Three Transformations in the Global Chemical Trade Landscape in 2025

In 2024, the global chemical industry faced a complex and challenging environment. First, sluggish consumer markets increased pressure on the supply side, leading to declining profitability for many chemical companies. This has resulted in operational challenges, with some companies struggling to maintain their business viability. The threshold for ranking among the global top 50 chemical companies has lowered, accompanied by year-over-year decreases in sales and profits. Second, global chemical trade has been disrupted by geopolitical tensions, with the United States reshuffling the "cards" on the global trade table. Third, to counter rising energy prices, climbing raw material costs, and fierce industry competition, some chemical giants resorted to measures such as plant closures, production halts, and workforce reductions. Lastly, technological advancements in the sector continued to emerge, with green and efficient chemical technologies driving structural adjustments in the global chemical industry.

Amid these dynamic and volatile circumstances, how will the global chemical trade landscape evolve in 2025?

The production layouts of global chemical companies are undergoing significant changes. On one hand, factors such as high energy, raw material, and labor costs, aging asset bases, and a lack of regional growth are eroding Europe’s competitiveness. Companies like BASF have shut down multiple plants, and more closures may follow. As a result, Europe will increasingly rely on chemical imports from the U.S., the Middle East, and China, altering its import-export dynamics.

On the other hand, China, Japan, and South Korea are actively expanding into Southeast Asian markets, leveraging the region's lower production costs and higher consumption growth rates. Several leading Chinese chemical companies and industry players are already making significant inroads into Southeast Asia, as evidenced by projects such as:

- **China Chemical Engineering and Sinopec Sixth Construction** partnering with **Vietnam Phu My Plastic Company** on a 300,000-ton/year PDH/PP project in Ba Ria-Vung Tau province.

- **Sinopec** establishing fuel stations and lubricant production facilities in Singapore, undertaking large refinery and chemical projects in Malaysia and Thailand, and acquiring a 49% stake in a Thai fuel distribution subsidiary.

- **Sailun Tires** investing in Cambodia to build a factory with an annual capacity of 6 million semi-steel radial tires, aiming to scale up to 12 million units.

- **Xuyang Group** developing a coal coking project in Indonesia, which has already commenced operations.

- **New Fengming and Tongkun Group** initiating an $8.624 billion integrated refining and chemical project in Indonesia.

Additionally, emerging economies such as Morocco, India, and Vietnam are attracting cross-border investments in chemical manufacturing. These developments could transition such nations from being chemical importers to regional self-sufficient producers or even exporters, significantly impacting global chemical trade flows and volumes.

High interest rates and inflation have affected key industrial sectors in traditional chemical markets like Europe and the U.S., including automotive and construction industries. Although Fitch Ratings predicts a gradual recovery by 2025, overall demand growth is expected to remain slow, affecting the scale and pace of global chemical trade.

While Europe and North America remain important chemical consumers, their growth rates are declining, signaling potential long-term shifts toward market contraction or transfer. Meanwhile, emerging markets are witnessing rising chemical demand, driven by factors such as population growth, urbanization, and industrial upgrades. Strategic industries like new energy and advanced materials are fueling the need for high-end chemicals, which could become pivotal drivers of global trade growth.

- **Brazil**, the largest country in South America, experienced a 16% increase in home appliance sales in early 2024, prompting companies like Whirlpool to expand production. The country's automotive output reached 2.36 million units in the first 11 months of 2024, with annual growth projected at 18.2%. This has significantly boosted demand for chemicals like plastics, polyurethanes, and electronic chemicals.

- **India**, with chemical consumption growth of 9.8% from 2015 to 2020, is expected to see an even faster rate of 12.2% between 2020 and 2025. Sectors such as dyeing chemicals, basic plastics, and specialty chemicals show immense growth potential.

- **Russia** continues to exhibit robust demand for pharmaceutical chemicals, high-performance plastics, and specialty chemicals, despite geopolitical constraints.

Other countries, including **Indonesia, Vietnam**, and **Mexico**, also display significant growth in sectors such as manufacturing, electronics, and automotive, further stimulating chemical demand.

For decades, fossil fuels such as oil, coal, and natural gas have dominated global petrochemical trade. However, changing energy landscapes and technological advancements are driving a transformation in trade portfolios.

While oil remains a major traded commodity, its trade growth is expected to slow in 2025 due to weakened demand, despite production adjustments by OPEC+ and rising output from non-OPEC countries like the U.S. Meanwhile, global coal trade hit a record 1.55 billion tons in 2024, and liquefied natural gas (LNG) accounted for 58.6% of total natural gas trade.

Emerging industries such as electric vehicles (EVs) and renewable energy are reshaping trade dynamics:

- **Lithium battery materials** like lithium carbonate and lithium hydroxide are witnessing surging demand as key components in battery production. Trade volumes for cathode materials (e.g., LFP and NMC) and anode materials (e.g., graphite and silicon-based products) are also rising rapidly.

- **Solar photovoltaic (PV) materials**, including polysilicon and EVA encapsulants, are experiencing strong demand due to the expansion of the solar industry. The emerging **perovskite PV cells** are driving demand for related chemicals like halides and organic amines.

- **Hydrogen energy** development is fostering trade in green hydrogen catalysts, electrolyzers, and high-performance hydrogen storage materials.

Additionally, **biochemical products** are gaining traction. Bio-based plastics like PLA and PBAT are seeing increased trade due to their applications in packaging and healthcare. By 2025, global demand for bio-based chemicals and sustainable materials is expected to rise significantly, offering new growth opportunities for petrochemical companies.

Despite lingering challenges in the traditional petrochemical sector, rapid growth in select segments, the expansion of emerging markets, and evolving trade portfolios present new opportunities for global chemical enterprises in 2025.