The EU27 chemical industry: Fragile improvement amid structural competitiveness challenges
During the first half of 2026, the EU27 chemical industry performed better than expected, likely linked to supply chain disruptions due to the situation in the Strait of Hormuz and the wider Middle East. However, the improvement remained fragile, uneven and well below historical norms, as the industry’s long-term structural challenges remained unchanged.
Market conditions improved modestly as producer prices and chemical sales increased. This was largely driven by higher prices rather than stronger production volumes, highlighting the continued weakness of underlying demand. Business confidence improved by 4.1 points compared to the same period in 2025, driven by an increase in recent production of 8.0 points. Yet both confidence and production remained in negative territory. While inventories normalised, demand remained weak, capacity utilisation continued to lag behind manufacturing, and employment expectations deteriorated.
Structural competitiveness challenges persisted. European chemical producers continued to face a substantial energy cost disadvantage relative to the United States, with the EU27-US gas price gap widening further in 2026. At 75%, capacity utilisation remained substantially below long-term averages, reflecting ongoing spare capacity and subdued operating conditions, particularly in Belgium, Germany and Italy.
Production performance remained mixed across the EU27 area. While France and Spain returned to growth, and Poland remained relatively stable, output continued to decline in several major producing countries, notably the Netherlands, Germany and Italy. Sectorally, ‘other organic basic chemicals’ and polymers remained the weakest-performing segments, weighed down by global structural oversupply and weak demand, while parts of the specialty and consumer chemicals segments proved more resilient.
Trade developments continued to be concerning. EU27 chemical exports and imports both declined in value and volume during the first half of 2026, with imports down by €5.6 bn (-5.9%) and exports by €7.2 bn (-6.3%). The export values downturn was concentrated in ‘other organic basic chemicals’ (-23%) and driven largely by weaker sales to the United States (-29%). Although the EU27 maintained a substantial chemical trade surplus in value terms (€18.4 bn in H1 2026), it narrowed as exports fell faster than imports. In volume terms, the trade deficit improved by 3.7 mn tonnes as imports declined significantly faster than exports (-12% vs -6%), primarily due to reduced imports of basic chemicals.
While market conditions improved from recent lows, the EU27 chemical industry continues to face significant structural headwinds. Weak demand, persistent energy disadvantages, low capacity utilisation and competitive pressures continue to prevent a strong and sustainable rebound.