November 2023

GlobalChemicals
Outlook
CONTENTSOur Trade Sector Expert
Olaf is the Atradius Trade Sector Expert for the chemicals industry. He started
his career in 1987 at Atradius, and works as a Senior Underwriter since 2005.

Underwriting in the chemicals sector is an
exciting and challenging task. Chemicals is
a truly global industry and consists of manydifferent sub-sectors. The chemicals industry
is a supplier to virtually all commercial sectors
and therefore has excellent diversification. As thechemicals sector is highly dependent on energy
prices, it is important to keep an eye on thesein individual countries in order to anticipate
negative sector developments at an early stage.
In addition, the increasing focus on sustainability
affects the chemicals industry more than othersectors and offers both opportunities and risks.
Olaf Gierlichs-Steffens,
Senior Underwriter,
Cologne, Germany

Contents
Chemicals global output to remain subdued until second half of 2024

3

Regional overview of chemicals performance

5

Does the war in Ukraine impact the chemicals industry? 

9How well is the chemicals industry prepared for the major shift 9towards sustainability?
What are the industry’s primary growth drivers?

10

What are the main headwinds most likely to affect the industry?

10

Summary

11

2
ATRADIUS GLOBAL CHEMICALS OUTLOOKChemicals global output to remain
subdued until second half of 2024
The outlook for the global chemicals market is gloomy with
output growth predicted at just 0.1% this year. What growth
there is in the market is mainly being generated from AsiaPacific, where China and India are increasing production.
Meanwhile the Americas, Europe and Africa have all seen
year-on-year contractions during 2023 and are unlikely tosee production outputs pick up until the end of next year.
So why is the industry facing such a bleak year? The reasons are complex
and are rooted in the industry’s reliance on energy, feedstocks and consumer
confidence. The chemical industry was amongst the worst impacted by
the energy crisis. Output is heavily eliant on oil and gas as feedstocks andrequires energy-intensive manufacturing processes.
High inflation and tight monetary policies are keeping feedstock prices
high and are also causing buyers and consumers to cut back on spending.
This weakening in demand means many chemical producers have been
unable to pass on higher production costs to their customers.

Chemicals: global key figures
2022

2023*

2024*

2025*
6.5
3.6

0.8 0.2
0.7 0.5

0.1 0.8

3.1

4.1

4.4 4.8 4.7

0.4
-0.3
-12.2

PRODUCTION INDEXGROSS OUTPUT (SALES),REAL USDINVESTMENT,REAL USDGROSS OPERATING SURPLUS(PROFITS), NOMINAL USD

Year-on-year, % change. (* Forecast) Source: Oxford Economics.

CONTENTS

3ATRADIUS GLOBAL CHEMICALS OUTLOOKThe global chemicals outlook also tends to closely track
global economic conditions. Chemicals products canbe found in many other downstream industries and,
therefore, industry growth patterns have been reflecting
the economic slowdown.
A rebound is in the cards
The outlook will brighten next year. A rebound of 3.1%
is predicted for the sector on a global level, driven by
growing demand from sectors such as construction andhousehold goods. Recovery will be gradual to begin with.
Signs suggest that the growth momentum is unlikely
to pick up pace until at least the second half of 2024.

Chemicals: output per region
2022
2023*

0.1

5.9

2.1

3.1
-2.4

-3.6

ASIA-PACIFICAMERICAS

2024*

4.8

0.2

2.1

-0.1

-5.6

EUROPE

2025*

1.9

5.7

2.1

3.8

2.5

MIDDLE EAST/AFRICA

Year-on-year, % change. (* Forecast) Source: Oxford Economics.

Global chemicals output per subsector
2022
2023*

2024*

4.9
2.1
0.8
-1.7

CHEMICALS TOTAL

2025*

4.9
3.1
1.6

1.9

0.1
-1.8

1.9

3.2

4.4

3.8
2.3

4.9
3.3

4.4

3.3

-1.7

BASIC CHEMICALSAGROCHEMICALSPAINTS & COATINGS

SOAPS &DETERGENTS

Year-on-year, % change. (* Forecast) Source: Oxford Economics.

CONTENTS

4ATRADIUS GLOBAL CHEMICALS OUTLOOKRegional overview of chemicals performance
Asia-Pacific
China
Chemicals production in China is showing resilience,buoyed by domestic demand. Output is predicted to increaseby 6.9% in 2023 and 5.2% in 2024. While the industry has
been impacted by slow growth in the nation’s property
sector, policy measures designed to promote growth in key
sectors such as construction and automotive, are supporting
domestic demand for chemical goods across a spectrumof subsectors.
Some clouds do darken the otherwise blue sky of theoutlook for China, namely the prospect of trade tensions
that could interrupt supply chains. These are mainly
focused on trade and technology issues and, so far,chemicals multinationals have remained committed totheir Chinese production and investment plans.

