July 2024

Industry trends
Chemicals

Chemicals sector
expertise for
global and regional
developments
and trends:
Olaf GierlichsSteffens, Atradius
Senior Underwriterin Cologne,
Germany.

Ongoing recovery,
with an uneven
outlook among
regions

Global overview

Asia Pacific, while the Americas and Europe
recorded contractions (see chart below).
Rebound in Europe and the US supports
This weakening in demand has meant thathigher global growth rates in 2024 and 2025.
many chemical producers have been unable
to pass on higher production costs to their
The chemical industry was amongst thecustomers.
worst impacted by the energy crisis in 2022
and into 2023, as output is heavily reliant on
An uneven long-term outlook
oil and gas feedstocks and requires energyHowever, in the course of 2024 a reboundintensive manufacturing processes. Highin the US and in Western Europe has gained
inflation and tight monetary policies kept
momentum, supported by lower energy
feedstock prices high, while also causing
prices and recovering demand from key
key buyer industries and consumers to cut
buyer sectors and consumers. Chemicals
back on spending. Global chemicals output
growth slowed down to 0.7% in 2022 and 1.2% production is now forecast to increase morethan 3% in 2024 and 2025. In the coming
in 2023, only sustained by increases in theyears Asia Pacific will continue to be themain driver of chemicals growth, followedby the US chemicals sector, which benefits
from shale gas supply. Europe chemicals
businesses will face competitive
disadvantages due to structurally higher
energy prices after the expiry of Russian
gas deliveries. The chemicals industry is
characterised by intense competition andongoing market consolidation. Larger
players often have economies of scale andgreater resources to invest in research anddevelopment, innovation and marketing.
This may cause smaller companies tostruggle to remain competitive.

Industry performance forecast
Europe1Asia and Oceania

Americas

Austria

Netherlands

Australia

Phillippines

BrazilBelgium

PolandChina

Singapore

CanadaCzech Republic

PortugalHong Kong

South Korea

MexicoDenmark

Slovakia

India

TaiwanUSA

FranceSpain

Indonesia

ThailandGermany

SwedenJapan

UAE

Hungary

Switzerland

Malaysia

VietnamIrelandTurkeyNew Zealand

Italy

UK

Excellent
The credit risk situationin the sector is strong /business performance in the
sector is strong compared toits long-term trend.
Good
The credit risk situationin the sector is benign /business performance in the
sector is above its long-term trend.
Fair
The credit risk situationin the sector is average /business performance in the
sector is stable.
Poor
The credit risk in the
sector is relatively high /business performance in the
sector is below its long-term trend.
Bleak
The credit risk in the
sector is poor / businessperformance in the sector is weakcompared to its long-term trend.

July 2024

Industry trends
Chemicals
Chemicals output
per region

2022

2023

Global0.7

1.2

Americas

1.2

Asia Pacific

Europe

1.8

-4.7

-1.7

4.9

-6.1

2024*

2025*

3.2

3.1

2.8

2.9

3.3

3.5

Global chemicals
output per subsector

2022

2023

Basic chemicals

-1.7

-1.0

Agrochemicals

3.5
Paints & coatings

1.5

Soaps & detergents

2024*

2025*

2.6

3.7

5.6

4.0
-0.1

1.9

3.7

3.2

2.7

3.1

1.0

1.9

1.8

2.3

Year-on-year, % change /*forecast– Source: Oxford Economics

Year-on-year, % change /*forecast– Source: Oxford Economics

Strengths and growth drivers

Constraints and downside risks

Advanced materials. Sectors such as electronics, automotive andaerospace are driving increased demand for high-performancematerials. This is creating opportunities for the chemicals industry
to develop materials to meet specific needs.

Energy prices. As an energy-intensive industry, the chemicalindustry is highly susceptible to oil and gas price volatility.

Sustainability. There is a growing demand for sustainable
solutions across the industry and this provides companies withthe opportunity to gain market share. The surge in EV production
increases demand for high-performance plastics and supplies forbattery materials.
Rising middle class in emerging markets. Rapid urbanisation andincreasing household purchasing power of the middle class inemerging markets should boost demand for soaps and detergentsproducts.

