The short version. US factory construction peaked near $250 billion a year in late 2024. In August it was down about 20% from a year earlier, and almost all of that is one category: chip, battery and electrical plants, down 45%. Everything else is up about 1%. Over ten years, US manufacturing output hasn’t moved. Adjusted for construction costs, we’re building about a third less chemical plant than in 2016, and most of what we are building is drug plants and big commodity units. The starting materials, high-purity chemicals and explosives precursors that the new fabs, drug plants and munitions lines need are still mostly made somewhere else.

I’ve been asked some version of the same question a lot this fall. Is reshoring real?

Here is the honest answer. We reshored the buildings. We didn’t reshore the chemistry underneath them.

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The factory boom was one boom

Start with the number everyone’s quoting. Private factory construction ran $168 billion at an annual rate in August, down about 20% from a year earlier (Census, October 1). That sounds like reshoring stalling. It’s more specific than that.

Nearly all of the decline sits in one line: computer, electronic and electrical plants. That’s the chip fabs and, by the Census definition, very likely the battery plants. The line peaked at $126 billion in June 2024. It was $52 billion in August. Take it out and everything else is up about 1%.

So reshoring didn’t stall across the board. The fab and battery wave crested, it’s rolling off, and nothing that size is starting behind it. The money went somewhere else. Data center construction hit $85 billion at an annual rate in August, up 73% in a year. In early 2018 it was about $6 billion.

Ten years, and output hasn’t moved

A step deeper, and it gets more uncomfortable. The Fed’s index of US manufacturing output was 99.2 in August 2016. It was 99.1 this August. A decade of tariffs, CHIPS, IRA and announcements, and we make about the same amount of stuff.

Manufacturing employment is 21,000 below January 2025, though it’s turned up for four straight months (BLS). The Reshoring Initiative, which tracks this better than anyone and is firmly on reshoring’s side, counted 244,000 announced jobs in 2025. Announcements and payrolls aren’t moving together.

Further, among manufacturers that reshored or are doing it now, the share satisfied with the results fell from 96% to 65% in a year (2026 USA Reshoring Survey). Those aren’t skeptics. Those are the people who did it.

That doesn’t mean the buildings were a waste. Capacity takes years to become output and plenty of those fabs aren’t running yet.

Chemistry had its boom a decade ago

Chemicals is the line people point to as the exception, and on the surface it is. Chemical construction was $43.7 billion at an annual rate in August, up about 6% from a year earlier, while most of what’s around it fell. It’s now about a quarter of all factory construction.

Adjust for what it costs to build and it looks different. The government’s price index for new industrial construction is up 74% since 2016. In today’s dollars, chemical construction ran about $66 billion a year in August 2016, at the tail of the shale cracker wave. It’s about $44 billion now. Back then chemicals was nearly half of all factory construction. We’re building about a third less chemistry than a decade ago, not more. (The index is for buildings, not process equipment, so call it rough.)

A fair objection: 2016 was a peak related to natural gas and energy. Against 2021 we’re up a little. Either way, chemistry never got a reshoring boom of its own (at least not yet).

Two numbers cut the other way. Chemical employment was 905,500 in September, up 11% since August 2016 on flat output (BLS via FRED), and that’s almost all pharma: ACC counts about 545,000 chemical workers outside pharma, and that number’s been easing (~5,500 works per year). And US chemical imports excluding pharma fell almost 10% in 2025, with the trade surplus still in place (ACC mid-year outlook). Neither one says we built the layer underneath. More people making the same output, mostly drugs, and fewer imports of chemicals we already make plenty of, isn’t reshoring. Drug imports tell you where the gap is: they’ve more than doubled since 2016 (UN Comtrade via Trading Economics).

And the plants we already have aren’t full. US chemical capacity is up about 5% since 2016. Output is up about 1.5%. Utilization was 71.7% in August, the second-lowest reading in ten years (Fed G.17). The American Chemistry Council expects US chemical volumes to grow half a percent this year, with specialty chemicals down (ACC).

Open the box: it’s drugs and crackers

Then there’s what’s inside the number. The government’s definition of chemical manufacturing includes pharmaceutical plants, and the Census chemical line is classified the same way. So when Lilly breaks ground on a $6.5 billion API plant in Houston, as it did last month, it lands in the chemical bucket. So does the $8.5 billion ethylene cracker in Orange, Texas that’s commissioning now.

You can see it in output too. Since 2016, US pharmaceutical output is up 18%. Basic chemicals output is down 7.5% (Fed G.17). Inside “chemicals,” it’s the drugs that are growing.

When I added up the large US chemical-sector projects I could find with a dollar figure attached, drug plants were the majority of the money, then crackers, chlor-alkali and ammonia. Electronic-grade, specialty and explosives projects together came to about 5%. That’s my own tally, not an official number, and it leans toward big announcements. But it isn’t close.

The layer underneath isn’t getting built

This is the part I care about, because it’s where I spend my time.

