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Yet production growth expected in 2025 and 2026
The future of the global chemical industry is uncertain. One the one hand, it is projected to experience growth in the immediate future. This should come as welcome news for a sector that has had to weather spiralling costs over the past few years. But on the other hands looms the question of tariffs, a question that does not yet have any clear answers.
When it comes to chemicals production, high energy prices hurt. During the 2022/2023 energy crisis, many producers were hit by the double whammy of increased bills for energy-intensive manufacturing processes, along with higher prices for oil and gas derived feedstocks.
What’s more, as suppliers to almost every trade sector in the world, the fortunes of the chemical industry are inextricably linked to the health of the global economy. Sector growth in most geographies slowed during the inflationary period as increasing materials costs collided with higher loan costs, making a dent in many P&L spreadsheets.
Against such a challenging backdrop, the projected global sector growth of 3% per annum for 2025 and 2026 would normally be regarded in a positive light. But global trade is currently looking very different to six months ago, with the cloud of uncertainty casting a shadow over the growth projections of many businesses.
Erratic approach to US tariffs causes uncertainty
Most of the uncertainty felt by the industry can be traced to a single source: the US White House. Within days of his second term as president, Donald Trump announced and then paused tariffs against both Canada and Mexico. On 4th of March 2025, the 25% tariff against Canada and Mexico went live and the tariff for China of 10% was doubled to 20%. Further tariffs against imports from China and worldwide imports of steel and aluminium have also been proposed.
However, during the first few weeks of the presidency, the industry is hearing a lot of talk but seeing a lot less action. What will actually happen in terms of US tariffs and any retaliatory measures remains to be seen What we can be sure of is that tariffs could be highly disruptive for an industry such as chemicals. Its highly traded position means that, even if not directly targeted by tariffs, many of its key markets and customer sectors are likely to be, which in turn could impact prices.
Asia Pacific will drive industry growth
Regardless of what eventually happens in terms of tariffs over the next couple of years, the majority of industry growth will be seen in Asia Pacific. Much of this will be driven by domestic demand in India as well as by the purchasing power of the rising middle class across emerging Asia.
The region doesn’t present an even picture of growth, however. Projections point to sluggish growth in China, largely propped up by government support. Although the future of the industry in Japan looks brighter than recent years, especially with specialist products for sectors such as automotive, growth remains pretty muted.
Europe battles through competitive disadvantages
The chemicals outlook for Europe does point to growth in the next two years. But this is modest, as domestic demand remains muted and higher local energy prices impact the competitiveness of exports. A stricter regulatory framework concerning the environment and safety is also likely to add a cost burden to many European chemicals businesses.
How the global industry manages the next few years will be a vital test of its resilience and something to monitor closely. Despite the uncertainty facing the sector, there are clear trends we can follow. I outline these and explore the main challenges facing the industry (globally and within the main regions) in the paper Industry Trends – Chemicals.