What are the main challenges in the global chemical industry?

The global chemical industry is facing supply-demand imbalance, geopolitical uncertainty, high cost pressure, and challenges of green transformation. The industry as a whole is hovering at the bottom, and the recovery path is still unclear.
1. The supply-demand imbalance persists, and market weakness suppresses profits
The problem of global chemical overcapacity is prominent, and demand growth is weak, resulting in a coexistence of oversupply and weak demand. Standard&Poor's global rating experts point out that although the industry has hit rock bottom, there is little significant improvement in revenue.
The global chemical production growth rate is expected to decrease from 2.6% in 2025 to 1.9% in 2026, with a significant slowdown in growth rate.
The segmentation of the market is obvious: the production of basic chemicals in the United States has slightly rebounded (+1.2%), but the production of specialty chemicals has shifted from a growth of 4.3% to a decline of 0.2%, mainly due to the continued downturn in downstream application areas.
2. Geopolitics and trade policies intensify volatility
The United States has imposed a unified tariff of 15% on EU goods (without most favored nation treatment), which has hit downstream chemical industries such as automobiles and machinery in Europe and indirectly impacted chemical orders.
Geopolitical conflicts, such as the US Iran and Russia Ukraine, drive up energy prices, increase production costs, and affect global trade flows and supply chain stability.
Trade policy uncertainty remains higher than historical levels, and despite the framework agreement driving a global trade rebound in the third quarter of 2025, the US control policy towards Venezuela still raises market concerns.
3. The persistent high cost dilemma in Europe
The prices of natural gas and electricity in Europe have remained high since the energy crisis, coupled with strict environmental regulations, resulting in high production costs.
The capacity utilization rate of the German chemical industry in Q2 2025 is only 72%, the lowest in 30 years, far below the breakeven point, and there is "no sign of improvement in the short term".
Several European chemical giants are under pressure on their performance: BASF, Covestro, AkzoNobel, and others have lowered their full year EBITDA expectations.
4. Green transformation and increasing pressure on sustainable development
The EU REACH, US FDA and other regulations are becoming stricter, leading to an increase in compliance costs for businesses, especially in areas such as personal care and electronic chemicals.
The "dual carbon" target is forcing Chinese chemical enterprises to upgrade their green processes, and the cost of carbon emissions is gradually being incorporated into the production system.
Despite the increasing demand for bio based and biodegradable materials, there are still barriers to technology transformation and large-scale production.
5. Technological innovation and high-end breakthrough are difficult
High end new materials (such as electronic chemicals and new energy materials) rely on imports, have low localization rates, long certification cycles, and high investment thresholds.
Although AI is driving the growth of demand for semiconductor materials (expected to increase by 6.5% by 2026), basic chemical companies find it difficult to quickly enter the high value-added track.
📌  The current industry is in a critical period of transition from "scale expansion" to "quality improvement", and enterprises need to find a balance between cost control, technological breakthroughs, and sustainable development.