Drug starting materials. USP found that 41% of the key starting materials behind US-approved drug ingredients come solely from China. Brookings put it plainly: making the active ingredient here doesn’t change the risk much if the starting material still comes from China. The new drug plants will need those inputs from roughly 2028 on. Very little of that capacity is being built here.

Fab chemistry. CHIPS put most of its materials money into wafers, polysilicon and substrates. The one award I can find for an actual wet chemical is a preliminary $52 million for ultra-high-purity isopropyl alcohol in Baytown, Texas. The fabs are being built. A lot of what they run on still doesn’t come from here.

Explosives. The Army awarded a TNT plant in Kentucky in November 2024, the first US TNT production since 1986. First output was supposed to come in about three years. The company now says early 2029.

Why it doesn’t get built

I don’t think it’s money. Finding the money is easy. It’s the demand side at the price point.

The world isn’t undersupplied. China and India make most of these molecules, they make them well, and they make them cheaper, often a lot cheaper. You just don’t like where it’s made. Asking a US plant to build redundant capacity at a higher cost isn’t really a capitalistic decision. It’s protection, or a backup plan, and somebody has to pay for it.

I can’t put a plant in the ground because you want it. I need an order: a price I can get a payback on, and a volume I can count on for five or ten years. A tariff alone usually doesn’t do it. Most buyers will eat the tariff and pass it along.

Washington hasn’t closed that gap. Everybody says the word reshoring, but it’s not specific enough. The policy hasn’t followed the value chain down to the precursor at step five, so nobody actually knows what they need. And the path of least resistance is to do nothing. I’d start by mapping the precursors under each critical drug, chip and munition, then pay for the order, not the building.

There’s a permitting piece too. In an August survey, SOCMA said 70% of the members it surveyed had cancelled projects because EPA’s new-chemical reviews take too long. That’s a trade group making its case. It matches what I hear.

What AI has to do with it

Apollo’s chief economist, Torsten Slok, made a macro case in the Daily Spark on October 9 (AI’s Insensitivity to Interest Rates Is a Problem for the Fed): the AI build-out doesn’t care about interest rates and soaks up capital, power and labor while rate-sensitive industries get squeezed. His conclusion: the Fed may have to hold rates higher for longer. Maybe. I’m not going to make a call on the Fed.

My read is narrower. Money for a good small chemical plant isn’t the constraint. What AI pulls on is everything else: grid connections, construction crews, attention. If you’re AI-adjacent, you’re growing. Everything else in industrial chemical land is still kind of languishing. It’s two extremes. And a small specialty project is competing for the same electricians and the same power as an $85 billion-a-year data center wave.

Where I think this goes

This part’s judgment, not data. I might be wrong.

1. Fewer new US plants starting up from 2028 on. Construction leads capacity by two to four years, and outside data centers and power the pipeline is shrinking.

2. Consolidation, not construction, in chemicals. Utilization near a ten-year low means more capacity than output. Expect rationalization, carve-outs, and buyers paying for plants that already run. Anupam Rasayan buying Jayhawk Fine Chemicals in Kansas this year is the pattern.

3. A starting-materials gap around 2028 to 2031, when the drug-plant wave comes online and needs inputs nobody built here. That’s an opening for qualified US plants, but only with an order behind it.

4. Data centers keep winning the fight for power and crews.

What I’d do differently Monday

If you’re underwriting in this space:

• Don’t read chemical construction as demand for the specialty layer. It’s mostly large volume drugs and crackers.

• A qualified, permitted, running US hard-chemistry plant is scarcer than the headlines suggest. It’s usually cheaper and faster to buy one than build one.

• Underwrite reshoring revenue only when there’s an order behind it, a price and a volume for five or ten years. Without that, it’s a story, not a forecast.

Where I might be wrong

The counter-case is real. Sunlit opened a $100 million high-purity hydrofluoric acid plant in Phoenix in October 2024 to supply the fabs, in a chemical McKinsey says the US imports almost entirely from Asia. Manufacturing payrolls are up 72,000 from their December low. And the share of contract manufacturers quoting reshoring work doubled in a year, from 16% to 32% (2026 USA Reshoring Survey). If those plants run and the orders keep coming, I’ll have been early to the wrong side.

But most of that’s foreign-owned suppliers following their customers here, and none of it reaches the starting materials.

I’d like to be wrong about this. If you’re running a US chemical plant that got the order, or you’ve watched one die on price, I’d like to hear about it. Challenge me.

Sources: US Census Bureau, Construction Spending, October 1, 2026. Federal Reserve G.17 via FRED (IPMAN, IPG325S, IPG3254S, IPG3251S, CAPG325S, CAPUTLG325S). BLS Employment Situation, October 2, 2026, and PPI for new industrial building construction. Reshoring Initiative, April 6, 2026 release and 2026 USA Reshoring Survey. American Chemistry Council Mid-Year 2026 Outlook. USP Medicine Supply Map, June 2026. Brookings. NIST CHIPS awards. Spectrum News, October 5, 2026. SOCMA, August 13, 2026. ACC Year-End 2025 Outlook. UN Comtrade via Trading Economics. Apollo Daily Spark, October 9, 2026. Inflation adjustments use the BLS PPI for new industrial building construction and are approximate.

