Redefining the Chemicals Industry Performance in 2026

Hello, we are back with another industry update, and this time chemicals are under the microscope. In a year shaped by global volatility, the industry is navigating rising energy costs, trade uncertainty, and ongoing geopolitical disruption. From conflict in the Middle East to shifting supply chains, market conditions remain unpredictable and pressure across the industry continues to build.

Continue reading to see how these changes may impact your business.

Inflation and Interest Rates

Inflation and interest rates remain and consistent pressure point, and the chemicals industry is no exception. After strong growth in 2024 and 2025, the industry is losing momentum, with global output expected to slow to just 0.6 percent in 2026. North America is seeing an even sharper shift, moving from growth into a slight contraction.

Much of this comes back to energy costs. Rising oil and gas prices are pushing production expenses higher, while softer demand makes it more difficult to pass those costs through. Combined with high interest rates and slower industrial activity, the industry is increasingly balancing rising costs with more cautious demand.

Trends Shaping Chemicals

The chemicals industry is under pressure from all sides, with disruptions in the Strait of Hormuz creating the most immediate impact.

The conflict has driven oil and gas costs higher, and for an industry that depends on these inputs for both energy sources and core feedstock. The impact is immediate and difficult to absorb, moving quickly through production with little room to offset the effect.

At the same time, overall growth is slowing as global competition continues to intensify. Trade disruptions and the redirection of Chinese exports are adding pressure, creating a more crowded and price sensitive market. While several reactions are happening at once and are difficult to manage, there are still clear pockets of opportunity.

Demand for advanced materials, electric vehicle components, sustainable solutions, and select agricultural inputs such as fertilizers continues to support innovation and targeted growth, helping the industry remain resilient.

Advancing the Industry

Even as broader market conditions remain volatile, parts of the chemicals industry are still finding ways to generate momentum. Demand tied to electric vehicles, advanced materials, and sustainable solutions continues to create growth opportunities across the sector. Chemical companies play a major role in EV production, supplying battery materials, specialty polymers, thermal compounds, and lightweight materials that help improve vehicle performance and efficiency.

Sustainability initiatives are also reshaping investment priorities. As companies target emissions and efficiency, demand is rising for cleaner production technologies, recyclable materials, and lower impact chemical solutions. The global push toward electrification and energy storage is increasing demand for lithium, nickel, graphite, and other battery related chemical inputs.

While traditional segments slow, innovation driven areas support resilience and position companies for long term growth despite market pressure.

Fertilizers and Agrochemicals Under Pressure in 2026

One of the clearest pressure points in the chemicals industry this year is the fertilizer and agrochemicals segment. Atradius projects a 2.4 percent decline in agrochemicals output in 2026, making it one of the industry’s weakest subsectors.

This weakness is closely tied to the sector’s heavy dependence on energy. Fertilizer production, especially nitrogen based products, relies heavily on natural gas as both a fuel and a key feedstock. As energy prices rise due to geopolitical disruptions, production costs increase quickly and significantly. At the same time, demand is becoming more constrained. Farmers and agricultural producers are highly cost sensitive. When fertilizer prices increase, buyers often respond by reducing application rates, delaying purchases, or switching to lower cost alternatives. This creates a squeeze on producers, where input cost rise while demand softens.

What Businesses Should Watch Closely For

As businesses navigate the remainder of 2026, the companies likely to perform best will be the ones staying flexible. Companies should closely monitor their exposure to energy costs, supply chain disruptions, and raw material pricing. For manufacturers, now may be the time to revisit sourcing strategies and diversify suppliers, especially for energy intensive and globally exposed materials.

Another area to watch is innovation investment. In slower growth environments, companies prioritizing efficiency, automation, advanced materials, and digital capabilities are better positioned to protect margins.

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