There's a phrase I've heard more times than I can count over the last two years, in boardrooms and investor calls and industry gatherings: "just one more year."
As in: just one more year of managing through the trough, just one more year of capital discipline and cost management, and then the recovery arrives and we get back to normal. Companies said it in 2024. They said it again in 2025. Then Liberation Day tariffs. Then Iran and the Strait of Hormuz.
The recovery kept not arriving on schedule. Every cycle of "just one more year" came with real costs: deferred investments, strained balance sheets, organizational talent walking out the door, customers whose needs went unmet.
The problem isn't really that the timing predictions were wrong. The problem is the whole posture: the belief that the primary strategic task is to predict when normalcy returns and position for it. That posture has become a liability.
A Lazard banker described the board conversations he's been part of at this year's World Petrochemical Conference, and something he said has stayed with me.
"You're going to be on a continuous trend where something new is always going to come. Agility is going to be key."
That's a structural observation, not pessimism. The sequence of disruptions, COVID, Russia-Ukraine, the tariff shock, Iran, aren't independent bad luck. They're expressions of a world that has become genuinely less stable, where geopolitical tools are being deployed deliberately, where supply chains face real chokepoint vulnerabilities. The next disruption is a planning assumption now, not a tail risk.
The companies that come out of this cycle strongest won't be the ones who called the timing right. They'll be the ones who stopped trying to call it and built something that doesn't require them to.
There's a sequence to how chemical companies manage through a prolonged down cycle. The Lazard team described it clearly: cost management first, then capex reduction, then asset divestitures, then shareholder return adjustments, then consolidation. These aren't simultaneous moves. They follow each other, and the discipline is in knowing where you are in the sequence and executing it honestly rather than hoping the next step isn't necessary.
The companies that lose ground are the ones that stay in cost management mode long past when the portfolio rationalization conversation should have started. That deferral has a cost. It depletes the capital and organizational energy that should be going into building the agility for the next phase.
Agility isn't only an organizational trait. It's a financial condition. You need the balance sheet flexibility to move when a window opens. You need the operational optionality to flex production, feedstock, and product mix when conditions shift. You need the organizational design that allows fast decisions at the level where the information lives, not three escalations up from there.
The practical discipline here is preparation, not prediction.
Know what you would do if conditions improved tomorrow. Not in general terms, specifically. Which investments would you accelerate? Which customers would you pursue? Which capacity would you bring back on? If you can't answer those questions in detail today, you're not actually ready to move when the window opens, and you have a weaker sense of what capabilities to preserve.
Update your outlook for the duration of the cycle. The Lazard team flagged this directly: what baseline do you use for capital allocation and M&A when the bottom of the trough keeps shifting? The honest answer is that the old expectation is probably too optimistic on both timing and depth. Rebuilding your financial planning around a more conservative cycle assumption isn't pessimism. It's clarity.
Only with those answers can you then know what you would cut if conditions don't improve. Again, specifically. Which assets are consuming capital that can't be justified at mid-cycle? Which overhead structures built for a different volume level are still in place? The companies that have done this analysis honestly, even if they haven't acted on it yet, are in a fundamentally different position than the ones still hoping they won't have to.
The recovery will come. It always does. The question is whether you'll be positioned to capture it, or still recovering from the preparation you didn't do.
Until next week,
Kendall -
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