If you only know the Raptor from photos, here’s what you’re watching. The U.S. Air Force (USAF) fact sheet, which is the service’s official public description of the jet, says it can supercruise. That means it stays above Mach 1.5 without lighting the afterburners, the fuel-guzzling kick most fighters need to go that fast. It’s Mach 2 class when it wants more. It also has thrust vectoring. The engine nozzles tilt, so the nose can point and turn harder than a plane that only steers with its control surfaces. I’m not trying to rank every fighter on earth. I just wanted to know what I was looking at.

Sitting there, I got stuck on the question I always get stuck on when something that complicated looks easy. Who figured out the metal? Who made the resin? And how do you keep hundreds of small shops qualified long enough to build the thing, and then keep recoating it every time someone takes a panel off?

The names on the jet

Lockheed Martin, Boeing, and Pratt & Whitney get the credit, and they earned a lot of it. Lockheed was the prime contractor. It did final assembly in Marietta, Georgia, and built the middle section of the fuselage in Fort Worth. Boeing built the wings and the aft fuselage. Pratt & Whitney built the F119, the engine that makes supercruise possible, under its own separate Air Force contract.

That’s the tip. Those three companies design the jet, put it together, and answer to the Air Force when something goes wrong. What they mostly don’t do is make every part.

How three companies turn into a thousand

This is the part I had to work through, because it isn’t obvious unless you’ve spent time around manufacturing.

A prime’s real job is integration. It owns the design, the drawings, the final assembly, and the flight testing. Then, part by part, it makes a make-or-buy call. Build this in-house, or buy it from someone who already does it well? On a fighter, a lot of things land on the buy side. The prime could probably learn to do most of them. But some smaller shop has already spent years getting good at one process and holding the certifications for it, and rebuilding that inside a giant company would cost more and take longer.

So the work flows down in tiers. A Tier-1 supplier sells directly to Lockheed, Boeing, or Pratt & Whitney. That might be a whole assembly, a wire harness, or a run of machined brackets. Tier-1 suppliers buy from Tier-2 shops, the forgers and casters and composite houses. Those buy from further down, from the mills, the resin makers, and the people who build the tooling. Each shop works from the drawing in front of it. Most of the shops below the prime never see the whole jet.

And it doesn’t stop at delivery. Sustainment, which is everything it takes to keep a delivered fleet flying, keeps pulling repairs, spare parts, and coatings work through the same kind of chain for as long as the jet flies.

That’s how three logos turn into roughly a thousand shops. The primes hold the program together, and the shops make most of the pieces.

How many shops are we talking about

The public numbers from original production are a little soft, and they don’t all count the same thing. Here’s where each one comes from.

In 2007, Boeing put out a press release celebrating the wing set for the 100th F-22. Almost in passing, it said parts and subsystems came from roughly a thousand suppliers in more than forty states.

In 2009, the Congressional Research Service (CRS), the nonpartisan research office that writes background reports for members of Congress, published a report on the F-22 program while Congress was arguing about whether to keep buying the jet. It cited a Lockheed map showing about 1,040 suppliers in forty-four states. A map like that is partly a lobbying tool, since it shows lawmakers how much of the work lands in their states. It’s still a real count.

Go back further, to 2002, and Lockheed was announcing its “Raptor of Distinction” award, which the F-22 industry team gave to standout subcontractors. That year it went to EDO, whose North Amityville plant was the largest single F-22 subcontractor in New York. The release said the jet drew on about 1,200 subcontractors and suppliers in forty-six states, including roughly forty New York firms, about thirty of them on Long Island.

The set I find most useful is the USAF F-22A Production Restart Assessment (2017). The Air Force wrote it for Congress to answer a question that kept coming up after the line shut down: what would it take to start building F-22s again? To answer that, it had to look back at how the original jets got built. It counts about a thousand first-tier supplier locations, roughly seven hundred Tier-1 firms, something like ninety thousand unique parts across the air vehicle and the F119 engine, and about forty thousand tools at the major fabrication and assembly sites.

The counts differ because one counts locations, one counts firms, and one counts every subcontractor and supplier the company could name. They all land around a thousand, which is what I trust. The parts number is the one that explains the rest. When I try to picture ninety thousand different parts, I end up picturing thousands of tiny product lines, each with its own drawing and its own tooling. Nobody runs all of that under one roof.

One line in that assessment stuck with me. Before any restart, the Air Force would have to confirm that the sub-vendors were still willing to do the work and could still requalify. Today’s sustainment base is smaller and different from the production-era count, but it’s still a multi-tier specialty chain, and it lives with the same question. Can this shop still make the part the drawing calls for, to the same standard, years later? In this world, that’s what reliable means.

