In the current state of global trade uncertainty, a key opportunity for chemicals companies (as well as in other industries reliant on critical raw materials) is operating within a locally driven value chain. While managing potential trade conflicts and tariffs is one advantage, an even greater prospect is getting closer to partners on both supply chain and commercial sides of a business. The circular economy supports sustainability while also developing local relationships that create value beyond what one may find in a more traditional “transactional” global business. —James Hogan
"Circular Economy is not just about sustainability – it’s a strategic advantage" CHEManager interview with Jan Haemer and James Hogan, Simon-Kucher & Partners
CHEManager: Trade conflicts are increasing and as a result, countries or economic areas are imposing import duties. How are chemical companies reacting to this situation?
Jan Haemer: Capital exports are a proven means of the chemical industry to be closer to the market and customers. Local production secures market access, strengthens customer relationships and makes companies more competitive as local suppliers. One example is BASF in China: The investment of USD 10 billion in the Verbund site in Zhanjiang not only secures growth, but also protects against trade barriers. Companies with local production are more resilient to tariffs and geopolitical risks.
James Hogan: In addition, this trend can be observed worldwide – companies invest not only out of regulatory pressure, but to secure local value creation and strategic independence.
What role does the availability of raw materials play?
J. Haemer: European chemical companies are often processors and dependent on imports, which makes them susceptible to price fluctuations. Cirucular Economy can remedy this: More recycled raw materials mean less dependence on global supply chains and more economic resilience.
J. Hogan: In the USA, companies are increasingly relying on the circular economy to secure their raw material base locally.
"Circular economy combines local raw material availability with strategic independence."
Can you give examples?
J. Hogan: Aurubis is investing in metal recycling in Georgia to replace primary raw materials and close local loops. This not only secures resources, but also resilience – for example, against short-term tariffs.
J. Haemer: Similar to Eastman in France. One billion euros will be invested in chemical plastics recycling – where the waste is generated, not where fossil raw materials have historically been extracted.
Is the circular economy economically competitive or driven by regulation?
J. Haemer: Lead markets accelerate the market ramp-up by using CO2pricing, recycling quotas and green tender criteria. For example, renewable energies became significantly cheaper due to increased demand. Circular economy will become economically viable as soon as economies of scale and rising carbon dioxide are achieved.2costs will reach the tipping point towards economic competitiveness.
J. Hogan: In the US, the Inflation Reduction Act has played a role recently, but with policy changes, the focus is now shifting to private initiatives and programs such as the Buy American Act, which are intended to strengthen local value creation.
Does this mean a new logic of raw material supply?
J. Haemer: Yes. In the past, raw materials were only imported, but today and in the future, industrialized countries gain an additional source of raw materials through waste. Raw material security is becoming more local, while further processing remains global.
J. Hogan: Exactly. Circular economy combines local raw material availability with strategic independence.
What prerequisites does the circular economy need to be economically viable?
J. Haemer: Scalable technologies, such as chemical recycling for high-value applications, efficient collection systems – established in the metal industry, often still patchy in the plastics industry – and regulatory incentives such as CO2pricing and minimum quotas for recycled materials.
J. Hogan: And early investments. Companies that adapt to the circular economy at an early-stage secure advantages. Those who wait too long become dependent on supply chains or regulation.
Their conclusion?
J. Haemer: The circular economy is more than sustainability – it reduces dependence on raw materials, minimizes trade risks and creates local value creation.
J. Hogan: Companies have to decide: continue to rely on global commodity markets or close local cycles?
This article originally appeared in Germany in CHEManager 03/2025 under the title ‘Advantage: Circular Economy’.
