Business News | EU Chemicals Recovery May Be Pushed into 2027 Amid Weak Demand, Oversupply: Report
Get latest articles and stories on Business at LatestLY. Recovery in the European Union's chemicals industry may be pushed into 2027 as weak demand, volatile crude prices, elevated freight costs and excess global supply continue to weigh on production, 360 ONE Capital said in a sector report.
New Delhi [India], September 23 (ANI): Recovery in the European Union's chemicals industry may be pushed into 2027 as weak demand, volatile crude prices, elevated freight costs and excess global supply continue to weigh on production, 360 ONE Capital said in a sector report.
EU27 chemical production fell 1.6 per cent year-on-year in the first half of 2026, following a 2.4 per cent decline in 2025. While capacity utilisation improved to 75 per cent in the third quarter from 73.2 per cent in the first quarter, it remained well below the long-term average of 81.3 per cent.
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The report said a near-term recovery does not appear imminent, with crude volatility and higher freight costs causing some demand destruction, particularly in discretionary segments. "We expect the remainder of 2026 to remain subdued for EU27 chemicals," it said, adding that these factors were "likely to push the recovery timeline into 2027".
The pressure is also visible in business confidence. The EU27 chemicals confidence indicator improved to an average of -10.5 during January-July 2026 from -14.6 a year earlier, but remained in negative territory, indicating that challenges facing the industry persist.
Energy costs remain a major disadvantage for European chemical producers. European gas prices averaged 45.1euros (USD 51.53) per megawatt-hour during January-July 2026, up 15.7 per cent from a year earlier, while US gas prices fell 9 per cent. As a result, the EU27-US gas price ratio widened to 3.6 times from 2.8 times a year earlier.
The report also highlighted a gap between sales and actual production. Chemical prices rose 4.2 per cent in the first half, supporting sales despite lower output. However, it said the divergence "suggests that the improvement remains fragile", with production volumes continuing to contract and underlying industrial demand remaining subdued.
Production weakness was particularly sharp in basic organic chemicals, which declined 9.2 per cent, while polymers and crop protection products fell 6.5 per cent each.
Globally, chemical production growth slowed to 1.5 per cent in the first half of 2026, with growth concentrated in China and India. China’s chemical production rose 4.6 per cent, while India recorded 0.6 per cent growth.
In contrast, production contracted in the US by 2.1 per cent, Brazil by 2.2 per cent, the EU27 by 1.6 per cent and Japan by 4.2 per cent. The report said China remained the key driver of global chemical expansion. (ANI)
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