Small batches, not a car plant

Most of those shops were never Lockheed, Boeing, or Pratt & Whitney. They were high-mix, low-volume places, a lot of them owner-operated. A car plant wins by making the same bracket a million times. These shops make short runs of odd parts that have to pass a qualification packet, meaning the shop has proven with paperwork and test pieces that its process makes the part to spec. Then they have to keep passing it. Change the process and you may have to prove it all over again.

That’s also why the chain gets so wide. One shop knows a difficult alloy. Another knows one weld process, or one sealant family, or one kind of tooling. The titanium shops aren’t the composite shops, the composite shops aren’t the adhesives shops, and none of them are the people running coatings robots, because each of those needs its own equipment, its own quals, and its own people who’ve done it for years.

A few of these shops show up by name in Lockheed’s small-business supplier releases, which is about the only public credit they get. In Texas, Complete Technical Representation in Carrollton and InterConnect Wiring in Fort Worth did machined components and wire harness kits, and M2 Global is in San Antonio. McGinty Machine in Wichita did precision-machined F-22 parts, according to a Lockheed release reposted on Airframer, a trade site that tracks aircraft suppliers. Click Bond, in Carson City, Nevada, makes fasteners. And Fort Walton Machining on the Florida Panhandle started with two people in 1997, grew into a serious qualified shop, and was named Lockheed’s 2010 Small Business of the Year.

Most of the thousand never got a press release at all. To see what they actually do, it helps to follow the materials.

Titanium that had to get qualified

Materials tables published while the jet was being built, including in the materials-engineering trade press, put titanium at somewhere around two-fifths of the structural weight. That’s more than nine thousand pounds in the airframe, roughly the curb weight of three mid-size cars, in just that one metal.

Ti-6-22-22 is a high-strength titanium alloy that the F-22 was the first to use at scale. The name is shorthand for its recipe. It isn’t commodity bar stock, and it had to be qualified for this jet.

Then there’s how you process it. Hot isostatic pressing (HIP) takes a rough titanium casting and squeezes it evenly from every side, at north of ten thousand pounds per square inch, to close up the tiny voids inside. Published accounts of the program name big pieces like rudder actuator housings, canopy decks, and inlet frames. Electron-beam welding joins thick titanium aft assemblies inside a vacuum, so oxygen can’t make the metal brittle. The payoff is that you can get rid of something like three out of four fasteners in those joints. Fewer holes means less weight and fewer places for things to leak or crack.

None of that is a prime pouring some metal. It’s mill work, casting control, vacuum welding, and tooling, mostly in shops you’ve never heard of, and they have to stay good at it.

Why the skins are BMI, not “plastic”

When people hear “composite” they tend to picture fiberglass on a boat. That’s the wrong temperature range entirely.

The exterior skins are bismaleimide (BMI), a resin that cures hard and holds up at temperatures where ordinary epoxy starts to soften. That matters at supercruise, when the skin heats up at speed. The best public source I’ve found is a CompositesWorld article on high-temperature resins. CompositesWorld is a trade magazine for the composites industry, and that piece walks through which resins were built for heat and where they ended up. For the F-22, it names Cytec’s BMI. The skins use IM7/5250-4 prepreg, which is IM7-grade carbon fiber that arrives already soaked in 5250-4 BMI resin. And Cytec’s CYCOM 5250-4 resin went into nearly four hundred components made by resin transfer molding.

Resin transfer molding (RTM) works like this. You put dry carbon fiber into matched metal tooling, inject heated resin under pressure, and cure it tight. That’s nearly four hundred molded parts, every one of them held to fighter-jet tolerances, and every one needing tooling that somebody had to build.

That Cytec line was in Tempe, Arizona, back then. Ownership changed later. Cytec went into Solvay, and the specialty materials business now sits under Syensqo, so today it’s a Belgian-parent specialty chemical company with a US plant lineage. That’s common in specialty chemicals. What I like about it, and what I’d want a kid who’s into how things are made to know, is that the resin has a name, a process, a plant history, and a qualification trail behind it.

Every panel open is a coatings job

The metal and the resin get the jet built. Keeping it flying is a different job, and a lot of that job is coatings.

The F-22’s stealth comes from low observables (LO), the features that make it hard to pick up on radar and infrared sensors. Shaping comes first: aligned edges, canted tails, inlets that snake so radar can’t see straight into the engine, and weapons carried inside. On top of that sits a multi-layer coating stack you can describe without giving away any recipes. There’s a primer, conductive layers, radar-absorbing material (RAM), gap fillers, and an infrared-reducing topcoat. Lockheed names a couple of fixes it’s working on to cut down on coating damage, Mighty Tough Boot and Form In Place. The companies that formulate the coatings aren’t named.

Lockheed’s F-22 sustainment page is where Lockheed describes the support work it does for the fleet, so read it as the company describing its own business. It says roughly half the maintenance on the jet is fixing stealth coatings that get damaged whenever a panel is opened for routine work. I’d have guessed engines, or avionics. So every time a panel comes off, somebody has a coatings job to do afterward.

