The European chemicals sector outlook for 2025 and 2026 seems to be treading cautiously, according to insights shared by UBS. The financial institution maintains a guarded stance on the industry due to sluggish macroeconomic indicators and ongoing tariff uncertainties. In a landscape where volatility looms large, experts at UBS project only modest gains in volume growth.
“We believe that a defensive stance is the correct approach for the next 12 months in the European Chemical sector,”
shared analysts led by Geoff Haire from UBS. The rationale behind this cautious approach stems from subdued momentum in cyclical end-markets and limited room for growth arising from low capacity utilization rates. Despite these challenges, the analysts foresee a 2.6% year-on-year volume growth in 2025 and a slightly improved 3.2% in 2026 across various segments of the sector.
While there are hopeful signs with Consumer Chemicals and Industrial Gases appearing more promising than other sub-sectors, the overall sentiment remains restrained. UBS forecasts a nominal EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) growth of around 4% in 2025—a figure aligned with market consensus but anticipates merely a 7% uptick in 2026 as opposed to market expectations of 10%.
“In our opinion, without an improvement in volumes and/or prices… double-digit EBITDA growth appears ambitious,”
noted the analysts cautioning against overly optimistic projections.
Within specific sub-sectors, UBS foresees significant divergences; expecting just around 1% EBITDA growth in Specialties and comparatively healthier figures of about 7% in Diversifieds for the year ahead—numbers that stand below general consensus estimates.
When it comes to preferred areas within the industry spectrum, Consumer Chemicals and Industrial Gases emerge as top choices for investment opportunities according to UBS recommendations. Companies like DSM Firmenich AG (AS: DSFIR), Air Liquide SA (EPA: AIRP), and Arkema (EPA: AKE) receive Buy ratings based on their perceived strengths within their respective niches.
On a contrasting note, Akzo Nobel NV (AS: AKZO) finds itself downgraded to Neutral status by UBS due to what is described as already factored-in cost-saving measures leaving little room for significant future upside beyond moderate single-digit EBITDA growth projections extending into subsequent years.
Notably less-favored names such as K+S AG (ETR: SDFGn), Umicore (EBR: UMI), and Victrex (LON: VCTX) also face headwinds attributed to structural or end-market challenges outlined by UBS’s analysis.
Looking beyond Europe’s borders, macroeconomic influences from slowing economies such as those of the US and China add another layer of complexity to the global chemical landscape. Forecasts projecting global GDP growth trailing behind previous figures mainly due to tariffs’ impact further contribute to an air of caution among investors eyeing this sector closely.
In conclusion, while certain pockets within the European chemicals domain show promise amidst challenging times highlighted by infrastructure constraints and economic slowdowns globally; exercising prudence appears essential when navigating through investment choices within this intricate web of factors shaping its future trajectory.
