European Chemicals: Structural headwinds back in focus after temporary tailwinds fade

Research evidence excerpt

European Chemicals: Structural headwinds back in focus after temporary tailwinds fade

d, based on the commentary from both European

but also global chemical companies over the past few months, the ME conflict has driven

notable pre-buying in March/April, particularly for commodity chemicals. Looking at

the latest trends across the key end markets, our conclusion is that underlying demand has

remained relatively weak in most of them in March-May. For example, the latest retail

sales data from China (Figure 14Chinaretailsales%YoY,3monthmovingaverage-keyindustrialcategories-Figure 15Chinaretailsales%YoY,3monthmovingaverage-keyconsumercategories) suggests a sequential deceleration in May

vs April, with total retail sales down 0.6% YoY in May – the first decline since Dec 2022;

furniture, building and deco, automotive and household appliances sales were

particularly weak, while cosmetics and home/personal care were more resilient but also

showing a slowdown in growth. We note that housing indicators have been mixed by

region, and although trends in China for both primary and secondary home registrations

have remained weak (Figure 31China:60-cityweklyprimarysalesregistrations-Figure 32China:12-citydailysecondary(existing)homeregistrations(sales)), existing home sales in the US rose 3% YoY

in May, which marks an improvement vs zero growth in the prior three months (Figure

22USexistinghomesalesSAR,units(m)). Nevertheless, overall, the end market environment remains weak – hence, given the

pre-buying at the start of 2Q, coupled with a seasonal demand slowdown in summer for

some chemicals, we would expect chemical sales volumes to come under pressure in

3Q26. For more details see the End Market Data section of this report.

• China anti-involution update: Limited progress so far.