This is also where a small company can matter without owning the chemistry. The Small Business Innovation Research (SBIR) program is how federal agencies pay small companies to solve specific problems. Through it, Aerobotix, a robotics firm in Madison, Alabama, won Air Force work to build multi-axis robots that reach deep into F-22 engine inlets and restore the specialized coatings at the depot, the Air Force’s heavy-maintenance base at Hill Air Force Base in Utah. The Air Force wrote up the project in 2017. Before robots, picture a maintainer in a Tyvek suit crawling up a twisting duct to do it by hand.

What we can say is American

The primes and final assembly are American, and the jet itself is US-only, since export is prohibited. Specialty metals fall under a domestic-preference rule in defense contracting, so titanium and specialty steels are generally melted or produced in the US or a qualifying country. That’s a rule about preference, though. It isn’t a map showing where every billet was melted. The BMI has a US plant lineage inside a global specialty-chemical parent. The LO coating formulators are opaque in the public record. And there are named US shops doing the application work.

So the honest answer is mostly American, with a few parts I can’t see into, and I’d rather say that than pretend I know more.

Strip the logos

If you took Lockheed, Boeing, and Pratt & Whitney off the top, what would be left?

Mills, HIP casters, electron-beam weld shops, BMI resin lines, RTM tooling houses, sealant makers, coatings floors. In the production-era count, that’s about a thousand first-tier shops across more than forty states, all making short runs of odd parts that had to stay qualified. I think that’s what people actually mean, or should mean, when they say “fighter industrial base.” I was thinking about all of them while the Demo Team came back around over Lake Erie.

I might be wrong about parts of this map. If you’ve worked in one of these shops, or you know where I’ve got it off, reply and tell me. And if you want the next one, subscribe to Curiously Optimistic.

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This is that continuation post…the so what…

Capital didn’t pause. It got a filter. The PE stats everyone quotes ($20B across 278 deals in 2021, roughly $5.9B in 2025, per C&EN citing S&P) aren’t a freeze. C&EN’s own read is that deal size fell more than deal count did. Look back about two years and the same filter shows up in four places on the value chain. Look forward 12 to 24 months, and I think it tells you where the activity will be.

Look back: four structures, one filter in each

1. Commodity: forced sellers, select buyers

Europe’s olefins and polyolefins weren’t waiting for a soft landing. High energy, regulatory and wage costs, Chinese capacity, soft auto and packaging demand. Sellers weren’t optimizing multiples. They were getting out.

LyondellBasell closed select European olefins and polyolefins into AEQUITA in May 2026 (now Velogy). SABIC agreed to sell its European Petrochemicals to AEQUITA at about $500M EV on roughly $3.5B of revenue, call it 0.14× sales, and sent its Engineering Thermoplastics package to Mutares at $450M EV, closed in August. Distressed industrial capital showed up. Strategic premiums didn’t.

This isn’t a growth story. It was buyers willing to take assets near asset value with the hope that they can run at a better cost base and live through the rationalization. Industrial consolidators and special-sits. Not peak-multiple strategics.

Filter rule: survival first. The opportunity is streamline, cost, rationalization, operating discipline. Growth multiples aren’t relevant here; think asset value, average cycle earnings and cash flow, and buyers with ability and desire to impact operations directly.

2. Process and intermediate: cleaning things up

Buyers and sellers didn’t abandon the middle of the chain. What moved were the pieces that helped the sellers tell a cleaner story (or an activist encouraged an action).

Johnson Matthey sold Catalyst Technologies to Honeywell for £1.325B, down from the £1.8B agreed a year earlier after the business underperformed. JM sheds process-tech complexity, Honeywell deepens the catalyst stack. Albemarle sold control of Ketjen to KPS and its Eurecat stake to Axens, about $670M combined, a lithium-cycle prune that keeps a minority. BASF closed a Coatings majority to Carlyle and QIA at €7.7B EV and sold Suvinil to Sherwin-Williams for $1.15B; BASF put the whole former division around 13× EBITDA. Ingevity sold its tall-oil refinery to exit CTO volatility. Arkema agreed to sell plastic additives to Praana. Synthomer carved William Blythe to H2.

True process integration still shows up too. Olin and Huntsman announced an all-stock merger of equals in June, chlorine into polyurethanes and epoxies, roughly $12.5B of combined sales. Shareholders approved in August. Close is targeted for the first half of 2027.

Filter rule: the seller wants clarity of story. The buyer wants efficiencies, adjacency, or a redeployment of sleepy story. Complexity that doesn’t serve the story sits; why act otherwise? Valuation paradigm is oddly historically “normal” if not sometimes “cheap”.

