January 14, 2026 What are the big themes as the industry looks to 2026? China trends key to sector outlook Chemical Week editor-in-chief Ian Young, senior editor Vincent Valk and S&P Global Energy chemicals price reporter Luke Warren join podcast host Jameson Croteau to discuss the 2026 outlook. Major themes include oversupply in the face of weak demand, opportunities related to AI, turbulent geopolitics, what's next for China's chemicals sector, and sluggish-but-resilient economic growth. The Chemical Week Podcast is the industry's premier platform for wide-ranging discussion of issues impacting the global chemicals sector, hosted by the editors of Chemical Week and S&P Global Energy. Subscribe to the Chemical Week podcast on your favorite platform, or visit chemweek.com/podcast to view our episode archive. Vincent Valk: Demand looks like it's going to remain soft. If you look at forecasts from the American Chemistry Council for example, there's not a lot of growth, but the bottom's also not falling out. It's just kind of plodding along but with this sort of capacity overhang still really a big problem for the sector, especially in bulk petrochemicals. Overlaying on top of that, if you look at trends in terms of line go up, line go down, maybe not much, but oversupply, AI, and geopolitics I think are really the big themes for the year. Jameson Croteau: Hello and welcome to the first Chemical Week podcast of 2026. I'm your host, Jameson Croteau. Today we've got a wonderful panel together to explore the Chemicals Outlook for 2026. I'm joined by some of S&P Global Energy's finest, Luke Warren, price reporter chemicals and Chemical Week's Editor-in-Chief Ian Young and Senior Editor Vincent Valk. How's everyone doing today? Vincent Valk: Hey, Jameson. Luke Warren: Ian Young: Jameson Croteau: Obviously 2025 was a year certainly of challenges for the industry. Tariff uncertainty clouded the sector cracker rationalization swept across Europe and supply and demand dynamics remained out of balance. 2026 looks to be another potential volatile year as policy and geopolitical tensions continue to mount. And while global chemical output is expected to increase in 2026, projections have growth tepid at best. So let's dive right in and I'll start this one thrown to you, Ian, but across the chemical sector, what major trends do you see dominating 2026, and how do these trends differ by region? Ian Young: Well, thanks, Jameson. I note you mentioned geopolitical tensions just now, and I think geopolitics will be one of the main factors shaping the chemical industry in 2026. I mean, the industry was buffeted by geopolitics throughout 2025. The Ukraine conflict continued and there was the Israel-Iran brief, but very intense conflict back in the summer. The war in Gaza and of all of this was really overlaid by tariffs, which just created an extra layer of complexity on the geopolitical front. Things seem to be calmer towards the end of last year. I mean, the ceasefires in the Middle East were holding, believe it or not, there are peace talks going on about Ukraine and Russia, and even the tariff rhetoric seems to have peaked. But then look what happened on January the 3rd, the US intervened in Venezuela and removed its president, and this has just gone and caused even more uncertainty for the chemical industry to deal with because the Venezuela situation definitely impacts the energy and feedstocks from. So geopolitics haven't gone away. They will be a trend in 2026. And my overall prognosis is really that the bulk chemicals industry will continue to struggle and the specialty chemicals industry will perform much better in niche markets such as electronic chemicals. But the overall picture, yes, is pretty cloudy. Jameson Croteau: Yeah, we can't have a quiet new year around here anymore, huh? And I guess I'll throw that same question to you, Vincent. What major trends are you seeing? Vincent Valk: Yeah, I'll keep this brief oversupply, AI geopolitics. Ian already covered the geopolitics pretty well and AI, I think we'll be talking a little bit about that later. So I'll punt on that one for now. Look a little bit about the supply and demand picture. I mean, demand looks like it's going to remain soft. If you look at forecasts from the American Chemistry Council for example, there's not a lot of growth, but the bottom's also not falling out, it's just kind of plodding along. But with this sort of capacity overhang still really a big problem for the sector, especially in bulk petrochemicals overlaying. On top of that, if you kind of look at trends in terms of line go up, line go down, maybe not much, but oversupply, AI and geopolitics I think are really the big themes for the year. Jameson Croteau: Yeah, great. We will touch on AI a little bit later. And Ian, I'll throw this first major question to you. With the chemical sector growth expected to decelerate in 2026, how do you feel and how do you see industry leaders best adapting to this market cycle? What are the primary factors contributing to the slowdown? Ian Young: Thanks. Thanks, Jameson. Two big questions really there. Petrochemical companies, petrochemical executives need to focus on doing the fundamentals well. They need to make sure that their bottom lines are as secure as possible, keep their costs under control. That's a crucial factor. If possible, don't reduce their R&D and innovation spending because really that's where the growth is eventually going to come from. And they should focus on their core businesses, particularly the ones that are generating the most growth, probably not commit to any large risky M&A deals, but then again, look at bolt-on acquisitions that don't cost so much money and might improve their geographical footprint. And sorry to say, probably more capacity rationalization, particularly when it comes to petrochemicals, but I think we're going to talk about that a bit later in the