European chemical companies pessimistic for 2025: recovery not foreseeable until 2026
Green transformation remains one of the top management priorities alongside digitalization and AI
After a sobering financial year in 2024 ("lost year"), the leading European chemical companies are still not forecasting any significant recovery for 2025. A cautiously positive development is only expected in the second half of the year - provided that a global trade war or a lack of economic recovery do not throw a spanner in the works. "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. The threat of trade wars and news of job cuts are dampening consumer sentiment in Germany and Europe," says Peter Hartl, Head of Studies and Partner at management consultancy Horváth. "Added to this are the major structural problems in Europe: the high energy and personnel costs, the ageing society - consumption is mainly by younger target groups - and the excesses of regulation, which, as things stand today, have still not been radically cut back."
Relocation of production facilities in full swing
Due to these structural problems in Europe, chemical companies are working flat out on structural adjustments to production networks and supply chains. The topic of "Supply or production footprint optimization" is the management topic that has gained the most importance compared to the previous year and has moved up six places to fourth place in the ranking. "This is primarily about relocating production. Capacities are being adjusted in Europe and newly established in growth regions. But relocating functional areas can also make sense," says Hartl.
For 2026, the majority of board and management members of leading European chemical companies surveyed by management consultants Horváth are optimistic that they will achieve earnings growth of at least five percent. "Positive effects are: Purchase prices have normalized, energy prices in particular have leveled off and become predictable, and at the same time the enormous efforts in the area of cost optimization are bearing fruit," says Hartl. With a view to the German market, the expert also expects that both the financial package adopted by the German government and consumers' preference for products manufactured in Europe will have a positive impact on the business development of companies in the chemical industry based here. "The defense industry is also indirectly dependent on chemical products," says the Horváth Partner.
According to company managers, the growth forecast for 2026 onwards will primarily affect net profit (bottom line) and be achieved through rising volumes rather than price increases. The companies expect production costs to remain high due to high material and energy prices. In order to remain internationally competitive, they cannot increase prices and are working at the limits of profitability, hence the strong focus on cost optimization. Compared to the previous year, the topic of "improving cost and revenue structures" has risen two places in the ranking of the most important management priorities and is in first place for 2025. "There is no alternative to cost optimization, which is necessary as a basis for creating financial leeway, building resilience and preparing for the future, and it is already being implemented in organizations as part of programs. The most important future and growth topics for the decision-makers surveyed are digitalization & AI and the green transformation," says Horváth Partner Hartl.
Green transformation remains one of the most important management priorities
Even though it has slipped from second to third place, three quarters of the board and management members surveyed believe that their business development is strongly influenced by decarbonization, the circular economy and climate neutrality. "Business models of the future will be fossil-free or at least climate-neutral. The use of renewable energy will replace fossil fuels in the medium to long term. For the chemical industry, this is not an idealistic idea or a heartfelt wish, but a simple business calculation," says Horváth Partner Peter Hartl. European chemical companies want to gain an international competitive advantage in the long term. However, due to the challenging framework conditions and political uncertainties, major investments are currently still being postponed. "And the excessive regulation in the area of sustainability is having a counterproductive effect," says Hartl.
AI is moving into core areas of the company
The strategic importance of digitalization & AI, and in particular the increased use of AI technology, has increased. Digital transformation is in second place in this year's ranking of the most important management topics - four places higher than last year.
"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," says Horváth expert Peter Hartl. AI will also play an increasingly important role in decision-making in maintenance. "With the help of AI, maintenance cycles can be optimized through better forecasting and spare parts can be reordered automatically with pinpoint accuracy," says Peter 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."
About the study
For the "Chemicals Executives Flash Report" study, board and management members from 24 market-leading European chemical companies were asked about their business prospects and strategic priorities in in-depth personal interviews. The sample is representative of the sector. The interviews were conducted and analyzed in the first quarter of 2025.
Note: This article has been translated using a computer system without human intervention. LUMITOS offers these automatic translations to present a wider range of current news. Since this article has been translated with automatic translation, it is possible that it contains errors in vocabulary, syntax or grammar. The original article in German can be found here.
Other news from the department business & finance