India
The Indian chemical industry is massive and is growing.
It is currently the fifth largest in the world and is expected
to extend its market share, outpacing global chemicals
growth. Production is expected to increase 4.3% in 2023
and 2.8% in 2024.
Growth is being driven by domestic demand, withan expanding population and economy. There is alsoa government focus on growth in the industry locally.
Government policies are supporting foreign direct
investment and creating petroleum, chemicals andpetrochemicals investment regions in a big to actively
support growth over the coming decade.

Chemical production remains competitively priced
in China, supporting the outlook for exports. Will
this remain the case? Possibly, although oversupply is
an issue impacting margins for many producers.

Chemical production remains competitively priced
in China, but oversupply could become an issue,
impacting margins.

China: chemicals key figures
2022
2023*

7.0

7.0

6.9

6.8

2024*

6.9

9.8

-11.9

PRODUCTION INDEX

5.2

5.2

5.4

8.0

14.3
5.4

5.4

4.6

-46.1

GROSS OUTPUT (SALES), REAL USD

Year-on-year, % change. (* Forecast) Source: Oxford Economics.

CONTENTS

2025*

INVESTMENT, REAL USD

GROSS OPERATING SURPLUS(PROFITS), NOMINAL USD

5
ATRADIUS GLOBAL CHEMICALS OUTLOOKFor Germany’s chemicalindustry hub, the possibilityof manufacturers relocating
to countries with lower
energy costs is a potential
downside risk.

United States
Chemicals output in the US is contracting. We are expecting
it to shrink by 1.9% in 2023 and by 0.8% next year. Demand
recovery for most chemicals subsectors is not expecteduntil the second half of 2024. Demand for value-added
production is not likely to gather momentum until 2025.
Much of the slowdown has been due to high inflationand monetary policies delivering high interest rates,that in turn have created difficult lending conditions.
The impact of this challenging economic situation has
been particularly evident in downstream industrial sectors
such as construction, durable goods and electronics.
However, the industry will not remain subdued long term.
The prospect of growth is strong. When interest rates
begin to ease and demand picks up, the highly competitive
position of the US chemicals industry (especially basechemicals and fertilisers), along with the easing of supply
chain disruptions, will support the rebound.
As with other nations government policies are supporting
growth in the industry. The CHIPS and Science Act and theInflation Reduction Act will accelerate the development oftechnology to reduce emissions. This will boost demand forchemicals used to make insulation materials, solar panelsand other related products.
US natural resources will also help drive growth and attract
investment. Shale gas, in particular, has led to more stablegas prices and has reduced the cost of producing chemicals
such as ethylene. This is helping US chemical producers
enjoy an advantage in cost competitiveness over their
European and Asian peers, especially those that typicallyuse naphtha (a derivative of oil) in order to produce
upstream chemicals.

USA: chemicals key figures
2022
2023*

EuropeEurozone and UK
Despite the recent fall in energy costs, chemicals businesses
in Europe have experienced a contraction in output thisyear. By the end of 2023, we think chemicals output for
the Eurozone will contract by 6.4% and by 5.6% in the UK.
As with the industry in other regions growth has beenhampered by the decrease in demand caused by highinflation and interest rates. Many customers are also still
destocking from elevated inventory levels, resulting in
subdued demand.
We should start to see the green shoots of recovery in 2024,
although this will be modest, with estimates pointing
to 2.4% in the eurozone and just 0.3% in the UK. The slow
return to growth will be influenced by weak global demand
and the continuation of high energy costs.
Germany
Germany is by far the largest chemicals producer in Europe,
accounting for more than 4% of global chemicals output.

2024*

2025*

12.2
1.8

4.2
-0.2

-0.2

-3.0

PRODUCTION INDEX

-1.9

-1.3

-0.4

GROSS OUTPUT (SALES), REAL USD

Year-on-year, % change. (* Forecast) Source: Oxford Economics.

