Editorial June 2025 A Complex Juncture for Chemicals Navigating Slow Growth and Rising Pressures

Rajiv Parikh

17 Jul 2025

Entering mid-2025, the global chemical industry is at a crossroads. After facing headwinds in recent years-weak demand, volatile energy costs, and geopolitical uncertainty-the sector is seeing tentative signs of recovery, yet structural challenges persist.

According to MarketsandMarkets, global chemical sales edged up from USD 6.18 trillion in 2024 to an expected USD 6.32 trillion in 2025-a moderate 2.3% increase. The American Chemistry Council projects a slightly stronger uptick of around 3.5%. But growth is uneven: specialty chemicals and industrial segments continue to lag, while end-use sectors like agriculture and consumer products are picking up momentum.

Regional Divergence:

In the U.S., momentum is building-chemical output is projected to grow nearly 1.9% in 2025. Key drivers include lower interest rates, increased capital spending (up 4.1% in 2024), and rebound demand in semiconductors, automotive, and housing. By contrast, Europe remains under stress. The EU chemical sector remains weak in Q1 2025-high gas prices, low output, and low capacity utilisation are inhibiting competitiveness Germany’s VCI recently downgraded its 2025 outlook, forecasting stagnation or ~1% contraction due to tariffs, energy costs, and geopolitical uncertainty. Yet companies are adjusting operations-shifting production footprints to lower-cost regions and expecting ~5% profit growth in 2026.

Supply Chain & Pricing: Inflation, Disruptions, Inventories

Despite deeper inventory levels earlier in the recovery, U.S. chemical inventories- to-sales remain above pre-pandemic measures-1.14 in April 2025 versus 1.11 a year ago—suggesting cautious restocking. Recent April chemical exports dropped 6.3% following March's uplift, while imports declined 9.8%, pushing the trade surplus higher.

Producer prices show early signs of easing: down 0.5% in May, offsetting prior inflation in agri, inorganic, and coating chemicals, even as organic chemicals and resins remain under pressure.

However, certain commodities are roaring. Sodium benzoate-a common food and cosmetic preservative-is experiencing steep price hikes due to ongoing supply-chain bottlenecks and surging demand. Other bulk segments, such as rock phosphate and sulfur used in fertilizers, are pressuring margins across agrochemical players

Specialty Growth Areas: Green, Rubber, Herbal, Pharma

On the bright side, several niche sectors are experiencing strong expansion:

Organic herbal hair colors, harnessing plant-based dyes like henna and amla, are growing at ~8% CAGR—forecasted to reach USD 2.77 billion by 2032
Rubber chemicals are benefiting from automotive, healthcare, and construction demand, with rising interest in sustainable, high-performance additives
The pharmaceutical chemicals segment is sizeable (USD 232 billion in 2024) and expanding steadily (~4.9% CAGR to 2030).

Sustainability & Innovation: ESG on All Fronts

Sustainability is no longer optional. Industry-first multi-stakeholder efforts—such as Together for Sustainability, now with 57 members-are standardizing greener supply-chain practices.

Green hydrogen is gaining traction. India, for example, is hosting sessions on “Developing a cost-effective ecosystem” for green hydrogen in June 2025, signaling long-term decarbonization aspirations. Meanwhile, EU is advancing action on “forever chemicals” like TFA-a byproduct of PFAS—amid debates between industry resistance and health advocates

Digital transformation is accelerating-IoT, AI/ML and supply-chain digitization are being deployed in petrochemical plants, OCSR systems, and logistics optimization.