HUN Chemicals · Cyclical · Specialty chemicals · Merger pending · Thesis updated July 2, 2026

A chemical rebound with merger risk

Polyurethanes is the core business, with Q1 2026 segment revenue of $923 million out of $1.43 billion.
Management says North American pricing should improve materially in Q2, the first such trend since 2022.
Q1 still showed pressure: company revenue rose 1%, but gross profit fell 9% and Huntsman posted a net loss.
Advanced Materials is the bright spot, helped by aerospace, power, and automotive demand.
The planned Olin merger could add scale, but it adds approval, leverage, and integration risk.

01 Running thesis

A trough, if pricing holds

Huntsman looks like a cyclical chemical company trying to climb out of a hard downcycle. The key change is in Polyurethanes, its largest segment. Management said North American pricing is set for a material sequential improvement in Q2, a trend it has not seen since 2022.

The bull case is simple. If MDI pricing holds, Huntsman can offset more than $100 million of extra raw material costs and start to rebuild margins. Advanced Materials also gives the company a better quality pocket, with strength in aerospace, power, and automotive markets.

The bear case is still serious. Q1 2026 results showed lower Polyurethanes margins, weaker Performance Products volumes, and a company net loss. Europe remains costly, China has too much chemical capacity, and a weaker economy could wipe out the early North American price gains.

The planned all-stock merger with Olin is now central to the story. It could create a larger chemical company with cost savings and better raw material links. It could also fail to win approvals, miss synergy targets, or distract management at the wrong point in the cycle.

May 2026▲Q1 commentary turned the setup more positive because management guided to material Q2 North American pricing improvement in Polyurethanes. The Q1 filing still showed margin pressure, so the recovery needs proof in Q2 and Q3 results.

Feb 2026→Management pointed to early recovery signs in 2026 and talked about possible industry consolidation. The 2025 10-K still confirmed a hard year, including lower revenue, lower adjusted EBITDA, and a 65% dividend cut.

Nov 2025▼The view worsened after management cited weak U.S. housing, Chinese overcapacity, and European deindustrialization. The dividend cut and focus on cash preservation signaled a longer downturn.

Aug 2025▼The story shifted from temporary destocking to a more muted demand problem. Weak construction demand, competitive European pricing, and Moers facility issues pushed out the recovery timeline.

02 Business model

Specialty chemicals, cyclical profits

Huntsman earns money by making chemical products and formulas for other companies. Its customers use those chemicals in insulation, cars, shoes, coatings, fuel additives, aircraft parts, adhesives, and industrial equipment.

The company competes on plant scale, product know-how, and customer support. In products such as MDI, amines, and epoxy formulas, the goal is to sell more than a basic commodity by helping customers meet exact performance needs.

The model breaks when supply is too high or demand is too weak. That is the current problem in several markets. Huntsman has been cutting costs, closing or consolidating sites, and moving some functions to lower-cost hubs, especially as Europe becomes less competitive.

Cash matters here because chemical cycles can last longer than investors expect. Huntsman cut its common dividend by 65% in late 2025, a clear sign that management is guarding liquidity during a long slump.

03 Product portfolio

What Huntsman sells

Cash cow

MDI

MDI is the key polyurethane chemical used in foam insulation, automotive parts, and construction products. It drives a large part of Huntsman's earnings power when pricing is firm.

Steady

Polyols and TPU

Polyols and thermoplastic polyurethane support uses such as footwear, flexible materials, and industrial parts. They add breadth to the Polyurethanes segment.

Steady

Amines

Amines go into fuel and lubricant additives, coatings, and other industrial uses. Supply disruption from a Middle East joint venture created a $4.5 million to $5 million Q1 headwind.

Cash cow

Maleic anhydride

Maleic anhydride is used in coatings, composites, and related industrial materials. Huntsman has been reshaping this area after the Moers, Germany facility closure.

Growth engine

Epoxy and acrylic formulations

These advanced formulas are used where strength, weight, and reliability matter. Aerospace, power, and automotive demand helped this segment grow in Q1 2026.

Option

Aerospace materials

Aerospace is a higher-quality end market inside Advanced Materials. Management expects growth slightly above aircraft build rates because Huntsman is winning more content per plane.

04 Business segments

Polyurethanes sets the tone

Polyurethanes64%modest

Performance Products16%declining

Advanced Materials20%growing fast

Mix is from Q1 2026 reportable segment revenue in the 10-Q MD&A, before intersegment eliminations. Polyurethanes was $923 million of $1.43 billion, so one segment still drives most of the story.

05 Risk factors

What could break the rebound

MDI price gains fade

High impact · Medium odds

The recovery case depends on North American MDI pricing holding after Q2. Q1 still showed lower average selling prices in Polyurethanes and lower margins. If customers resist increases or supply loosens, the expected margin turn could fail.

We watchQ2 and Q3 Polyurethanes adjusted EBITDA, MDI price comments, and whether price offsets raw material inflation.

Europe and China stay structurally weak

High impact · High odds

Management has called out European deindustrialization and Chinese overcapacity as major problems. Europe faces high energy and regulatory costs, while China can flood markets with excess chemical supply. That can cap global pricing even if North America improves.

We watchEuropean plant closure news, China export pressure, and management comments on regional MDI pricing.

Olin merger does not deliver

High impact · Medium odds

The Olin deal could add scale and cost savings, but it is a large merger in a cyclical industry. Approval delays, integration costs, or missed synergy targets could hurt shareholders. It could also pull management attention away from fixing core margins.

We watchAntitrust clearance, shareholder votes, updated synergy targets, integration cost estimates, and the expected closing timeline.

Raw material and energy squeeze

Medium impact · Medium odds

Management expects to absorb more than $100 million of added raw material costs in Q2 through price increases. That only works if price moves stick. Energy shocks or feedstock disruptions would pressure gross profit fast.

We watchQuarterly gross profit, raw material cost guidance, and pricing versus cost commentary.

Performance Products disruption lingers

Medium impact · Low odds

Performance Products had a $4.5 million to $5 million headwind from constrained ethylenamines joint venture output tied to a Middle East disruption. Management framed it as temporary, with a restart expected in 30 to 45 days from the Q1 call. If it drags on, it would add to already weak volumes.

We watchSaudi amines plant restart status and Q2 Performance Products shipment volumes.

06 Quick answers

In one breath

What is Huntsman's most important business?

Polyurethanes is the most important segment by revenue. In Q1 2026, it had $923 million of reportable segment revenue, far more than Performance Products or Advanced Materials.

Why does MDI pricing matter so much for Huntsman?

MDI is a core chemical used in polyurethane products such as insulation and automotive materials. When MDI pricing is weak, Huntsman's margins can fall even if volumes improve.

Is the Olin merger good or bad for Huntsman shareholders?

It could be good if the combined company wins approvals, cuts costs, and improves its raw material position. It could be bad if integration costs are high, approvals take longer than expected, or the promised savings do not arrive.

Why is Finn cautious on Huntsman?

The company may be near a cyclical bottom, but the proof is not in the reported numbers yet. Q1 showed a net loss, weak margins in key areas, and a major pending merger that adds risk.