive quarters of volume growth, reaching $10.4 billion in sales, yet faced significant margin pressure in polyol businesses. The Industrial Intermediates & Infrastructure segment saw margins contract by 740 basis points due to pricing pressures and issues at the Sadara joint venture. Dow is addressing these challenges with a multifaceted approach: a $1 billion cost savings target by 2026, asset reviews including the Böhlen cracker, and strategic delays to its Path2Zero project.

Looking Ahead

The polyether polyol market's future hinges on several factors, including U.S.-China tariffs and Europe's energy costs. Leading companies are adopting distinct strategies: Covestro through aggressive restructuring, BASF with portfolio optimization, and Dow via operational flexibility. Sustainability initiatives, particularly around bio-based polyols, are emerging as key differentiators.

As the industry navigates this downturn, strategic agility and cost discipline will determine survival. The question remains whether these measures will suffice to sustain until demand recovers or if recovery will extend into 2026. Whatever the outcome, the market's landscape is poised for change.