Randy Velarde has seen a lot during his decades in the chemical distribution sector, but nothing, he says, like the “self-inflicted” upheaval of early 2025.
The president of Houston chemical distributor the Plaza Group says that his industry tends to mirror the economy as a whole, and that while he’s not ready to run up a “red flag” on the latter quite yet, he’d put out a “yellow flag” — reflecting a precarious position that seems to shift almost by the day.
Meanwhile, beyond broader macroeconomic uncertainty, the global nature of the chemical supply chain means that some segments will be impacted by tariffs more than others — including, most notably for distributors, a pair of key solvents used frequently in coatings and adhesives.
Velarde joined Industrial Distribution earlier this spring for a look at how the Plaza Group, and the chemical sector as a whole, is dealing with an unprecedented and unpredictable trade environment.
This interview has been edited for length and clarity.
Industrial Distribution: We’re in a different environment now than we were coming into the year, obviously, but I wanted to start leading into the current conditions a little bit: what did the market for chemical commodities look like heading into 2025, and what were the main factors that contributed to those conditions?
Randy Velarde
ID: Going back to 2024, and even years past — what did the environment look like for the Plaza Group?
RV: It was an okay market, I think, during most years in the Biden administration; the economy was fine. Our business is probably most influenced by the economy — the domestic economy, where probably 80% of our sales are in mostly the U.S., but also Canada and Mexico. And they were pretty decent economies, all the Americas. We experienced some, I’ll call it ‘okay’ years leading up to the new administration.
ID: Within the chemical market overall, how are tariffs affecting that industry?
RV: I’d say, if flags were an indication, I’d put out a yellow flag. I’m not putting out the red flag quite yet because of all the uncertainty, but the potential does exist for a big, wavy red flag, and it’s mostly because of the fact that the business community likes, as much as they can get, certainty. And what’s taken place in the last 30 days or so is perhaps, in my history – and I’ve been in the business 45 years, 31 of which I’ve owned the Plaza Group – it’s probably as high a level of uncertainty as we’ve had.
ID: Moving to the Plaza Group, in particular, how are tariffs affecting you specifically, and what adjustments are you trying to make to counteract those?
RV: Well, first of all, it’s hard to say, because the tariffs are on one day, and they’re off the next day.
If we can get some greater certainty, I think businesses will deal with it, as we always have, but as long as this level of uncertainty exists, we’re just in a state of [the] unknown, and that’s a really bad state. The business community – specifically tariffs, if they take place – we’re just not sure. But, if they do take place, those will have an impact on the economy, which is the biggest impact on our business, and then it can be business sector by business sector.
For example: this is wide-ranging, as refineries, of which we take a lot of product from — some refineries take in Canadian crude in a rather substantial way. If there’s an imposition of a tariff on Canadian crude to refineries, for example – we deal with one in Ohio, a Canadian-based company – and if they experience a tariff, well, what does it do to their business? What does it do to their refinery operations? A lot of sectors that we sell into; again, it’s going to be product by product.
For [another] example, acetone — that happens to be a large product for us. It’s a solvent that’s used in coatings. And it’s the vehicle, if you will: it takes the resin from the spray can to the wall, and then it goes away. Acetone could be severely impacted. A large amount of imports come into our country to supply that sector: resins, other coatings, adhesives — those two in particular. And if tariffs are imposed on largely Asian product coming into our country, that would affect their supply. The price would go up: supply-demand … and there’s less supply and, and so therefore, the price will go up with it — bringing into place an inflationary kind of pressure.
ID: That kind of leads into my next question. A lot of the companies we cover deal in adhesives and coatings. Can you tell me a little bit about how those segments, beyond acetone, might be affected by the current market conditions, such as they are — and then what you’re hearing from those customers and how you might be adjusting?
RV: There’s very specific products, like acetone. MEK is another large component in the coatings world and adhesives, and MEK — there’s not a barrel, a gallon, a pound of MEK that’s produced in the U.S. It’s all imported from Europe and Asia, and so the potential exists for that one to be affected — again, if the tariffs take place, if there’s an Asian tariff in place; it’s just so hard to keep track of. In the area of solvents, those two I can think of could be impacted in a big way, because it’s a lot of imports of both of those products. A lot of the other, I’ll call them hydrocarbon solvent products that are used by the coatings houses and adhesives, most of it, is domestically supplied, so I don’t see that being impacted as much. There’s some Canadian supply of that, but a pretty small amount. But it could be impacted by refinery operations, right? I mentioned before — Canadian crude that could be subject to a tariff would impact refinery economics. I’m going from one side to the other, but that’s just the world we’re living in today.
In theory, those hydrocarbon solvents will not be impacted. I can’t speak to some of the inorganics; TiO2s are a rather large product for coatings houses, [but] we’re not involved in that space.
ID: You have a long list of products, of course, but one thing I was curious about was some of the sustainability-focused products, lignosulfonates and some of the other ones. What does the demand picture look like for those in this environment, and then where do you see that heading in the coming months and years?
RV: I won’t bore you with getting into all those details, but that product in particular [is] ag and animal feed ingredients — businesses that are really an exciting part of our portfolio. Lignosulfonates, I’ve not seen much of an impact, perhaps only the fact that some of our supplies are coming from Sweden and some of our supplies are coming from Canada. To the extent there’s a tariff imposed on that supply, then there could be an impact there, but the business itself, lignosulfonates, is growing — it’s gotten GDP-kind of growth, but it’s a nice, nice business.