2

Transition to sustainability. This will create challenges as well
as opportunities for the sector. Companies are facing major
investments in decarbonisation and optimising sustainability.
Pressure from stakeholders is increasing, and ESG performanceis expected to be benchmarked as highly as cost and otherproductivity metrics.
Regulatory and compliance pressures. Stricter regulations aimed
at reducing environmental impact and improving safety standards
may create disruptions for companies in the chemicals industry as
they work to adapt while maintaining profitability.
Supply chains. The chemicals industry is highly dependent on raw
materials sourced from various regions across the globe. Potential
supply chain disruptions, caused by geographical tensions, natural
disasters or logistical issues are downside risks.

July 2024

Chemicals outlook
AmericasChemicals output

2022

2023

2024*

2025*

Brazil

3.7

-7.8

-0.3

2.6

Canada

-3.1

-2.9

2.4

2.3

Mexico

-1.4

-6.2

2.8

0.8

CanadaUnited States

0.9

-0.6

3.2

3.0

MexicoYear-on-year, % change /*forecast – Source: Oxford Economics

USA
Good short-term and mid-term growthprospects
US chemical production contracted by
0.6% last year, as high inflation and tightmonetary policies negatively affecteddemand from construction, durable goods
and electronics. However, we expect
chemical output to rebound in 2024 and2025, growing by more than 3% annually.
The US economic outlook for the coming
12 months remains good. Disinflation
should allow the Federal Reserve tocontinue its monetary easing, which would
support higher demand from key buyer
sectors. Additionally robust household
consumption will support demand forchemicals, with basic chemicals output toincrease by 4.2% and soaps and detergentsto grow by 3.5% this year.

3

Government policies are supporting growthin the industry. The CHIPS and Science
Act and the Inflation Reduction Act will
accelerate the development of technology to
reduce emissions. This will boost demand forchemicals used to make insulation materials,
solar panels and other related products.
US natural resources will also help drive
growth and attract investment. Shale gas
has led to more stable gas prices and has
reduced the cost of producing chemicals
such as ethylene. Investments in US shale
gas-related projects over the past decade
have been large, estimated at USD 208
billion by 2022. This is helping US chemical
producers enjoy an advantage in costcompetitiveness over their European andAsian peers, especially those that typicallyuse naphtha (a derivative of oil) in order toproduce upstream chemicals.

Industry performance forecast
BrazilUSA
Excellent
The credit risk situation in the
sector is strong / businessperformance in the sector is strong
compared to its long-term trend.
Good
The credit risk situation in the
sector is benign / businessperformance in the sector
is above its long-term trend.
Fair
The credit risk situation in the
sector is average / businessperformance in the sector
is stable.
Poor
The credit risk in the sector
is relatively high / businessperformance in the sector
is below its long-term trend.
Bleak
The credit risk in the sector ispoor / business performancein the sector is weak compared
to its long-term trend.

July 2024

Chemicals outlook
Asia PacificChemicals output

2022

2023

2024*

2025*

China

7.0

10.6

4.7

3.1

India

-4.0

4.8

4.1

6.5

Japan

-4.2

-7.9

-0.9

1.7

South Korea

-10.6

-5.3

-1.6

3.3

Year-on-year, % change /*forecast – Source: Oxford Economics

Industry performance forecast
Australia
China
Hong Kong
India
Indonesia

China
Good growth rates, but overcapacity is an
issue
After a whopping 10.6% increase in 2023,
China´s chemical production growth isexpected to slow down to (still robust) 4.7%
in 2024 and 3.1% in 2025. This is in line withlower economic growth prospects for the
coming 18 months.
While construction-related chemicalbusinesses have been impacted by the woesin the nation’s property sector, government
policy measures designed to promote growthin the manufacturing sector are supporting
domestic demand for chemical goods acrossa spectrum of subsectors. In international
comparison Chinese chemical production
remains competitively priced, supporting
exports.
However, oversupply is an issue, impacting
margins for many Chinese chemical
producers. Additionally, further increasing
trade tensions with the US could become aconcern. So far, chemicals multinationals
have remained committed to their Chinese
production and investment plans.

India
Robust domestic demand and government
supportThe Indian chemical industry is currently
the fifth largest in the world, and is expected
to extend its market share, outpacing global
chemicals growth. Production is forecast to
increase by 4.1% in 2024 and by 6.5% in 2025.
With an expanding economy and increasing
population, chemical growth is mainly being
driven by domestic demand. Government
policies support foreign direct investment
and provide petroleum, chemicals andpetrochemicals investment regions, which
will spur growth over the coming decade.
4Japan
A rebound is on the cards for 2025
We expect Japan’s chemicals output is
to decrease by 0.9% in 2024, after a 7.9%
decline in 2023. In early 2024 the paints
and coatings segment suffered from a
temporary production stop at Daihatsu
Motors. Private consumption andinvestment are still below their 2019 peaks.
However, private consumption should pickup as of H2 of 2024, supporting growth in
the soaps and detergents segment (up 2.8%
in 2024). In 2025 we expect chemicals
production to rebound by 1.7%.
Japanese basic chemical producers feelcompetitive pressure from their cheaper
producing Chinese and US peers. We
expect that in the mid-term and long-term
the Japanese chemicals industry will
focus on more specialised products forautomotive, electronics and life sciences,which provide higher margins.