CONTENTS

-2.5

-0.8

-0.8

1.8

3.9

2.8

-3.8

INVESTMENT, REAL USD

GROSS OPERATING SURPLUS(PROFITS), NOMINAL USD

6
ATRADIUS GLOBAL CHEMICALS OUTLOOKDuring 2022, chemicals production in Germany contracted
by a significant 12%. By the end of 2023 production isprediction to shrink by another 10%, followed by a modest 1%
rebound in 2024.
Although such huge drops in production will inevitably
affect the industry in Germany, the impact is not likely
to be severe. This is because the sector is fairly robust withstrong capitalisation, good access to external financing anda well-balanced debt profile.
That said, energy prices are high and present a concern tothe industry. The biggest risks include the possibility of
manufacturers relocating to countries where energy costs
are lower. Businesses that are unable to pass on increased
production costs to customers could struggle with cash flow
and, in turn, may present a credit risk to their suppliers.

Eurozone and UK: chemicals key figures
2022
2023*

2024*

2.2
-4,5

-3.9

-4.2

PRODUCTION INDEX

0.0
-7.0

-7.6

-8.6

2025*

2.1

1.5

INVESTMENT, REAL USD

Year-on-year, % change. (* Forecast) Source: Oxford Economics.

Germany: chemicals key figures
2022
2023*

2024*

1.0

-12.2

-12.2

-7.7
-13.1

PRODUCTION INDEX

-4.0
-10.1

-10.1

-9.9

GROSS OUTPUT (SALES), REAL USD

Year-on-year, % change. (* Forecast) Source: Oxford Economics.

CONTENTS

5.7

4.0

-1.1

-1.9

GROSS OUTPUT (SALES), REAL USD

4.4

4.3

GROSS OPERATING SURPLUS(PROFITS), NOMINAL USD

2025*

1.0

5.7

2.9

5.7

9.0
3.5

-5.4

INVESTMENT, REAL USD

GROSS OPERATING SURPLUS(PROFITS), NOMINAL USD

7
ATRADIUS GLOBAL CHEMICALS OUTLOOKThe increased global focus onsustainability is likely to resultin improved processes, reduced
environmental impacts and better,safer products.

Issues that
could impact
the industry

8
CONTENTS

ATRADIUS GLOBAL CHEMICALS OUTLOOKDoes the war in Ukraine impact
the chemicals industry?
Russia’s invasion of Ukraine has had a massive and possibly
permanent impact on energy trade flows into Europe.
Although this affects all sectors, the chemicals industry
has been especially affected due to its reliance on energy
intensive processes and on oil and gas for certain feedstocks.

It remains to be seen how long this situation will last.
High investments in a “greener” industry will need to befinanced in the short to medium term, but financing should
not be a problem for players with very good credit ratios.

Although gas prices have eased recently, they are still
eye-wateringly high, and remain 70% above the average
cost during the 2015-2019 period. These high energy costs,
along with high production costs and tight regulations
means many European chemicals businesses may struggle
to compete with their American or Asian counterparts.
However, although some European firms are announcing
plans to adjust their production strategies in order toensure economic viability, in the short term at least we do
not expect to see a serious deterioration in terms of thefinancial strength of the players. In the long term, theymight be affected by high input costs and lower demand.

How well is the chemicals industry prepared
for the major shift towards sustainability?
There has been a growing recognition of the environmental
impacts of the chemical industry, particularly in termsof energy consumption, emissions, waste production,and resource utilisation. In response many companies
have started to develop sustainable production processes,
including the use of eco-friendly technologies, and green
chemistry processes.
This presents a range of opportunities for the industry as it
brings to market new sustainable materials and processes. The
industry already invests heavily in R&D. The increased global
focus on sustainability is likely to result in improved processes,
reduced environmental impacts and better, safer products.
However, without technological advances, such as usinghydrogen as a sustainable feedstock or a source of fuel,there will be a limit on how much the energy mix can shift
away from fossil fuels and lower emissions in the sector.
Some industry commentators have raised the possibility of
an increased credit risk for the industry in Europe, in lightof the EU’s ambitious sustainability plans. However, thisis hard to predict. It depends on various factors like energy
price levels, the cost of environmental protection measures,
CONTENTS

changes in demand for more eco-friendly products and therisk of losing market share to competitors that have already
implemented sustainable practices.
Plastics subsector
Individual subsectors also face their own challenges.
For example, bans on many single-use plastics are being
implemented in growing numbers of regions and territories
throughout the world including the EU, UK, China, Taiwan,
Canada some US states and cities, and some African nations.
While unquestionably good for the environment, suchpolicies will impact the plastics industry which is tasked
with the challenge of finding alternative materials thatare more environmentally friendly while offering similarfunctionalities.
Agricultural chemicals subsector
Pesticides and fertilisers used in agriculture can haveenvironmental impacts, including soil and water pollution.
The challenge for the subsector is to develop moresustainable agricultural practices and meet environmental
targets. Some of these are legally binding, such as thoselaid out in the EU’s Farm to Fork strategy, which seeks
to reduce the use of hazardous pesticides by 50% by 2030.
ATRADIUS GLOBAL CHEMICALS OUTLOOK

9

What are theindustry’s primary
growth drivers?

