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Olin-Huntsman: A new chemical giant and its impact on coatings
As Olin and Huntsman combine their businesses, the coatings industry faces questions over competition, innovation, supply security and pricing. While the companies promise greater efficiency and stronger market positions, experts see both opportunities and risks for coatings manufacturers.
The announced merger between US chemical companies Olin and Huntsman marks one of the most significant transactions in the chemicals sector in recent years. The companies plan to combine in an all-stock deal that will create Olin Huntsman, a business with annual revenues of around EUR 11 billion. Subject to shareholder and regulatory approval, the transaction is expected to close during the first half of 2027.
The strategic rationale behind the combination is to create a more vertically integrated company by linking Olin’s upstream production of chlorine, caustic soda and other key feedstocks with Huntsman’s downstream portfolio of advanced materials and specialty formulations. The companies expect approximately EUR 370 million in annual cost synergies within three years through raw material optimisation, operational efficiencies and lower administrative costs.
For the coatings industry, the merger brings together an important supplier of epoxy resins, polyurethane materials and other specialty chemicals that play a central role in industrial, automotive and construction coatings. While the companies present the transaction as a way to strengthen resilience and improve competitiveness, the consolidation also raises questions about supplier diversity, innovation, pricing and long-term competition.
Daniel S. Murad, Chairman of The ChemQuest Group, argues the immediate market reaction may be driven less by the advantages of vertical integration than by concerns over supplier concentration. “Dual sourcing at customers becoming one supplier – Whilst among customers that value integrated upstream to downstream supply, there may be some customer movement towards Olin / Huntsman, the bigger concern will be related to two suppliers becoming one. When Hexion / Huntsman almost merged – The prospect resulted in customers seeking new approvals and Hexion certainly lost share to Dow and others”, he expands. “That will ring true today and make Huntsman / Olin customers want to approve new sources. Aditya Birla will be much more proactive than Westlake when it comes to capturing new business.”
Doug Bohn, Director of Orr & Boss Consulting, also underlines the industrial logic behind the combination, particularly for epoxy resins and related coating raw materials. “Olin has a significant chlorine and caustic soda business as well as other chemical businesses that can be combined with Huntsman’s downstream businesses. In theory, this should lead to lower costs and more stable and secure supply of products that the European and global coatings industry purchases such as epoxy resins, MDI, and various amine-based products.”
Looking specifically at Europe, Bohn thinks the success of the merger will ultimately depend not only on strategy but execution. “The company is expecting that it will be stronger and a more cost-effective supplier in the epoxy resin business. If it is able to achieve the targeted cost savings synergies, without impacting its ability to innovate and serve its customers, it should be able to grow its business at above market rates offer better and more cost-effective products for its European customers.”
Raw material volatility, tariffs and a changing market
The past several years have been marked by unprecedented volatility across the paints and coatings supply chain. Manufacturers have faced fluctuating raw material costs, supply chain disruptions, geopolitical tensions and changing trade policies, making supply security and cost management key priorities throughout the industry. Murad is skeptical that a larger, more integrated supplier like OlinHuntsman would help stabilise the market. “I don’t view this as a stabilising issue between these two competitors”, he states. “If the acquisition was Olin acquiring in-like upstream feedstock competitors, then it would be stabilising given the incredible overcapacity globally of feedstocks leading to dumping and the geopolitical climate to isolate China’s dominance in chemical feedstocks.”
Trade policy continues to shape the operating environment for chemical producers. However, neither expert expects tariffs alone to determine the success of the merger. While Murad believes tariffs will affect market dynamics, he argues they will not fundamentally alter the global competitive balance: “It will impact the competitive dynamics in today’s tariff environment, but fundamentally, the Chinese still hold the upper hand.” Doug Bohn expects the combined company’s regional footprint to limit the direct impact of tariffs on its overall business. “The new company will be a United States-based company with 56% of its revenue based in the US and Canada. So, this portion of the company’s revenue will likely not be impacted by tariffs and trade policy”, he explains. “The combined companies’ European revenue is 17%. We think that most of the companies’ European revenue is produced in Europe so it will have limited impact. The new company will have 18% of its revenue from APAC and 9% from other regions. Those regions could see some tariff impact but overall, we think that it will be limited.”
Consolidation gathers pace
Beyond its immediate impact, the merger also highlights the ongoing consolidation of the chemicals industry. Scale and integration are becoming increasingly important as companies adapt to changing market conditions. Murad believes the Olin–Huntsman transaction is unlikely to be an isolated case. “The global economic demand slowdown and incredible overcapacity across the board (particularly in China’s possession) is causing companies to evaluate their parental rights, (i.e. who is legitimately the rightful owner). Meaning, examining which assets are strategically core vs. non-core, harvesting or divesting the latter and using the cash to invest in the core.”
Dan Murad also expects the combined company to generate significant value from procurement, manufacturing and organisational efficiencies, while warning that reduced competition could ultimately influence pricing. “I expect a large amount of value will come from raw material savings (e.g., Huntsman feedstock cost reduction), SG&A (redundant resources across the board ) and operational efficiencies (including rationalization of customers, SKUs, formulas, products, etc., integrating production, etc.) and pricing. No doubt with fewer competitors, pricing will likely increase particularly with Chinese firms under the anti-dumping laws in place.”
Integration will be critical
Turning strategic ambitions into measurable results, however, will depend on the successful integration of the two businesses. Doug Bohn believes delivering the planned synergies while maintaining innovation and customer service will ultimately determine whether the merger creates lasting value. “The company needs to achieve its cost savings targets (USD 300 million in 3 years and USD 400 million in 5 years). Perhaps more importantly the company needs to continue developing new products and serve its customers” he states. “The new company will be larger and should be stronger financially to compete with other chemical companies from around the world. If it can do that and avoid the integration risks, it should be able to grow market share. So increasing sales revenue above the growth of the market is another indicator of success.”
At the same time, he warns that integrating two organisations of this size is unlikely to be straightforward: “I think that the main execution risks is that to achieve the operations and asset footprint cost savings, the companies will need to close plants. That is never easy and will require transferring production from one plant to another.” According to Bohn, transferring production between sites can create unforeseen technical and operational challenges. “In practice, this is difficult since no two plants are exactly the same and this often results in unexpected problems both from a cost standpoint as well as quality and consistency of production standpoint”, he underlines.
The integration of business processes presents another hurdle. “Also, there is a planned USD 150 million in SG&A cost savings. This means that the sales and administrative functions of the two companies need to be combined and reduced,” says Bohn. “Again, this is never easy. Different ERP systems and ways of doing business need to be integrated. This can often lead more costs as one company may need to convert from one ERP setup to another and employees will need to be trained and get used to a new way of doing business. This can lead to more costs and time for the companies to get the perceived benefits.”
Beyond the operational aspects, Bohn believes management focus will be critical during the integration process. “As the above comments indicate, the complications of integrating two large companies can be challenging. The main risks are that the integration takes longer than expected and does not achieve the targeted benefits”, he states. “The management of the companies may become distracted during the integration and instead of focusing on developing new products for its customers and improving its internal operations, it is focused on the integration and then falls behind.”
This is one of the areas where Murad also sees potential challenges for the coatings industry. He believes increasing market concentration could slow the pace of innovation. “The precedence in a highly concentrated market is toward lower innovation mitigating risk of substitution of existing share. Whilst that’s already happened in epoxies, I expect the trend to continue.” Murad also believes customers will seek to diversify their supply base in response to the merger.: “I expect for those customers that would become sole sourced as a result of the merger, they will immediately begin qualifying new sources as a means of continuity of supply.”