Japan
Malaysia
New ZealandPhillippines
Singapore
South Korea
TaiwanThailand
UAE
Vietnam
Excellent
The credit risk situation in the
sector is strong / businessperformance in the sector is strong
compared to its long-term trend.
Good
The credit risk situation in the
sector is benign / businessperformance in the sector
is above its long-term trend.
Fair
The credit risk situation in the
sector is average / businessperformance in the sector
is stable.
Poor
The credit risk in the sector
is relatively high / businessperformance in the sector
is below its long-term trend.
Bleak
The credit risk in the sector ispoor / business performancein the sector is weak compared
to its long-term trend.

July 2024

Chemicals outlook
EuropeChemicals output

2022

2023

2024*

2025*

France

-3.3

1.3

1.0

1.3

Germany

-11.8

-8.9

7.7

0.4

Italy

-0.4

-4.1

2.1

1.9

Belgium

United Kingdom

-4.5

-10.1

-3.2

0.8

Czech RepublicYear-on-year, % change /*forecast – Source: Oxford Economics

Industry performance forecast
Austria

Denmark
FranceEurozone
A recovery with several troubles ahead
After a 6.4% contraction last year, we expect
chemicals production in the Eurozone to growby 4.1% in 2024. The rebound is driven bylower energy prices, and a modest economic
recovery, with rising demand from key buyer
industries and higher consumer spending.
Further easing of monetary policy should
prop up both the chemicals and downstream
sectors.
That said, it remains to be seen whether
some chemical producers in the Eurozone
will be able to survive until the region sees
any meaningful recovery. Currently, only amodest 1.5% chemicals production growthis forecast for 2025. Chemical businesses
unable to pass on increased production costs
to customers could struggle with cash flow,presenting a credit risk to their suppliers.
While energy prices have decreased since2023, longer-term worries remain. Gas prices
are likely to remain above pre-crisis levels
indefinitely as Europe replaces Russian
gas with global imports of liquified naturalgas. Gas prices are forecast to settle at astructurally higher level, weakening longterm competitiveness with American andAsian rivals.
In addition, stricter environmental
regulations mean chemicals businesses will
face increasing regulatory scrutiny. Meetingthese requirements while maintaining
profitability and innovation could bechallenging.

5

Germany
A rebound is ongoing, but relocation of
production is a downside risk
Germany is by far the largest chemicals
producer in Europe, accounting for more than
4% of global chemicals output. Chemicals
production contracted by 11.8% in 2022
and 8.9% in 2023. In particular, the basic
chemicals and fertilisers segments sufferedfrom massive gas price hikes in 2022.
Despite the whopping decline the industry
is still robust, with strong capitalisation,
good access to external financing, and awell-balanced debt profile. We expect German
chemicals production to rebound by 7.7% in
2024, supported by decreased energy prices
and surging demand from key buyer sectors.
However, energy prices are likely to remain
above pre-crisis levels, preventing chemicals
production from returning to levels seen
before 2022. In 2025 only a modest 0.4%
output growth is forecast, and the annual
growth rate in the 2022-2028 period amounts
to just 0.3%.
The biggest risk for the German chemicals
production economy is the possibility of
manufacturers relocating to countries whereenergy costs are lower.

Germany
Hungary
Ireland
Italy
Netherlands
PolandPortugal
Slovakia
Spain
SwedenSwitzerland
TurkeyUK
Excellent
The credit risk situation in the
sector is strong / businessperformance in the sector is strong
compared to its long-term trend.
Good
The credit risk situation in the
sector is benign / businessperformance in the sector
is above its long-term trend.
Fair
The credit risk situation in the
sector is average / businessperformance in the sector
is stable.
Poor
The credit risk in the sector
is relatively high / businessperformance in the sector
is below its long-term trend.
Bleak
The credit risk in the sector ispoor / business performancein the sector is weak compared
to its long-term trend.

July 2024

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