Procurement Impact: Olin Huntsman US Chemicals Merger

The merger between Olin and Huntsman, two major US chemical producers, could have significant implications for procurement professionals managing chemical supplier relationships.

The 'merger of equals' will create OlinHuntsman Corporation, a North American chemicals giant with approximately US$12.5bn in projected 2025 revenue, fundamentally reshaping the supplier landscape for businesses relying on chemical inputs.

Chemical companies are under increasing pressure from regulations while facing soaring energy costs and workforce shifts. A report from McKinsey highlights that after years of outperforming the rest of the market, the chemicals industry's returns are lagging.

This consolidation could represent both a response to these market pressures and a catalyst for changes in how chemical products are sourced and priced.

According to Huntsman, following the close of the transaction, the combined company will benefit from enhanced scale, scope and expanded chlorine optionality, enabling it to create value across markets and cycles. 

Peter Huntsman, Chairman, President and Chief Executive Officer of Huntsman, says: “The opportunities this merger creates enables us to generate greater value for our shareholders, deliver exceptional service and products for our customers and provide greater stability and opportunities for our associates. This merger of equals takes two great companies and creates a much stronger global leader.”

Olin's ammunition business, Winchester, which supplies sporting, law enforcement and military customers, will continue to operate as a business within the combined company.

Supply chain footprint consolidation

The merger will consolidate an extensive global manufacturing network that procurement teams will need to map carefully. Huntsman operates more than 55 manufacturing, research and development and operations facilities in 25 countries and employs roughly 6,000 associates.

Across its three business segments, Olin Chlor Alkali Products & Vinyls, Olin Epoxy and Winchester Ammunition, Olin employs 7,700 professionals in more than 15 countries and operates tens of plants across its core business sectors.

The combined entity would operate with roughly 13,700 employees across an expansive global network of dozens of facilities. Olin operates in more than 25 locations in the US, has production sites in Latin America, with four manufacturing sites across the Middle East, Africa and India regions, as well as a manufacturing facility in China.

This geographic spread could offer supply chain resilience, but the integration process may also introduce transition risks that require careful monitoring.

Reduced supplier competition dynamics

A report from McKinsey highlights that for most of the past 20 years, the chemicals industry has generated returns above those of the broader capital markets.

However, after reaching record heights during the COVID-19 pandemic, the chemicals industry may be facing a new era: global indexes have increased 24% per year since November 2022, while chemicals stocks grew less than 2% per year over the same period.

Facing new regulations, overbuilt capacity, high energy prices, regionalisation, inflation, workforce and demographic shifts, chemicals companies may be looking for new ways to add value.

Peter added, discussing the merger: "As our industry continues to globalise, we compete more today against countries, than companies, trade policies and global supply chains than ever before."

The consolidation of two significant players in the chemicals sector could reduce supplier options for procurement teams, potentially affecting pricing power and negotiation leverage.

Sourcing strategy implications

The integration will combine Olin's manufacturing and feedstock capabilities, including chlorine and caustic soda, with Huntsman's downstream products and formulation expertise. Among other things, Olin is a manufacturer of small calibre ammunition, a global chlor alkali producer and North American seller of chlorine, bleach and hydrochloric acid.

Huntsman is a leading producer of polyurethanes, advanced materials and performance products.

Ken Lane, President and Chief Executive Officer of Olin, who will lead the combined company, says: "This combination provides a compelling opportunity for Olin and Huntsman to create a more resilient and value-focused chemicals company anchored in North America.

"Huntsman has built an impressive portfolio of polyurethane systems, formulation technologies and advanced materials serving technical, application-driven end markets."

According to Huntsman, the two companies' portfolios and enhanced geographic footprint, including a significant presence in the US Gulf Coast, will position OlinHuntsman to capitalise on regional sector dynamics. This, along with its presence in Europe and Asia, will enable it to better serve customers across key markets.

Ken adds: "I'm excited by the opportunity to lead OlinHuntsman and deliver long-term value for our shareholders, customers, employees and communities."