3. Specialty and fine: high-value, named themes

Specialty cleared when capital could name the theme and the switching costs were real. High-growth, high-margin, attractive end markets. Four themes carried the window, with a few others taking shape:

Electronic chemicals, including AI and semis. Element Solutions bought EFC at about 12× forecast 2026 EBITDA and Micromax from Celanese at about $500M, roughly 12.5×. Air Liquide paid €2.85B for DIG Airgas in Korea, 20× trailing, about 15× with backlog and synergies, for semiconductor, display, and battery gases. DuPont spun Qnity as a semiconductor pure-play. Process IP, customer quals, and fab adjacency hold the multiples. Electrical infrastructure runs on the same demand story (transformers, grid, data-center power).

Battery materials, as geo and replacement cost. Rio Tinto closed Arcadium Lithium for about $6.7B, a 90% premium, for Western lithium capacity and customer access. I Squared put about $800M of equity into ENTEK alongside up to $1.3B of DOE loan support for US separator capacity. AMG closed the remaining Zinnwald equity for EU critical-minerals consolidation. Buyers paid for qualified capacity and stickiness and anticipated demand.

Defense and critical materials. Michelin folded Tex-Tech into Polymer Composite Solutions this July, after Cooley and Flexitallic in the same defense-and-industrial composites lane. MP Materials’ partnership with the Department of Defense (convertible preferred, a separation loan, and a ten-year NdPr price floor) is the clearest critical-minerals processing print in the window.

Life-science and nutrition ingredients. IFF sold Pharma Solutions to Roquette at about 13× and closed in May 2025, then agreed to sell Food Ingredients to CVC at about 10×. dsm-firmenich sold its Feed Enzymes stake to Novonesis for €1.5B and closed, then agreed to sell Animal Nutrition & Health to CVC at about 7×. Excipients and enzymes clear high. Long quals, regulated customers, specific modalities / capabilities, book to bill balance, and margin (think absorbed costs vs empty capacity) are what got paid for.

India inbound sits underneath. Bain’s Novopor platform bolted on Pressure Chemical in the US. JSW closed Akzo Nobel India at roughly 25× per AkzoNobel. Anupam Rasayan bought Jayhawk Fine Chemicals from CABB. Arkema’s additives prune goes to an Indian buyer. Bankers and private companies are receiving India inbounds looking for US manufacturing presence. The same climate that pushes EU prunes onto the tape pulls capital into qualified sites…production moving towards India and its public market multiples.

Filter rule: named themes plus quals / market access plus high margins. End-market driver, differentiation, a technical or geographic moat. Valuations here remain elevated with many more buyers vs limited supply of opportunity. Strategics or PE-backed strategics are the dominant players here, with private equity reacting to whatever platform opportunities are left over.

4. Downstream from reaction: where PE is hunting

Downstream from reaction means the chemistry is already made. Formulation, specialty distribution, adhesives, water treatment, coatings applied rather than synthesized. Blending, coating, sealing, selling into a named end market. High margin, low capex, application know-how. As far from reactive and industrial chemistry as you can get and still be in chemicals; easier for the blue vest in NYC to understand and communicate to their IC.

This is where PE never left. The platform vintage is older (Solenis under Platinum, Univar under Apollo, Caldic under Advent). The last 24 months were hold, add-on, and selective new platforms. Solenis completed NCH. Pritzker took Buckman. Lindsay Goldberg took EMCO. Arsenal exited Seal for Life and ATP to Henkel. Henkel agreed to buy Stahl at about €2.1B EV.

On the medical side, H.B. Fuller’s offer for Advanced Medical Solutions prints at about 13× 2026 EBITDA pre-synergy, and its earlier GEM and Medifill package ran about 15.5×. Long clinician and device qualification cycles are the moat.

High multiples are still the rule when the book is clean and the end market is structural. PE specialty medians sit in the 12–14+× band.

Filter rule: end-market attractiveness, gross margin, technical differentiation in application know-how, depth of the technical team, qualification cycles (especially medical), and scale still clear high multiples here. Buyers are still trying to drive returns through consolidation, but nothing meeting attractive business criteria is cheap.

“Hung” platforms

Roughly 2015 through 2021, North American sponsors built several aggregation platforms. A lot of what was built remains hung now. Assets were aggregated around general themes but only loosely entangled. High-value buys sit next to weaker margin or weaker demand. Still good businesses, but many lack the firepower or duration to keep aggregating, can’t IPO at middle-market scale, and show noisy margin or supply chain. Hold periods are stretched (understatement). Prepare-to-sell density is rising.

M&A will come here…but not quite yet. I don’t see a real forcing function. Sponsor owners continue to wait for their businesses to grow (or recover) into a valuation that would motivate an action and will continue to wait until there’s an external driver (market, lender, LP, etc.). For them and their investors, it’s hard to find good assets at scale, so I’d rather manage the business I know than pay up or wait around for the next (not to mention the mgmt fee and upside optionality to wait).

I would suspect when these assets come there are three routes: a) sponsor-to-sponsor partnership with structuring (theme is go finish the roll-up we started and split the business up down the road); b) split up now, which means selling to strategic as step one and whatever is left over goes to sponsors to make anew (or you convince the strategic to take it all and divest later); or c) an unforeseen forcing function requires a relatively quick action / divestment (credit fund stops extending or LPs force a sale).