What are the main
headwinds most likely
to affect the industry?

The chemicals industry enjoys an almost unique positionin that its products are in demand from a wide range ofother industries. Chemical goods are widely used in global
manufacturing supply chains from pharmaceuticals toagriculture and manufacturing to cutting-edge technology.
This creates strong resilience and is a major driver of theindustry’s growth trends.

As previously discussed, energy prices are a critical factor
affecting growth in the chemicals industry. As an energyintensive industry, it is highly susceptible to oil and gas pricevolatility. As the industry, and indeed the world, transitions
toward clean energy this will create challenges as well
as opportunities for the sector. Chemical businesses will
face ever tighter regulatory directives, as well as changing
customer preferences. In fact, there is already growing
demand for green and ethical products. This includes
consumers asking where ingredients come from andassessing environmental impacts.

In addition to robust demand in B2B markets is a growing
consumer demand, especially in emerging markets.
Growing affluence among consumers in emerging markets
is resulting in greater purchasing power and growing
demand for consumer goods, cars, household disposables
including soaps and detergents, as well as construction
materials that are chemicals-based.
Growing global consumer demand for electric vehicles
can also be identified as an important growth driver for
the industry. The recent surge in electric vehicle production
is resulting in increased demand for high-performanceplastics and chemicals for use in batteries.
As the global population grows, so does the need to increase
agricultural productivity. This is likely to drive long-term demand
for fertilisers, pesticides and other agrochemicals, as well as
potential growth in areas such as genetically modified crops.
CONTENTS

Decarbonisation involves substantive financial investment.
However, few chemicals businesses can afford to be left
behind as they face increasing pressure from various
stakeholder groups. Moving forward, ESG performance is
expected to be benchmarked as highly as cost and otherproductivity metrics.

Currently it is still hard to predict if the EU’s
ambitious sustainability plans will lead to increased
credit risk for the chemicals industry in Europe.
ATRADIUS GLOBAL CHEMICALS OUTLOOK

10

Summary
What are the top three opportunities forthe chemicals sector during the next few years?

What are the constraints and downside risks forthe chemicals industry in the mid and long term?

Sustainable and green chemistry
Global demand for sustainability presents a significant
opportunity for the chemical industry to develop andmarket environmentally friendly products and processes.
This includes bio-based materials, renewable energy
solutions and circular waste and resource consumption.

Regulatory and compliance pressures
Stricter environmental regulations mean chemicals
businesses will face increasing regulatory scrutiny.
Meeting these requirements while maintaining profitability
and innovation could be challenging, especially forcompanies with complex supply chains and operations.

Digital transformation
Embracing digital technologies such as artificial
intelligence, machine learning and the Internet of Things(IoT) can help chemicals companies streamline theiroperations and enhance their efficiency. Data analytics can
optimise production processes, supply chain management,
enable predictive maintenance and even support productdevelopment.

Transition to sustainability
In addition to providing opportunities for the industry,
the focus on improving sustainability also presents
challenges. Primary among these is the need for investment
into research, technology and process reengineering.
In addition, growing consumer demand for green or ethicalproducts often chemicals companies are increasingly
required to explain environmental impact, list chemicals
in products and benchmark decarbonisation actions.

Advanced materials
Sectors such as electronics, automotive and aerospace are
driving increased demand for high-performance materials.
This is creating opportunities for the chemicals industry
to develop materials to meet specific needs, as well the
chance to collaborate with technology providers and engage
with sustainability initiatives. Strategic investment into
R&D will be needed to help chemicals businesses capitaliseon opportunities. Growth in the electric vehicle sector iscreating demand for high performance plastics.
CONTENTS

Geopolitical uncertainties
The chemicals industry can be vulnerable to supply chain
disruptions, tariffs, trade restrictions and geopoliticalconflicts. Addressing these challenges necessitates strategicplanning, agile business models, collaboration withregulatory bodies, and proactive approach to adopting
sustainable practices. As an energy-intensive industry,the chemical industry is highly susceptible to oil and gas
price volatility.
ATRADIUS GLOBAL CHEMICALS OUTLOOK

11

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CONTENTS

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