Chemicals Industry Trends February 2025

Global overview: Annual production growth of about 3% expected in 2025 and 2026

In the course of 2024 a rebound in the US and in Western Europe has gained momentum, supported by lower energy prices and recovering demand from key buyer sectors and consumers. We expect chemicals production to increase by about 3% annually in 2025 and 2026.
 

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.
 

Any trade wars caused by massive US tariff increases and subsequent retaliatory measures by the countries affected could fragment international chemical markets, reduce efficiency, and disrupt established supply chains.

USA: Good short-term prospects for chemicals

US chemical production increased 2.1% in 2024, and we expect solid growth rates of 3.8% in 2025 and 2.7% in 2026. Monetary easing and expansionary fiscal policies by the new administration should drive robust consumer spending and boost demand from key buyer sectors like automotive and construction.  
 

US natural resources will help to drive US chemicals growth and attract investment due to lower commodity prices. This is helping US chemical producers to enjoy an advantage in cost competitiveness over their European and Asian peers.
 

The additional 10% blanket tariffs on imports from China could boost US domestic production of chemicals like polypropylene and ethylene glycol. However, as of 2026 the impact of additional import tariffs could exert downward pressure on US chemicals output

China: Slowdown of growth amid tariff threats

After strong increases in 2023 and 2024, China´s chemical production growth is expected to slow down to 2.2 in 2025 and 3.6% in 2026. This is due to more sluggish household consumption growth, lower manufacturing activity and a marked slowdown in export growth.
 

In international comparisons Chinese chemical production remains competitively priced, supporting exports. However, oversupply is an issue, impacting margins for many Chinese chemical producers.
 

We assume that the effect of the additional 10% US tariffs on imports from China will have only a modest effect on sector performance. However, any escalation of the trade dispute with high blanket tariffs on all Chinese exports to the US are a downside risk for the industry.

India: Robust domestic demand and government support drive chemicals

Chemicals production is forecast to increase by 6.4% in 2025 and by 10.9% 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: A rebound in 2025, but oversupply from China is an issue 

We expect Japan´s chemicals output will increase by 1.4% in 2025, after contractions in 2023 and 2024. Japanese automotive production is set to rebound after a major slump due to safety issues in early 2024, proping up the chemicals sector. 
 

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. 

Eurozone and UK: Growth in 2025, but long-term worries remain

We expect chemicals production in the eurozone to grow by 2.1% in 2025 and by 2.6% in 2026, supported by a mild recovery in both private consumption and industrial production. In the UK, chemicals output growth will be low at 1.7% after contractions in 2022-2024. 
 

While energy prices have decreased since 2023, longer-term worries for European chemical producers remain. Gas prices are likely to stay above pre-crisis levels indefinitely. Higher gas prices weaken the long-term competitiveness with American and Asian rivals. 

Germany: A rebound is ongoing, but relocation of production is a downside risk 

After major contractions (-11.8% in 2022 and -9.2% in 2023) production recovered by 6.9% in 2024. However, we expect only a modest 1.9% increase in 2025, as domestic demand remains weak and structurally higher energy prices weigh on exports. 
 

Despite the sluggish recovery the industry remains robust, with solid capitalisation, good access to external financing, and a well-balanced debt profile.
 

However, as energy prices are likely to remain above pre-crisis levels, lower international competitiveness is an issue. There is the possibility of German chemicals manufacturers relocating to countries where energy costs are lower.