conversation. Primary factors, we demand, I mean that really is a big, big challenge for the global industry and a lot of that weak demand is caused by the geopolitical uncertainty that we've just discussed. Oversupply, that's another big factor, and I think we're going to talk about that later as well. So I'll just list that for now. And again, high costs particularly in Europe. Jameson Croteau: Thanks, Ian. Vincent, is there anything you want to add to that? Vincent Valk: Yeah, I mean, I think the other thing is on the supply side, obviously a lot of this oversupply coming out of China, and that's all tied back to a Chinese industrial policy and B, Chinese growth over the past several years, not really being what the Chinese government maybe thought it would've been back in the late 2010s when a lot of these projects were underway. So it really is tying down to this kind of tapering down of global growth and at the same time, industrial policy, which, and I didn't mention that in my answer to question one, but probably another big theme worth keeping an eye on for the year. Jameson Croteau: Yeah, thanks, Vincent. I think that's a good segue to jump into Europe a little bit. Ian, I'll throw this one back to you, but as EU regulations like CBAM and the Circular Economy Act are looking to take effect in 2026, how can Europe balance this increasing regulatory pressure with the need to stay competitive? And what does it take for Europe, as you mentioned, to recover from its petrochemical cracker rationalizations? Ian Young: Thanks, Jameson. Well, it's a big challenge and it's an even bigger solution if a solution could be found. There are a number of reasons for Europe's lack of competitiveness, particularly in bulk chemicals and specifically in petrochemicals. And one of the reasons frequently cited for that is the regulatory burden in Europe. There's a tsunami of regulations impacting the chemical industry coming in 2026 in the EU and for the industry, there are huge costs, millions, if not billions, of euros associated with complying with all this legislation. Not to mention all the bureaucracy that companies have to deal with to become aligned with this legislation. Now, again, the industry can try to trim its cost as much as possible as previously discussed, but really it needs a lot of action from policymakers in Brussels. The industry really needs to leave them in no doubt that this is not okay, that this is really a drag on the industry's competitiveness. The policymakers in Brussels really need to understand, and I think they are beginning to that their environmental and sustainability agenda, including carbon taxes, is actually leading to deindustrialization in Europe. Ineos owner, Jim Ratcliffe, has been very vocal about this and other industry executives are becoming more vocal about this. There are signs that politicians are listening. I mean, we had the EU action plan for the chemical industry in mid-2025 includes various simplification actions in terms of legislation. In December, the European Commission announced measures to boost circularity and also provide clarity around laws governing chemical recycling. I mean, the recycling industry in Europe really hasn't got off the ground, and this is largely due to regulatory uncertainty. And the commission did in December announced a number of measures to try to provide some clarity on chemical recycling to get that industry off the ground because it's going to be a huge factor in the European industry achieving greater circularity. But the industry is impatient. It wants action now. The crisis is now. So I think there's still a lot of lobbying going on behind the scenes in Europe to try to persuade European Commission that further action is needed to reduce the environmental and regulatory burden. In terms of Europe's Pecém rationalization, which has been going on now for well almost two years, I'm afraid that more rationalization is needed to balance capacity and demand. Our analysts here at S&P Global Energy CERA, they say that a number of additional crackers need to close in Europe, but also demand needs to recover, and that is linked to economic growth, and there doesn't seem to be much of an improvement in economic growth coming in Europe for a while. And our analysts seem to say that no fundamental improvement is coming particularly in petrochemicals until 2028, and that seems a long way away right now, Jameson. Jameson Croteau: Yeah, thanks for that insight, Ian. That is quite a while away. I guess I'll throw this one over to Luke. We've seen persistent oversupply from China and soft demand continue to challenge these markets. How are companies addressing these supply and demand imbalances and what impact might China's anti-involution policies have on global trade flows and market dynamic? Luke Warren: Sure, Jameson. Yeah, as everybody is rightly pointed out already, I think oversupply and overcapacity are going to continue to define the petrochemical industry into 2026 with the epicenter of that clearly in Asia, more specifically China of course, where ongoing capacity additions are colliding with sluggish global demand growth. I think to use a bit of a case of the European phenol and acetone markets are useful to understand how this imbalance has played out in practice even with operating rates in Europe sitting at around 60 to 70% throughout much of 2025, both markets have remained structurally long, and that length has been reinforced by continued downstream capacity rationalization. Most recently through the closure of Westlake's BPA and epoxy resin sites in the Netherlands as well as Trinseo's MMA production facility in Italy, I think in response producers have shifted into perhaps a bit of a defensive mode, if we can call it such cutting operation rates where possible extending maintenances delaying startups. For example, a new IPA production unit in Spain has been delayed to Q1 and