Market and product

Compiled by Bao Hien

The global chemical industry entered 2026 in the middle of a prolonged downcycle, with production growth repeatedly revised downward from initial forecasts. Within that broader picture, fertilizers and agrochemicals have emerged as one of the hardest-hit segments, given the sector's deep exposure to energy costs.

A Global Picture of Repeatedly Downgraded Growth

In early 2025, the chemical industry was expecting global production to grow by around 3.5%. Reality turned out very differently: growth came in at only about 1.9% in 2025, and forecasts for 2026 have continued to be revised down to somewhere between 1.5% and 2%, depending on the source. According to the American Chemistry Council (ACC), US chemical output is expected to grow just 0.3% in 2026, down from 0.7% in 2025; some other forecasters, such as Deloitte, even project a slight 0.2% decline in US output. Martha Gilchrist Moore, ACC's chief economist, says a meaningful recovery won't materialize until 2027, when growth is projected to reach 2.3%.

The picture varies sharply by region. Europe looks even bleaker: according to Cefic's (the European chemical industry association) first-quarter 2026 report, EU27 chemical production fell 3.2% year-on-year, with capacity utilization at only around 74% — well below the long-term 2014-2019 average. Europe's share of the global chemical market has shrunk to about 13%, while China's has climbed to roughly 46% of global chemical sales. European natural gas prices remained about 2.5 times higher than in the US throughout 2025, severely eroding competitiveness. Cefic data show the scale of European plant closures grew sixfold between 2022 and 2025, from 2.9 million to 17.2 million tonnes of annual capacity; in 2024-2025 alone, 37 million tonnes of capacity — about 9% of Europe's total chemical capacity — was permanently shut down, with 49% of closure announcements citing energy cost competitiveness as the main driver. Germany's chemical industry association (VCI) even forecasts domestic chemical output could decline by around 1% in 2026.

The US, by contrast, has retained a competitive edge thanks to abundant, low-cost shale gas, which keeps feedstock costs (via ethane) considerably lower than the naphtha imports relied on by Europe and much of Asia. While traditional chemical end-markets — construction, automotive, consumer goods — are all slowing, semiconductors stand out as a rare bright spot: demand for ultra-high-purity chemicals used in chip manufacturing is projected to grow about 8.5% in 2026, driven by the data center and AI infrastructure boom.

Fertilizers and Agrochemicals: The Segment Under the Most Pressure

Within this broader, challenging landscape, fertilizers and agrochemicals stand out as one of the weakest subsectors. According to an analysis by Atradius (a trade credit insurer), global agrochemical output is expected to decline by 2.4% in 2026 — a much steeper drop than the chemical industry as a whole.

The root cause lies in the sector's cost structure: nitrogen fertilizer production depends heavily on natural gas, which serves as both fuel and direct feedstock for ammonia synthesis. When energy prices spike due to geopolitical disruption — specifically, conflict in the Middle East disrupting oil and gas flows through the Strait of Hormuz — production costs rise quickly and sharply, almost immediately. Demand, meanwhile, contracts in response: farmers and agricultural buyers are highly price-sensitive, so when fertilizer prices rise, the typical reaction is to cut application rates, delay purchases, or switch to cheaper alternatives. The result is a segment squeezed from both sides — rising input costs alongside softening demand — a combination that is particularly damaging to producer margins.

This dynamic was already taking shape before the conflict escalated. Cefic's Q1 2026 report flagged geopolitical risk tied to the Strait of Hormuz as one of the biggest sources of uncertainty at the time, even though its full impact was still difficult to assess. By mid-year, once the conflict had actually broken out and dragged on, forecasts for agrochemicals turned considerably more pessimistic than initially expected.

What Businesses Should Watch

Amid this prolonged uncertainty, analysts consistently stress the importance of staying flexible: closely tracking exposure to energy costs, supply chain disruptions, and raw material pricing, and considering supplier diversification — particularly for energy-intensive inputs or those heavily dependent on international supply. For businesses in the agricultural value chain, closely monitoring fertilizer pricing and demand is especially important, as volatility there can ripple through food production and transportation costs. By contrast, businesses tied to electric vehicle supply chains, battery materials, and sustainable solutions are likely to see relatively steadier demand even as overall growth remains sluggish.

Sources
1. Atradius, "Redefining Chemicals Industry Performance in 2026."
2. American Chemistry Council (ACC), "Building the Foundation for Growth," December 2025; and figures reported via C&EN, "US chemical industry will see only slow growth," January 2026.
3. Cefic, "Chemical Trends Report Q1 2026."
4. OPIS (Dow Jones), "Europe's Chemical Industry Faces Fight for Survival."
5. Deloitte, "2026 Chemical Industry Outlook" (via Chemical Processing and PCI Magazine).
6. SCI (Society of Chemical Industry), "Chemistry in 2026: Navigating the year of uncertainty."