Look forward: the takeaway

1. Commodity stays active, and it stays EU-centric. A fair amount of activity, a small set of buyers who want to participate at asset value. AEQUITA-style and Mutares-style clears, not strategic premiums. Think asset value and an ambition to a post-rationalized cash flow.

2. Process and intermediate is cleanup. More motherships pruning for a cleaner story, more buyers running efficiencies or redeploying the asset. Valuation historically “normal”. Look for activist activity in public names.

3. Specialty clears on the really high-value stuff. High-growth, high-margin, attractive end markets: thermal materials, electronic chemicals with AI and semis behind them, defense and critical materials, life-science ingredients with a qual and demand cycle, India inbound for US presence. Valuation starts at 10 and goes up from there (or doesn’t clear).

4. Downstream from reaction stays PE’s hunting ground. Application expertise, high margin, low capex, away from the reactor and away from industrial chemistry as much as possible. There’s a race for scaled platforms or add-ons that fits within these aggregators. Valuation starts at 12 and goes up from there (unless margins and perception of valuable IP are absent).

Look familiar?

It should. It’s the two-speed economy I wrote about earlier, showing up on the deal tape. Capital is going to the fast lane: application, quals, named drivers. It’s an asset allocator and aggregator story. The slow lane clears at asset value or waits.

If you’re living this, challenge me. What do you see, and where do you see the market going?

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I think this supply chain shock in the Middle East takes longer to clean up than most people expect, so perhaps we’re not really hitting our stride until Q4. I’d call it a flat-to-down year on volume, but a building year on conviction and pipeline quality.

And I was bias a negatively on the institutional investing market:

The room is full of smart people writing memos about why they can’t act. Tariffs. A war that shut down the Strait of Hormuz. An oil shock. A helium shortage. AI disruption.

Next week I’ll take a real crack at where chemicals and materials go from here. Grading myself publicly, for “fun”…

What I was actually saying [in March]

The above remains the headline, but I thought then, as I do now, that this is much bigger than energy. It really is a supply chain reset:

This isn’t just an energy shock. It’s a chemicals and materials shock. Urea, sulfur, helium, naphtha. Food, fabs, fiber, pharmaceuticals. Same week.

I think that piece changes how you underwrite and look at the durability and competitive position of a business. When the input cost can move 50 percent on a headline, the diligence question stops being “what are your margins” and becomes “what happens to your margins when your input costs double overnight” not to mention if you can actually get the input materials delivered. Diligence used to be financial, legal, environmental, commercial, done. Now supply chain resilience is its own workstream.

And the line I believe more today than I did in March:

Even if the Hormuz situation stabilizes, and we’d all certainly welcome that, the structural lesson doesn’t change. Global supply chains are a liability for any business that depends on a shipping lane through a contested waterway, and buyers have permanently internalized that into how they evaluate targets.

So that’s the frame and Hormuz is not the only contested waterway. Here’s how the calls actually did.

The scorecard: three I nailed, one I oversold, one still open

• Duration — Nailed. I said: not a 30-day oil spike, it takes longer to clean up than most people expect, and “soon” was never the right word. What happened: roughly day 180. Islamabad memo June 17, a 60-day clock, expired mid-August with no final deal. Transponder traffic (AIS) about five ships a day versus 85 to 100 before the war. Not normal, not zero.

• Helium — Nailed. I said: not a 60-day story, don’t assume the strait reopens and helium is fine in 90 days. What happened: damaged trains, partial restarts, overland ISO containers as a workaround, not a restoration. China banned helium exports in July with no expiry.

• Fertilizer / Nitrogen — Nailed. I said: a binding input, not a footnote to the oil story, and it stays elevated. What happened: affordability killed demand, so late-summer urea isn’t a 2022 reprint. Elevated, not panic. Fall prepay is the live test, and it’s too early to call. We should all be thinking about impact on food supplies.

• Oil Prices — Wrong. I would have thought prices would have more permanently reset higher. Admittedly, I’m writing about a market with intricacies that others know much better than me. That said, if you told me ~20% of the global oil supply was left trapped. That perhaps alternative shipping and pipelines, forced reduction of consumption of demand in Asia, and release of global strategic reserves might off set ~50% to 75% of the shortfall, and much of that is a shot in the arm, not a permanent fix. I still would have thought oil would be higher.

• The M&A Pause — Oversold. Half right, half dumb. I said: capital freezes up, a room full of smart people writing memos about why they can’t act while the deals go to whoever’s willing to move. What happened: not a freeze. The tape kept moving all summer. Investment seems to have gotten more selective: the “good” books cleared at very high values, commodity barely did, and a signed mega-merger still fell apart.

