2025 Chemicals Industry Highlights | Business Update
The chemical industry is facing significant challenges as 2025 progresses. Heightened tariffs and geopolitical uncertainties are disrupting supply chains. Industry experts emphasize that maximizing margins and optimizing product movement have become priorities for many companies. Victoria Meyer, a consultant in the sector, indicates that the decade is heavily marked by supply chain concerns, particularly regarding tariffs.
Impact of Geopolitical Tensions
Geopolitical tensions, particularly in Europe and the Middle East, affect the global chemical supply chain. Recent surveys, such as those conducted by the Chemical Business Association (CBA), show that while shipping routes through the Red Sea and the Suez Canal face fewer disruptions, the ongoing Ukraine-Russia conflict is worsening supply complications.
- European chemical industry faces severe contraction.
- India experiences significant growth in the chemical sector.
Turbulent Times in Europe
The European chemical sector has been in decline since 2019, worsened by the COVID-19 pandemic. A recent Ineos report reveals that output in the UK and Germany fell by 30% and 18%, respectively, compared to 2019 levels. High energy prices and excess global capacity, primarily from China, have diminished Europe’s price competitiveness.
The European Chemical Industry Council (Cefic) highlighted the necessity of strong domestic demand for recovery, yet optimism remains low. Plant closures have escalated job losses, with companies like Dow Chemical and Sabic announcing shutdowns in various locations.
Key Closures and Job Losses
- Sabic’s olefins cracker in Teesside, UK, is set to close.
- Dow Chemical will shut its ethylene cracker in Böhlen, Germany, and two other plants by 2027.
- ExxonMobil will close its Fife Ethylene Plant in Scotland by February 2026.
The polymer segment suffers acutely, with many chemical crackers either closed or on the verge of closure. Wood Mackenzie estimates that up to 40% of EU ethylene capacity is at risk of shutting down. A report from multiple EU nations warns that potential closures could put 50,000 jobs at risk by 2035.
Global Overcapacity Issues
Global overcapacity in ethylene production is a significant problem. New capacity primarily from China is reshaping trade flows, affecting older and less efficient plants, especially in Europe. According to Wood Mackenzie, global ethylene capacity has grown by over 40 million tons since 2020, with 70% originating from China.
Encouraging Growth in India
In contrast, India is witnessing robust growth within its chemical sector. Amit Gandhi from Boston Consulting Group indicates that the specialty chemicals market is projected to double from $150 billion in 2020 to over $300 billion by 2030. The rising domestic consumption of chemicals reflects positive demographic trends.
- 103 Indian chemical companies have stock valuations greater than $250 million.
- Capital investments in the sector are expected to increase.
Artificial Intelligence Integration
Artificial intelligence is gaining traction as companies use it to improve operational efficiency. Innovations in AI facilitate enhanced performance and real-time optimization within chemical plants, marking a shift in operational strategies.
Sustainability Challenges
Despite earlier enthusiasm, sustainability has dropped in priority compared to previous years. The biofuels sector, in particular, has struggled, with European regulations affecting market viability. Industry leaders indicate that many sustainability initiatives have been postponed or scaled back.
Looking Towards the Future
The chemical industry is currently in a prolonged downturn. Analysts project that improvements may not be seen until 2027. Companies are increasingly turning to regional supply chains to mitigate tariff impacts. Major industry players are expected to undergo restructuring similar to those seen after the financial crisis of 2008–2009.
Overall, the chemical landscape is under significant transformation, and stakeholders must adapt swiftly to navigate the ongoing challenges.
