European Chemical Industry Recovery Will Delay Until 2027
The EU chemicals sector faces ongoing production declines through 2026 due to weak demand and high energy costs.
Updated on Sept. 23, 2026 in Chemistry
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Chemical production in the European Union dropped 1.6 percent during the first half of 2026, extending a downturn from 2025. Experts now project that any meaningful industry recovery will not occur until 2027.
Why it matters
Weak consumer demand, volatile crude prices, and elevated freight costs continue to squeeze the sector. These factors are compounded by excess global supply and persistent energy expenses that stifle manufacturing growth.
Capacity utilization hit 75 percent in the third quarter of 2026, remaining well below the long-term average of 81.3 percent. Meanwhile, gas prices averaged 45.1 euros per megawatt-hour, marking a 15.7 percent increase from the previous year.
The details
Basic organic chemicals production plummeted 9.2 percent, while polymers and crop protection products both saw 6.5 percent declines. Global chemical production growth has slowed to 1.5 percent, forcing European manufacturers to contend with significant headwinds in discretionary segments.
Timeline
EU27 chemical production declined 2.4 percent during 2025.
EU27 chemical production fell 1.6 percent in the first half of 2026.
Chemicals confidence indicators averaged -10.5 from January to July 2026.
Capacity utilization improved to 75 percent in Q3 2026.
A recovery for the European chemicals industry is projected for 2027.
The Big Picture
The current 75 percent capacity utilization rate marks a notable departure from the long-term industry average of 81.3 percent. This gap illustrates how persistent under-production is fundamentally shifting the sector away from its historical performance norms.
The persistent slump in organic chemical production and polymers will likely keep manufacturing costs higher for consumer goods reliant on these materials. This trend suggests that price volatility for downstream products may continue until the industry reaches a more stable supply-demand equilibrium.
The takeaway
Industrial buyers should prepare for continued supply constraints throughout the remainder of 2026 as the sector works through its current output deficit. Long-term planning should account for energy cost volatility as a primary factor in chemical manufacturing stability.
Further reading
Learn more about industrial benchmarks in the Chemistry section.
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