Now we're going to spell out what makes chemical industry companies distinct scale.

Because of the high fixed costs and bargaining power in variable costs, scale is highly rewarded In this industry, big is beautiful over supply scale.

Reward would naturally motivate players to build and build.

However, there's a large penalty for getting this wrong.

If Dow built a chemical plant in the wrong place or at the wrong time, it would be a huge waste, as that capacity is expensive to build and hard to redirect.

Forex chemical companies like to be big, and this usually means international trade for exchanges will cause revenues to fluctuate on the cost side.

Even if the chemical company is buying in the domestic market, they'll often be buying dollarized commodities such as oil and gas.

This means the quoted price will be in dollars exposing non-US firms to the dollar, even if they're not trading with America commodity prices.

Because so many chemical players take oil, gas, and other bulk inputs and transform them, anything that disrupts this market will have a big impact.

In turn, because oil and gas process is vulnerable to disruption through shipping pipelines and national policies, it is volatile.