A Lost Year or a Lost Future for the EU Chemical Industry?

2024 has been called by many as the ‘lost year’ for European chemical industry production, yet 2025 is shaping up to be no better, as chemical industry analysts can see no end in sight for struggling European chemical companies.

The global economy has had a difficult ride over the past few years with disruptions occurring one after another. The 2008 banking crisis, Brexit, Trump’s first trade war, COVID, supply chain disruptions, Russia’s invasion of Ukraine, and now Trump’s second upheaval to global trade have all dented economic optimism.

“The chemical industry is heavily dependent on consumer sentiment, as almost all consumer goods contain chemicals, at least indirectly. And consumer sentiment is in turn strongly influenced by psychology,” explains Peter Hartl, Head of Studies and Partner at the Horváth business consultancy.

But are these emotions only a short-lived glitch or are there deeper problems that the EU chemical sector needs to resolve?

Short-term Outlook for EU Chemical Sector

The short-term outlook for the EU chemical sector remains cautious as it continues to face several challenges. After a period of contraction driven by high energy costs, supply chain disruptions, and a stagnant local economy, the industry is beginning to show some signs of stabilization. The easing of energy prices, particularly natural gas, has provided some relief to producers heavily reliant on energy-intensive chemical processes. Additionally, a gradual recovery in key downstream industries—such as automotive, construction, and pharmaceuticals—is helping to support demand for chemical products.

However, the sector still faces pressure from global competition, especially from producers in regions with lower energy and regulatory costs. The transition toward greener production methods and compliance with the EU Green Deal and REACH regulations is also requiring significant investment, which is putting smaller chemical businesses under strain.

While minimal growth is expected in 2025, the risks of geopolitical instability, uncertain economic conditions, and a possible global recession risk destroying any chance of even the slightest recovery.

“The threat of trade wars and news of job cuts are dampening consumer sentiment in Germany and Europe,” adds Hartl. Neither of which are promising signs for chemical producers.

Long-term Outlook for EU Chemical Sector

The long-term outlook for the EU chemical sector is shaped by the dual needs of sustainability and competitiveness. As the EU advances its Green Deal objectives and moves towards climate neutrality by 2050, the chemical industry will play a central role in enabling a low-carbon, circular economy. This transition presents both opportunities and challenges. Companies that invest early in green technologies—such as electrification, bio-based feedstocks, and carbon capture—are likely to gain a competitive edge as the development of sustainable chemicals and raw materials will be key to meeting regulatory and consumer demand.

Digitalization could also reshape the chemical sector in Europe’s favour, improving efficiency and enabling smarter, safer production. Strategic autonomy could also reduce dependence on foreign suppliers for critical chemicals while also driving localised investment.

“Technology is not only increasingly finding its way into internal processes, but also into core functions and areas of the company, such as production planning and sales in pricing,” notes Hartl. “Alongside decarbonization, digitalization is the absolute top topic for the future and growth, and the industry will make further major progress here in the coming months.”

However, these are transitions which require massive capital investment, particularly in modernizing infrastructure and adapting to stricter environmental standards. Given the extraordinary turmoil in global markets and considerable nervousness among investors, chemical industry analysts are questioning how much European chemical companies can endure.

This leaves the European chemical industry standing at a crossroads. While short-term stabilization may offer a glimmer of hope, deep-rooted structural challenges and global uncertainties continue to cast a long shadow over its recovery.

However, without decisive support from policymakers, bold investment in innovation, and a rethinking of Europe’s industrial competitiveness, the risk is that the continent’s chemical industry will not only stumble through a ‘lost year’ but could even face a lost decade. Whether recovery is possible will depend not only on external conditions but on how boldly the industry and its stakeholders choose to act now.

The chemical sector’s future depends on its ability to adapt—not only to shifting consumer sentiment and volatile geopolitics, but also to the pressing demands of sustainability and digital transformation. For while the road ahead is complex, the European chemical sector’s adaptability and innovation may well yet position it for a sustainable and competitive future.

Photo credit: Javier Gomez on Unsplash, Raw Pixel on Freepik, Starline, & Kjpargeter