• Q4 M&A stride — TBD. I said: not really hitting our stride until Q4, flat-to-down on volume, a building year on conviction and pipeline. What happened: first week of September, so Q4 hasn’t started. Still digesting, not striding. If “stride” meant the deal year finding its feet, I may be a quarter or two early. Let’s see what happens in the next two weeks (every year we race to publish books in September and shoot for a year end closing). Bet you there’s less of a race this year and the common logic slides to spring. The healthy IPO and stock market makes everyone feel good about deploying…

If you’re generous, call it three and a half out of five combining supply chain and M&A. I did good on duration, okay on supply chain and prices (ex-oil), and M&A stayed stronger than I would I have told you in March. Let’s call it a B- overall.

Going a little deeper on M&A

I said capital would freeze. In the same article I also said the structural forces, dry powder, carve-out supply, aging PE assets, LP impatience, don’t stop because of a war or a tariff headline, they build. I think that remains the right instinct. In March, I acknowledged that pressure and still called for a pause anyway. Dumb…

Not surprising, capital doesn’t sit on its hands. Through July the chemicals and advanced materials tape was moving, and not quietly. Olin and Huntsman put together a $12B-plus merger of equals and got it shareholder-approved. AkzoNobel and Axalta did the same in coatings, an all-stock merger of equals their shareholders backed. Private equity and sovereign money kept taking carve-outs: Carlyle and Qatar’s QIA closed the BASF Coatings business in July, a €7.7B deal, and Berkshire closed OxyChem for $9.7B. Europe’s commodity petchem kept clearing too…counting distressed and sometimes negative enterprise value.

The multiples say the same. Lincoln’s Q1 chemicals print was about 12.4x mean and 8.9x median EV/EBITDA, and PE deal value in chemicals had already compressed before the war (roughly $5.9B in 2025 against $20B across 278 deals in 2021…post-covid rush). So the better version of this isn’t “nobody transacted” or fear causing paralysis. Instead, it’s that capital continues to get more picky. I said freeze…the market said filter.

So what, and where I think we are

The world is already building away from the strait. Ugly in places, expensive in places, and a lot of it won’t reverse when this finally ends. Livable pain gets adapted around, and the workaround is already making the blocked lane tolerable for anyone who can afford it. That lowers the urgency of a handshake.

Since fall 2019, there’s been a new reason to wait every quarter. The firms getting deals done aren’t the ones with the best analysis. They’re the ones who structure around imperfect information and go. I still think that’s right. I also think there’s a real chance leaders misplay this: wait for an all-clear that doesn’t come, or call it over because oil eased, and miss the fertilizer, the helium, the plants that don’t restart. Long-term economic harm. And there is real human harm.

What I don’t think goes away

A few things the scorecard points to that I don’t think are temporary.

The two-speed market continues. Spec-driven specialty with domestic supply on one side, import-tied commodity on the other, and the gap between them widens rather than closes. These aren’t mood swings. They’re structural drivers for activity: reshoring, second-sourcing, and supply chain resilience now priced into every diligence.

And the attractive end stays expensive. Specialty and tech platforms cleared all summer, commodity barely did, and I don’t see what makes the good assets cheap from here. That theme was true before 2026 and this year has only further solidified that.

Next week: where this is actually going

This week I looked back. Next week I put in writing where I think things are going looking forward: which segments the structural drivers reward, where the two-speed split ends up, what stays expensive and why, and what an operator does about it now instead of after the all-clear.

In 6 months, we can reflect again and see where I’m “smart” or dumb…

If this resonated, I go deeper on ideas like this in Curiously Optimistic. I always welcome a dialogue, so please challenge me on my perspective.

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Most organizations bought AI and just bolted it onto their old org chart. The productivity gains are not showing up for the same reason they did not show up in the 30 years factories kept the steam-age floor plan after the electric motor arrived: the technology is new but the architecture and processes around it are not.

This is the awkward middle.

The shift is really about a new kind of participant at your table rather than a new tool on the table. As a result, you should be thinking about the redesign of your team layer by layer, and you might just be about to cut the exact group that would enable your success.

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In February 1915, Arthur D. Little told the Chamber of Commerce of the United States that America should not build a synthetic dye industry.

He was the most respected consulting chemist in the country. His argument was arithmetic. Even if American producers took every pound of domestic demand, he said, it “would amount to only about $10,000,000 annually, a little more than the candy sold by the Woolworth stores.” Why, he asked, “should we duplicate them only to plunge into an industrial warfare against the most strongly fortified industrial position in the world?”

Five years later the Senate Finance Committee answered him without meaning to. American dye consumption ran about twenty-five million dollars a year, the committee reported, “but these dyes were absolutely necessary in industries producing $3,000,000,000 worth of goods annually.” In the …

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She comes by the question honestly. A few weeks ago she taught me a parenting lesson about incentives I haven’t been able to shake, and I think it’s a useful perspective on whether AI is really cheating.

She arbitraged her own chore chart. I’ll explain.

The chore board

At home we run a digital chore chart. My daughter and her younger brother each have two lists on it. One is a set of daily routines they are supposed to knock out, the ordinary have-to-do things (the “must dos”). The other is a set of extra jobs around the house, and each of those carries a reward (the “may …

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By Bob Girton, August Grace Advisory

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