Industry trends chemicals October 2025

Global overview

Lower global trade and trade policy issues additionally exert both direct and indirect pressure on the industry 

We expect chemicals production growth to slow down to 2.1% in 2025 and to 1.5% in 2026. The industry’s deep integration into nearly all areas of industrial production means it is vulnerable to the impact of tariffs and any issues arising out of trade policy decisions.

The pressures felt by the industry is both direct and indirect. Higher input costs for downstream industries weigh on chemicals demand. The automotive sector is a primary target of US tariffs.

A key concern remains the potential diversion of Chinese goods - originally destined for the US - into other markets, particularly Europe. This shift could lead to an influx of cheaper Chinese products, undercutting demand for domestically manufactured goods and, by extension, the chemicals used in their production. 

The chemicals industry is characterised by intense competition and ongoing market consolidation. Larger players often have economies of scale and greater resources to invest in research and development, innovation and marketing. This may cause smaller companies to struggle to remain competitive.

USA

Tariffs affect demand from key buyer industries in the domestic market

US chemical production increased 3.3% in 2024, but we expect growth to slow down to 0.6% this year and a 0.8% contraction in 2026. 

Domestic demand from automotive and construction is decreasing, as those key buyer sectors for chemicals feel the impact of higher input costs caused by tariffs and ongoing trade policy uncertainty. Ever-changing tariff levels are prompting US manufacturers to delay projects and withhold investment until they receive further clarity. 

In the mid-term the outlook for the US chemicals sector is more positive, underpinned by stronger consumer demand and the benefits of shale gas projects.

In the course of 2026, the Trump administration’s expansionary fiscal policy is expected to lift household spending and business investment, boosting demand for manufactured and chemical goods. In 2027 US chemicals production is forecast to rebound by 4.2%, and growth rates should remain solid above 3% annually in 2028 and 2029.

China

Slowdown of growth amid tariffs and lower domestic demand

After strong increases in 2023 and 2024, China’s chemical production growth is expected to slow to 5.5% this year, and in 2026 only a 1.3% increase is forecast. Given the oversupply of housing, construction volumes will remain low, reducing demand for chemical goods from a key buyer sector. 

The effective US tariff rate on Chinese goods amounts to about 40%, hurting chemicals demand from key buyer sectors that export to the US. However, export losses to the US are being partly compensated by more shipment to the EU, Africa, and Asia.

China has a significant overcapacity issue, impacting margins for many Chinese chemical producers. Around 18.7 million tons of chemical capacity were added in 2024, which will be tackled by the targeted closing of inefficient, older facilitates in the coming years.

India

Robust domestic demand and government support drive chemicals

Chemicals production is forecast to level off in 2025, but to grow by 9% in 2026. With an expanding economy and increasing population, chemical growth is mainly being driven by domestic demand. 

Government policies support foreign direct investment and provide petroleum, chemicals and petrochemicals investment regions, which will spur growth over the coming decade.

Japan

Weaker demand from automotive has its impact

We expect Japan’s chemicals output to contract by 0.9% in 2025, followed by a 0.8% increase in 2026. Automotive as akey buyer sector for the chemicals industry is suffering from US tariffs and elevated global trade uncertainty.

Japanese basic chemical producers feel competitive pressure from their cheaper producing Chinese and US peers, in particular in the basic chemicals segment. Significant oversupply from China is leading to losses for many companies, and even the closing of facilities. 

EU and UK

No growth in 2025 and 2026, and long-term worries remain

We expect chemicals production in the eurozone to level off in 2025 and 2026. Structurally higher energy costs remain a key challenge for European producers. Higher gas prices will weaken long-term competitiveness with American and Asian rivals.

US tariffs could divert more Chinese exports to Europe, reducing demand for European goods made using local chemicals. Moreover, China is projected to expand its chemical output, worsening global oversupply of chemicals and likely pushing global chemical prices down further. This would make it even harder for European producers to compete. 

In order to cut costs and to improve operational efficiency, several facilities have been closed over the past two years in the EU and the UK

Germany

Another output contraction is looming

After major contractions in 2022 and in 2023 chemicals production recovered by 5.2% in 2024. However, we expect contractions of 1.3% in 2025 and 0.6% in 2026, as a subdued German economic performance, the impact of US tariffs and global trade uncertainty hit the industry.

The struggling German automotive industry is an important buyer sector, and US tariffs on German car exports are hurting the paints and varnishes subsector. However, we expect chemicals growth rates to recover as of 2027, when a major fiscal package is due to come into effect.

German chemicals benefit from integrated plants with a wide range of products and expertise in speciality chemicals. However, as energy prices are likely to remain above pre-crisis levels, lower international competitiveness is an issue.

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