BASF SE (BASFn.DE): All eyes on 2027 – risks skewed to the upside

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BASF SE (BASFn.DE): All eyes on 2027 – risks skewed to the upside

BASF SE (BASFn.DE)

17 July 2026 Citi Research

BASF's shares have fallen back to their February levels, suggesting investors are

largely looking through the earnings tailwind from the Middle East-related market

distortions. This was also evidenced by the negative reaction to this week's pre-

release, which featured higher-than-expected 2Q EBITDA but an unchanged full-

year free cash flow guidance.

To some extent, this is understandable, as a large part of the Q2 beat is likely

temporary. Petrochemical spreads have normalised more quickly than might have

been expected given the roughly 90 force majeures declared across global

commodity chemicals. China appears to have filled the supply gap, likely from

inventories. While our Asian team's product basket remains up year-on-year, it has

given back most of the gains seen in March and April.

As a result, sentiment towards the shares had turned increasingly bearish,

particularly among London-based hedge funds. While recent developments around

the Strait of Hormuz and the resulting increase in oil prices have supported

beneficiaries of ongoing supply disruptions such as BASF, we believe the market's

focus has largely shifted to 2027 already.

Below, we discuss why we believe risks to earnings expectations for next year are

skewed to the upside.

Demand risks near-term, but underlying

recovery remains on track

So far, the impact of the US-Iran conflict on demand appears to have remained

relatively limited, aside from some short-term destocking. Industry commentary

from ICIS points to generally weak demand conditions across most petrochemical

value chains. A key factor has been the >30% decline in oil prices from the peak