Value optimization and production relocations have received in importance, industry backs green transformation
After a sobering year in 2024 (last year), the main European chemical corporations are no longer forecasting any significant recovery for 2025. A cautiously positive development is most effective predicted in the second half of the year – provided that a worldwide trade warfare or a lack of economic recovery do now not thwart the forecast.
“The chemical industry is closely depending on customers sentiment, as almost all customers goods contain chemicals, as a minimum in a roundabout way. And consumers sentiment is strongly stimulated through psychology. The threat of trade wars and news of job cuts are reducing consumers sentiment in Germany and Europe,” stated Peter Hartl, author of the study and Partner at the management consultancy Horváth.
“Moreover, there are the foremost structural problems in Europe: the excessive energy and personnel costs, the growing older society – consumption is particularly pushed with the aid of younger target groups – and the excesses of law, which, as of today, have still no longer been radically cut back.”
Relocation of production sites in full swing
Due to those structural issues in Europe, the chemical industry is working vitreously on structural adjustments to production networks and supply chains. “Supply or production footprint optimization” is the management subject that has gained the maximum importance as compared to the preceding year and has moved up six places to fourth place in the ranking. “This is mainly about relocating production. Capacities are being adjusted in Europe and newly installed in growth regions. But relocating purposeful regions and can also make sense,” says Hartl.
The majority of board members and executives of main European chemical corporations surveyed by management consultancy Horváth are constructive that they will attain an boom in profits of as a minimum 5 % in 2026. “Positive outcomes are: Purchase prices have normalized, and energy prices have stabilized and become more expected as a result. At the same time the huge efforts in cost optimization are paying off,” stated Hartl.
With regard to the German market, the expert also anticipated that both the investment bundle surpassed by the German authorities and customer desire for products produces in Europe may have a positive effect on the business growth of corporations within the chemical industry based right here. “The defense industry is likewise not directly depending on chemical products,” stated the Horváth Partner.
According to the interviewed managers, the increase forecast for 2026 onwards will mainly have an effect on net profit (bottom line) and be attained by increasing volumes as opposed to price increases. The corporations anticipate manufacturing costs to remain high due to high material and energy prices. In order to remain across the world competitive, they cannot rise sales expenses and are running at the edge of profitability, hence the sturdy focus on cost optimization. Compared to the preceding year, the topic of “enhancing value and revenue systems” has risen two locations in the ranking of the most critical management priorities and is in first place for 2025.
“There is no option to value optimization, that’s essential as a foundation for growing economic flexibility, building resilience and making ready for the future, and it’s far already being implemented in organizations as part of programs. The most essential future and growth subjects for the decisions-makers surveyed are Digitalization & AI in addition to Green Transformation,” says Horváth Partner Hartl.
Green Transformation nevertheless stays one of the most essential management priorities
Even though it has slipped from 2nd to 3th place, 3 quarters of the board members and executives surveyed consider that their business development will be strongly inspired via decarbonization, the circular economy and climate neutrality. “Future commercial enterprise models may 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 isn’t always an idealistic idea or a heartfelt desire, however easy business math,” says Horváth Partner Peter Hartl. European chemical corporations are aiming to gain an extended-term global competitive edge. However, because of the tough challenging conditions and political uncertainties, major investments are presently nonetheless being postponed. “And the excessive regulation in sustainability is having a counterproductive impact,” says Hartl.
AI finds its way into center business areas
The strategic significance of “Digitalization & AI”, and in the particular use increased AI technology, has accelerated in evaluation to 2024. As a top control precedence, Digital Transformation ranks second in this year’s rating – four locations higher than previously. “Technology isn’t most effective permeating inner procedures however also core features and regions, inclusive of manufacturing making plans and sales, specifically in pricing,” says Horváth professional Peter Hartl.
AI will also play an increasingly more crucial position in decision-making for maintenance. “With the assist of AI, upkeep cycles may be optimized through higher forecasting, and spare parts can be reordered automatically with pinpoint accuracy,” says Peter Hartl. “Next to Green Transformation, Digitalization is the key control topic for the future and growth, and the industry will make further fundamental progress right here in the coming months.”