increasingly relying on exports to manage the excess material in the European market. For example, over the summer we saw Europe pushing quite a lot of acetone into the US when an arbitrage window opened quite briefly. And of course, China adds a whole other layer of complexity with its anti-involution policy push, while in theory it could imply slower operating rates or delays to new projects. The reality is that most large phenol units are already built or being built, and these are highly, and that means excess Chinese production is more likely to be absorbed via indirect exports, so through downstream products or downstream of phenol and acetone like polycarbonate or epoxy resins rather than through outright acetone exports for example. I think that shift in trade flows is already visible and is reshaping trade dynamics globally without necessarily easing upstream oversupply. And I know uncertainty is a term that we throw along quite a lot in the chemicals markets, but very recently I think we've been reminded of how fragile this balance the supply demand balance could be. The recent insolvency filings by DOMO Chemicals at its German subsidiaries I think have injected fresh uncertainty into a market that had been positioned for length early this year. That means that we're seeing feedstock constraints among producers in January just as operating rates at Domo and Europe more broadly are at minimum rates as well as ongoing maintenances in the region, which have tightened up phenol and spot availability very early on in the year. And I think this underscores how quickly sentiment and fundamentals can turn even in an oversupplied environment. Jameson Croteau: Yeah. Luke, you talked about how quickly things can change, and I think one bright spot for 2025 was the quick burst of AI semiconductor chips and data center pushing dynamic growth. This one, I'll throw you over to you, Vincent, but with the AI data center boom driving growth in chemical end markets such as specialties and construction, how significant is this opportunity going to be for chemical companies and how long do you think this wave will last? Vincent Valk: Yeah, I mean it's definitely an opportunity for the industry. If you look at ACC's forecast for chemicals and use markets, the semiconductors and electronic sectors forecast to post the strongest growth in 2026 at 6%, and that's after 12% growth in 2025. A lot of companies, particularly in specialty chemicals, had said that this is a growth driver. I wrote a feature on this subject, especially the data center opportunity over the summer and Dow, Ecolab, DuPont. Now Qnity and RPM are among the names that see this as a real opportunity for growth. At the same time, I want to emphasize, let's not overstate this. When I spoke to RPM for that story, they said that the construction market, and they're a big producer of construction chemicals, is overall flat. And data centers are the big exception, and you can really see this in some of ACC's projections. Business investment looks pretty strong in 25 and 26. ACC projects 2.6% growth in 26. That's for US business investment. But here, I'll just quote ACC's year-end outlook, "Business investment has been a tale of two segments, AI and not AI. The surge in construction of data centers has triggered demand for semiconductors, computers, certain electrical equipment and advanced cooling materials, all of which require chemistry. And it's absolutely true that all of these things require chemistry and it's absolutely true that if you are active in semiconductor materials, if you are like Ecolab and you make materials that can go into cooling data centers, if you are making construction materials that might go into a building envelope or specialized kinds of flooring, that can really be a boost for you. But it's also true that all of the other things outside of this market are not doing so well." "ACC expects us housing starts to be flat. S&P Global expects light vehicle sales in the US to decline this year. Industrial production looks soft all over and is expected to decelerate. ACC is looking at less than 1% growth, and S&P Global actually expects a slight decline for industrial production. And consumer spending is also soft and there's some real downside risk there if you get say an equity market correction or if a labor markets weaken further." So it's a good story for the industry and it's worth watching, but net-net, it's really offset by everything else. How long will it last? I don't know. We've been building data centers pretty rapidly, but compute needs keep going up. Also, something worth mentioning here, NVIDIA, the big AI chip maker, said a few days ago that their next generation chips require less cooling, and that's a big consumer of chemistry and data centers. It's not clear to me how significant this particular innovation is, but it's a reminder that chemicals and materials are a cost for the companies that are making chips and building data centers. So it kind of stands to reason that they will try to reduce that cost to the extent that they can. Jameson Croteau: It's definitely something to watch and obviously it can't buoy all the negative swirling uncertainty around the industry. As we head into 2026, we will shift gears a little bit here. Talk about M&A 2023 and 2020 pretty slow years for M&A with 2025 having a big boost towards the end of the year. At the end of 2025, there is this trend towards carve-outs and divestiture shares, and that looks to continue into 2026 with major players retaining equity stakes and partnering with non-traditional buyers. How are these creative deals structures changing the landscape of chemicals M&A, and what risks and advantages do you see for buyers and sellers in this market? Vincent Valk: You talked a little bit in the question about sellers retaining equity stakes, and that's not new exactly, but we have seen a lot of it this year and