Horváth, an international, independent management consultancy, is reporting that after a sobering business year in 2024, the leading European chemical companies are still not forecasting any significant recovery for 2025. The consultancy reports that a cautiously positive development is only expected in the second half of the year — provided that a global trade war or a lack of economic recovery do not thwart the forecast. 

"The chemical industry is heavily dependent on consumer sentiment, as almost all consumer goods contain chemicals, at least indirectly. And consumer sentiment is strongly influenced by psychology. The threat of trade wars and news of job cuts are dampening consumer sentiment in Germany and Europe," said Peter Hartl, author of the study and partner at Horváth. "Furthermore, there are the major structural problems in Europe: the high energy and personnel costs, the ageing society — consumption is mainly driven by younger target groups — and the excesses of regulation, which, as of today, have still not been radically cut back."

Relocation of Production Sites in Full Swing 

Due to these structural problems in Europe, the chemical industry is working diligently on structural adjustments to production networks and supply chains. “Supply or production footprint optimization" is the management topic that has gained the most importance compared to the previous year and has moved up six places to fourth place in the ranking. "This is primarily about relocating production. Capacities are being adjusted in Europe and newly established in growth regions. But relocating functional areas can also make sense," explained Hartl.

The majority of board members and executives of leading European chemical companies surveyed by Horváth are optimistic that they will achieve an increase in profits of at least 5% in 2026. "Positive effects are: Purchase prices have normalized, and energy prices have stabilized and become more predictable as a result. At the same time the enormous efforts in cost optimization are paying off," said Hartl. With regard to the German market, the expert also expects that both the funding package passed by the German government and consumer preference for products manufactured in Europe will have a positive impact on the business development of companies in the chemical industry based here. "The defense industry is also indirectly dependent on chemical products," explained the Horváth partner.

According to the interviewed managers, the growth forecast for 2026 onwards will primarily affect net profit (bottom line) and be achieved through rising volumes rather than price increases. The companies expect production costs to remain high due to high material and energy prices. In order to remain internationally competitive, they cannot increase sales prices and are operating at the edge of profitability, hence the strong focus on cost optimization. Compared to the previous year, the topic of "improving cost and revenue structures" has risen two places in the ranking of the most important management priorities and is in first place for 2025. "There is no alternative to cost optimization, which is necessary as a basis for creating financial flexibility, building resilience and preparing for the future, and it is already being implemented in organizations as part of programs. The most important future and growth topics for the decision-makers surveyed are Digitalization & AI as well as Green Transformation," said Hartl.

Green Transformation Remains an Important Priority

Even though it has slipped from second to third place, three quarters of the board members and executives surveyed believe that their business development will be strongly influenced by decarbonization, the circular economy and climate neutrality. "Future business models will be fossil-free or at least carbon-neutral. The use of renewable energy will replace fossil fuels in the medium to long term. For the chemical industry, this is not an idealistic idea or a heartfelt wish, but simple business math," expained Hartl. European chemical companies are aiming to gain a long-term international competitive edge. However, due to the challenging framework conditions and political uncertainties, major investments are currently still being postponed. "And the excessive regulation in sustainability is having a counterproductive effect," said Hartl.

AI Enters Core Business Areas 

The strategic importance of digitalization and AI, and in particular the increased use of AI technology, has increased in comparison to 2024. As a top management priority, Digital Transformation ranks second in this year's ranking – four places higher than previous years. “Technology is not only permeating internal processes but also core functions and areas, such as production planning and sales, particularly in pricing," explained Hartl. AI will also play an increasingly important role in decision-making for maintenance. "With the help of AI, maintenance cycles can be optimized through better forecasting, and spare parts can be reordered automatically with pinpoint accuracy," said Hartl. "Next to green transformation, digitalization is the key management topic for the future and growth, and the industry will make further major progress here in the coming months."

About the Study

For the "Chemicals Executives Flash Report" study, board members and executives from 24 market-leading European chemical companies were asked about their business prospects and strategic priorities in in-depth personal interviews. The sample is representative for the sector.

Learn more about the study and Horváth at www.horvath-partners.com.