The global industry in 2025 is full of uncertainties

ICIS has released its key trends forecast for global chemicals and energy in 2025. ICIS believes that 2025 will be an uncertain year for the chemical industry, with major restructuring and fierce competition. Geopolitical uncertainty in the Middle East and the risk of increased trade friction between China and the United States will continue to impact the chemicals market.

ICIS expects that in 2025, the chemical import and export trade situation in the Asia-Pacific region will continue to change and uncertainty will continue to cloud. Policy changes such as tariff adjustments and reciprocal trade barriers from the United States could lead to a split in trade patterns. The Asia-Pacific region is likely to become a transit point for chemical raw materials from China to the West, and the scope will also expand. Middle Eastern producers may choose to invest further in Europe or elsewhere to bypass tariffs and gain access to new technologies and markets. Industry analysts believe that the situation of the Asia-Pacific chemical industry in 2025 will improve compared to 2024. However, the production capacity issue still needs attention, and the improvement of structural problems needs to be put on the agenda. Consumption is expected to continue to grow in Vietnam and Indonesia this year, but in the longer term, Pakistan and Sri Lanka have more growth potential.

ICIS noted that geopolitics in the Asia-Pacific region remains an ongoing threat to the global economy. If the Middle East conflict spreads, it could lower global growth expectations, lead to higher oil prices and limit supply. The Middle East and Russia are major oil exporters in the Asia-Pacific region, and any change will have a big impact on chemical production in the region.

For the European chemical market, 2025 will be a year of plant closures and restructuring. ICIS analysis shows that current multinationals are focusing on their core strengths and are rationalizing the number of plants they operate in Europe through divestment or partnerships. The restructuring trend is accelerating as companies realize that to grow their businesses and maintain profitability, they need to sell or close bulk chemical assets and refocus on high-growth specialty chemical portfolios.

ICIS stressed that European demand will remain weak, plagued by geopolitics and protectionism. After 27 consecutive months of contraction in the European purchasing managers' index (PMI), there is no recovery in sight. Confidence in the European chemical industry will improve when the manufacturing sector, especially the construction and automotive industries, experience renewed growth. However, ICIS believes that the European chemical industry will see more innovative technologies as companies refocus on their core business. European producers will accelerate their shift to specialty, green, biobased or low-carbon chemicals for innovation. As a region with a large number of chemical talent, Europe has been at the forefront of low-carbon chemistry and chemical recycling.

North American chemical companies show signs of stalling. In the past year of 2024, due to the impact of seasonal factors such as hurricanes, many US chemical companies have suspended work and even planned to maintain equipment in advance. ICIS said that U.S. chemical companies do not have much planned capacity additions in 2025, and the content of future development announcements is not good. At present, in the case of high interest rates, the chemical industry faces a high cost of capital. If interest rates continue to decline, investment in the chemical sector is expected to restart in 2025 and 2026.

Experts believe that the chemical industry, as a large U.S. export industry, is highly vulnerable to the impact of tariffs, and U.S. oil, natural gas and liquefied natural gas will do better under the new administration. But geopolitics will dominate the U.S. chemical export landscape. ICIS predicts that if the situation in the Middle East becomes more complex, oil prices could rise, raising costs in global markets. In addition, excess capacity will continue to have a negative impact on the development of the US chemical industry. The competitiveness of U.S. chemicals is under pressure from lower-margin products from other producers, which affects exports. At present, more products are entering the United States from the Asia-Pacific region, which will make the American chemical industry face more overcapacity.

ICIS notes that in today's world, sustainability remains a key driver of business strategy. But there is a lack of clear, consistent regulatory rules around the world. Against the backdrop of a weak economy, many chemical producers are focusing on viability. The European chemicals and energy industries operate under the strictest and most frequently changing regulations. In addition to the newly approved European Packaging Waste Regulation (PPWR), more legislation is expected to be introduced in Europe in 2025.

ICIS says global investment in low-carbon chemicals and plastics will continue to accelerate progress towards sustainability goals. Dow Chemical, for example, plans to build a zero-carbon steam cracking furnace in Canada, where all the CO2 will be fed down an existing trunk line and the final product sold to consumers at the price of "zero-carbon polyethylene." Japan, South Korea and Brazil are turning to specialty chemicals, including more environmentally friendly alternatives.

ICIS believes that the development of the AI industry in 2025 will have a more profound impact on the development of the global chemical industry. Experts say the next year will see generative AI more widely used for everyday tasks such as information retrieval, summarization, and translation. Over time, AI and automation will transform the fields of chemistry and energy. For chemicals that have traditionally operated in stable, long-term supply networks, it will make it easier to obtain information on market trends and predict changes in demand, supporting the development and negotiation of supply chain planning solutions. It will also improve transparency and optimize planning for environmental initiatives such as plastic waste reduction and circular economy projects.