I think it's an indication that sellers still see some upside and there's pressure on corporate portfolios, but we are not really in a particularly robust market for either the industry's products or for M&A. So they see this as a way to kind of shed some assets, relieve that pressure, while also being able to realize some upside if and when the market improves. And generally, the bankers I talk to say carve-outs and divestitures are likely to continue to be a big theme in 26, and whether that's some of these European crackers or some of this portfolio optimization that we see at various companies at BASF, probably a prime example with a recent sale of the coatings business. And the other thing I'll flag here is infrastructure investment funds. We had two deals announced in December where infrastructure funds acquired operating chemical assets. BP sold their Castrol lubricants business to Stonepeak, and earlier in the month, Hexion sold its Gulf Coast formalin business to Ancala. One does wonder if we're going to see more of this. I spoke with the CEO of Hexion after that deal was announced, and he said the idea of scaling up continuous improvement initiatives can make chemicals, assets, or at least some of them appealing to infrastructure investors because it's a way to kind of generate steady returns and these initiatives can really mount very quickly when you're moving large volumes of product. Also worth noting that infrastructure funds do tend to hold assets longer than say private equity. So it's a different class of buyers, and I'll be curious to watch over 206 and beyond where this particular trend goes. Jameson Croteau: That's a lot to delve into there and a lot to explore for the M&A outlook. I guess this will be the final one, and I'll throw it to Vincent and if anyone has a few extra words they can add, but as 2026 emerges from the uncertainty of 2025 into a market that's sort of bouncing along the bottom, what do you see as the key upside and downside risks for this economy? Vincent Valk: Yeah, so I asked this very question to Ken Wattret, who is the vice president of Global Economics at S&P Global, and looking at the macroeconomy, the broader economic picture. He mentioned a deteriorating labor market, particularly in the US and a correction in asset prices as sort of big downside risks. The labor market in the US isn't falling off a cliff, but it hasn't been great. Low hire, low fire is the phrase I've heard used a lot to describe it, and if that gets worse, there's real downside risk for consumer spending. And the other side of this is equities where the market has been propped up by a small number of tech stocks just as a data point are CW75 index of chemical stocks that we compile here at Chemical Week was down in 2025 while the S&P 500 index was up, which is pretty unusual historically. Also worth mentioning here that ACC has noted that while consumer spending in the US has been okay, it's really driven by high income households a consequence of the strong stock market. So you could really see an impact on the economy if equities go south. As for upside, Wattret said that AI investment has been bigger than expected pretty consistently. We've already talked about that, and it certainly could happen again. Another factor is trade. The trade related uncertainty has definitely receded. As we spoke about earlier, the geopolitical uncertainty perhaps hasn't receded. As for trade specifically, I mean that uncertainty could decline and that could be a boost though of course it could also go in the other direction. And geopolitics is still generally a big cause of uncertainty. S&P Global has been tracking a trade policy uncertainty index, and it has gone down by quite a lot since mid-year, although it is elevated by historical standards and the economy has been fairly resilient to tariffs. Looking at the forecasts, S&P Global Market Intelligence expects us GDP to rise by 2.2% this year with a 2.7% increase globally, and inflation is expected to be close to 3%, which is above the Fed's 2% target. So that's another area where things could potentially get dicey, especially as we start to see some more interest rate cuts. But the manufacturing economy, which is really the most relevant bit for chemicals, still seems to be in the doldrums. I already talked about industrial production housing starts, and the projections are weak from both ACC and S&P Global on both. As for chemicals, we've got this persistent oversupply situation that we've talked about, and really the bottom line is that demand has to go up or supply has to go down. Ian Young: Vincent's talking about the economic situation, maybe I could say a few words just on China, a glimmer of hope. Perhaps the Chinese economy did perform better than expected in 2025. It took a hit in the early part of the year because of US tariffs. But China did a really good job of diverting its exports elsewhere, and actually Chinese exports rose in 2025, and that helped the Chinese economy to hit the government's target of 5% GDP growth, which is much less than the Chinese economy grew at five or 10 years ago, but it's still much better than the rest of the world. So China seems to be a bit more stable economically. The real estate bubble that afflicted it recently has stabilized. Maybe the tariff situation is stabilizing, so better outlook for China than maybe as recently as six months ago. But then again, how does this play out in the petrochemical industry? Well, I've got a few sobering statistics here to tell you. China will add 6.3 million metric tons a year of ethylene capacity in 2026, and it will add another 6.8 million metric tons a year of ethylene capacity in 2027. So this really does cast a long shadow over the Chinese chemical industry and the global petrochemical industry. So a lot of challenges for the wider petrochemical sector and chemical sector to deal with in 2026. Jameson Croteau: