Instead, the sector is confronting adverse structural changes that may lead to more capacity closures over the next few years, Scope says in its latest outlook on the European chemicals sector.

“European production remains burdened by structurally high energy costs compared with Asia and the US. China’s transition from a primary export market to a direct competitor also continues to alter the supply-demand balance for European producers,” says Mikel Zabala, associate director and leader author of the report.

“This shift is most acute in the commodity segment, where low-cost supply from China and Latin America is increasingly displacing domestic output,” Zabala says.

In parallel, prolonged demand weakness in sectors like construction, automotive and agriculture is weighing down on commodity and specialty firms. These pressures have dictated precariously low capacity utilisation which is likely to persist in 2026. Capacity utilisation rates for the chemicals sector have declined to around 75% over the past three years, well below the ~82% historical average

Leverage for the 14 companies covered by Scope will fall through the year but commodity chemicals firms face a tougher challenge. Many are still struggling with high leverage, while volatile feedstock costs make it hard to predict when margins and credit metrics will improve. A turnaround for these producers looks unlikely until utilisation rates improve through shuttering capacity.

In contrast, specialty and integrated players remain more resilient. Their robust risk profiles, global footprints, and pricing power protect them from the macro challenges impacting commodity peers. Benefiting from generally healthy balance sheets, these companies are well positioned to maintain credit strength through 2026 despite the broader structural challenges facing the European sector.

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