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What a year! As 2025 begins to draw to a close, I’d like to take this opportunity to thank our clients around the globe who have trusted ChemQuest to help them navigate these uncertain and (at times) turbulent economic, geopolitical, and industrial dynamics. Your faith in us is much appreciated.
I know that a wait-and-see attitude can be tempting during times like these, but I strongly believe the quest for continual improvement and long-term profitable growth should not be dependent on working under ideal circumstances. And circumstances this year have certainly not been ideal.
Challenging Global Conditions
Geopolitical tensions, including various regional conflicts and questions surrounding tariffs (e.g., on which products and countries, and at what levels), led to massive global uncertainty. While the impacts of any actual or eventual tariffs have yet to be fully realized, the true result seems to have been a widespread collective pause as many companies simply chose to wait out the uncertainty.
Others have — correctly, in my view — taken the opportunity to explore ways to improve their operations. For example, we have helped many clients this year undertake initiatives to optimize their supply chain management processes, develop in-house capabilities to mitigate dependencies, and even relocate operations to more favorable regions. By taking a long-term view beyond the current circumstances, these companies have made proactive improvements to their operations that will bring benefits for years to come.
Expectations for 2026
Though I don’t have a crystal ball, I see cause for both concern and optimism in the coming year. First, the “bad news.” Overcapacity, weakening demand, and unrelenting high energy costs have resulted in the closures of dozens of chemical facilities across Europe. According to Oxford Economics, Europe’s chemicals output has already declined significantly since 2019, including in the UK (30%), Germany (18%), France (12%), and Belgium (7%).
It is unfortunately quite possible that this trend is irreversible, particularly as European governments don’t seem interested in addressing the energy crisis and ongoing expansions in Asia will curtail the potential for global capacity right-sizing. While the closures are problematic in and of themselves, the tendency of the chemicals companies to focus solely on measures related to short-term consolidation is concerning.
If the European chemical industry has any hope of succeeding in the future, effort must be put into both mid- and long-term strategic planning. For example, in order to compete against low-cost rivals, companies must identify and develop ways to differentiate not only their products but themselves as true partners for their customers. They can explore other measures as well, including optimizing their operations to reduce costs or expanding into adjacent markets to tap a new customer base. Regardless of the path(s) they decide to take, resiliency and high-level, forward-looking strategy are a necessity.
On a more positive note, the U.S. Federal Reserve dropped interest rates three times (so far) in 2025. Lower interest rates have set the stage for a more positive M&A environment for specialty chemicals, and we are certainly seeing increasing activities in this area. Regardless of whether an additional rate cut will come in December — and it might — companies are moving forward with deals at a growing pace. I expect this trend to continue into 2026 and beyond.
Looking to the Future
Truly successful companies keep an eye on current conditions, certainly, but they never lose sight of their long-term goals. A challenging geopolitical climate or poor economic conditions should inform your strategy, not dictate it.
Indeed, it is often during difficult times that significant opportunities become apparent. Please don’t hesitate to contact me or anyone on the ChemQuest team to explore your options. Let’s work together to find the opportunities that make 2026 a year of proactive strategic growth.
How can we help you? Let’s start talking: https://chemquest.com/lets-start-talking/
