EU chemical industry shows 'fragile improvement' amid high costs

Brussels – The EU27 chemical industry showed signs of improvement during the first quarter of 2026, but the recovery remains "fragile" as weak demand, high energy costs and global trade risks continue to weigh on the sector.

In its latest chemical trends report, published 22 June, the European chemical industry council Cefic said the industry has moved "from deep contraction [in 2025] to fragile improvement", with business confidence, order books and exports recovering from the lows seen in 2025.

However, "demand remains weak" and the sector has "not yet entered a sustainable recovery phase," Cefic warned.

Business confidence improved to around -9% in April from -19% in October 2025, while order-book assessments recovered to around -26%.

Stocks of finished products also "fell sharply and are almost balanced by April", representing "one of the most significant improvements" compared with 2025.

"Compared with 2025, the first quarter of 2026 marks a transition from deep contraction to fragile improvement," the report stated.

"Confidence improves and inventories normalise. However, demand remains weak, employment expectations deteriorate further, showing that the sector has not yet entered a sustainable recovery phase."

Despite the improvement in sentiment, Cefic said the European chemical industry continues to face a "deep and structural competitiveness challenge," with performance remaining well below pre-crisis levels.

A key concern, according to Cefic, remains Europe's energy cost disadvantage, with natural gas prices averaging around €42/MWh during January-April 2026, compared with roughly €13/MWh in the US.

According to Cefic, European gas prices remain 3.3 times higher than US levels, widening the transatlantic competitiveness gap and weighing heavily on energy-intensive sectors including polymers, basic chemicals and other organic chemicals.

The association also reported that EU27 chemical capacity utilisation edged up to 74.3% in the second quarter but remained well below the long-term average of 81.3%.

Chemical production, meanwhile, fell 3.2% year-on-year in the first quarter.

The decline was particularly pronounced in "other organic basic chemicals" and polymers.

Across Europe, the recovery also remained "fragile and highly uneven", with France the only major producing country to record growth (+2.4%), while Germany (-4.3%), Italy (-7.7%) and the Netherlands (-9.4%) continued to post significant declines.

Trade also weakened during the first quarter, with exports down 12.4% year-on-year to €4.6 billion and imports down 15.7% to €4.8 billion.

While the EU chemical trade surplus increased slightly to €6.7 billion, Cefic said this reflected weaker imports rather than improved competitiveness.

"Overall, the improvement in the trade balance reflects import compression rather than a recovery in competitiveness, underlining a weak demand environment," the report concluded.

Without improvements in energy affordability, demand and global trade conditions, Cefic warned, "the risk of a continued erosion of Europe's chemical production base remains significant in the medium term."