Chemicals 2025: A new reality for the global chemical industry

The global chemical sector is navigating a period of structural change. Three years of reduced demand and intensifying competition have reshaped market dynamics across value chains. While some in the industry expect the era of historical overperformance to return, many players still do not see momentum building for a sectorwide recovery. Signals suggest that the industry may lag behind the broader market for years to come.This outlook comes even though valuations across the chemical industry have rebounded over the past 12 months—albeit at a pace below the broader market. The 9 percent annualized TSR increase during that period partly corrects earlier overreactions and partly reflects renewed confidence in the sector’s long-term fundamentals. But structural overcapacity in many core chemical supply chains, set against a modest demand outlook, paints a more sobering picture of sustained pressure on margins. To succeed in today’s chemical industry, companies will likely need to combine near-term discipline with long-term reinvention, rethinking cost structures, portfolios, and innovation strategies.Our analysis draws from our proprietary database tracking nearly 700 chemical companies, reflecting the latest arrivals and departures from the industry. This article explores the state of the chemical industry, the forces underlying today’s trends, and the opportunities that could help players emerge stronger in the next phase of the cycle.