The global chemical industry is experiencing significant challenges, with the US sector expected to see only modest growth in the coming years. The American Chemistry Council (ACC) recently reported that the US chemical output will grow by just 0.3% in 2026, following a 0.7% increase in 2025. This slow recovery comes as other regions, particularly Europe and Japan, face numerous plant closures due to an oversupply of capacity.
While US chemical manufacturers benefit from relatively low energy costs, they are not immune to broader economic currents that are affecting their profitability. The ACC’s outlook highlights several factors impacting the industry, including rising tariffs, increasing unemployment, and a sluggish industrial sector. “High interest rates, higher prices for imported equipment and materials, and a highly uncertain economic landscape have curtailed or delayed investments,” the report notes.
Investment Trends and Market Dynamics
Despite the overall slow growth, there are pockets of investment within the sector. The demand for data centers to support artificial intelligence (AI) has created a dichotomy in business investment. The ACC indicates that while AI-related investment is thriving, non-AI sectors are lagging behind. Stocks in companies associated with AI technologies have seen substantial gains, leading to increased consumer spending among higher-income groups.
The automotive industry also reflects these mixed signals. According to Cox Automotive, 2025 marked the strongest year for the US auto sector since 2019 with 16.3 million new vehicle sales. However, projections indicate a decline to 15.8 million sales in 2026 due to slower economic growth and changes in tax incentives for electric vehicles.
On a more positive note, the housing market may provide a boost to the chemical industry. Neil Ghosh, global head of chemicals at Truist Securities, anticipates that a rebound in housing would significantly benefit chemical makers, particularly in construction-related chemicals such as adhesives and sealants. Ghosh stated, “If the housing market comes back, that is going to be a direct impact on many niche chemicals.”
Future Outlook and Production Costs
Looking ahead, the ACC predicts that a more substantial recovery for the chemical industry will not occur until 2027, when growth is expected to reach 2.3%. Martha Gilchrist Moore, the ACC’s chief economist, emphasized that while the recovery may be slow, the production cost advantages for US petrochemical manufacturers will likely persist. “Our competitiveness remains very, very positive for US chemical manufacturing,” she remarked, attributing this to ongoing gains in ethane production driven by natural gas resources.
Despite these advantages, the pace of new large-scale projects in the US has significantly slowed since the late 2010s. While the $8.5 billion Golden Triangle Polymers project in Texas, a collaboration between Chevron Phillips Chemical and QatarEnergy, is set for completion this year, few major projects are on the horizon. Shruthi Vangipuram, a principal analyst at Wood Mackenzie, noted that significant project delays by companies like ExxonMobil and Dow indicate a thinning investment pipeline.
The challenges faced by the US chemical industry highlight the complex interplay of economic factors impacting growth. While there are signs of potential recovery, the sector must navigate a landscape marked by uncertainty and fluctuating demand. With the economy evolving, the chemical industry will need to adapt to maintain its competitive edge.