European Chemicals Sector blues set to return. Place BASF (UW) on -ve CW; d/g Evonik, Arkema and IMCD to UW; u/g Clariant to OW

Research evidence excerpt

European Chemicals Sector blues set to return. Place BASF (UW) on -ve CW; d/g Evonik, Arkema and IMCD to UW; u/g Clariant to OW

e see potential incremental growth tailwinds over time from the

evolving geopolitical backdrop, on top of a best-in-class structural organic growth,

margin and underlying ROIC profile – yet the shares have significantly

underperformed and de-rated over the past year despite consistent strong organic

earnings delivery. We upgrade Clariant to OW from N — while it has screened

as a relative loser from the ME conflict, we see the current discounted valuation as

an attractive entry point into a higher-quality specialty chemicals profile. Croda

(OW), Umicore (OW), Syensqo (OW) and Fuchs (OW) remain our other

preferred longs.

• Temporary tailwinds from the ME conflict may be fading: As seen in Figure

11DevelopmentofspotpricesforselectedchemicalsinChinafromend-Feb2026(beforethestartoftheMidleEastconflict)untilnow, prices and spreads for several chemicals have fallen substantially from

late‑Mar/early‑Apr peaks, as panic buying eases, some demand is destroyed,

and supply shortages prove less severe than initially feared. With some

disrupted APAC supply ramping back up as feedstock constraints ease, we

expect Europe to see weaker pricing/margins from June versus current levels

that, in some cases, have risen sharply since the conflict began. We note that

European chemical industry utilization only saw a modest uptick in Apr 2026

vs. Jan 2026, and remained somewhat below Apr 2025 levels, and well below

the historical median (Figure 17Europeanchemicalsindustryutilisation).

• A prolonged Strait of Hormuz (SoH) disruption could be a net negative for

European chemicals. While the market has viewed SoH-related oil/naphtha