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Investing.com -- European chemicals are unlikely to see a strong recovery in volumes through 2025 and 2026, according to UBS, which maintains a cautious stance on the sector amid sluggish macro indicators and lingering tariff uncertainty.
UBS expects only modest gains in volume growth, with its analysts forecasting 2.6% year-on-year volume growth in 2025 and 3.2% in 2026 across the sector. The outlook is skewed in favor of Consumer Chemicals and Industrial Gases, with other sub-sectors trailing.
“We believe that a defensive stance is the correct approach for the next 12 months in the European Chemical sector,” UBS analysts led by Geoff Haire said, citing muted momentum in cyclical end-markets and limited upside from low capacity utilization.
The bank forecasts EBITDA growth of 4% in 2025, in line with consensus, but sees only 7% growth in 2026, well below the market’s 10% expectations.
“In our opinion, without an improvement in volumes and/or prices in 2H25 we believe that double-digit EBITDA growth appears ambitious,” the analysts wrote.
Within sub-sectors, UBS sees a notable divergence, expecting just 1% EBITDA growth in Specialties and 7% in Diversifieds for 2026, compared to consensus estimates of 9% and 15%, respectively.
Defensive sub-sectors Consumer Chemicals and Industrial Gases are UBS’s preferred areas, with Buy ratings on names such as DSM Firmenich AG (AS:DSFIR), Air Liquide SA (EPA:AIRP), and Arkema (EPA:AKE).
The analysts note that Consumer names offer relatively better volume and earnings visibility, and that “the Consumer Chemical companies offer high-single-digit EBITDA growth with mid-single-digit volume growth.”
By contrast, UBS downgraded Akzo Nobel NV (AS:AKZO) to Neutral, stating that the upside from cost savings and divestitures appears largely priced in.
“While the company can deliver high-single-digit EBITDA growth in 2025 and 2026 on the back of cost savings, we expect this to fall to mid-single-digit EBITDA growth beyond 2026,” the analysts said.
They also cut their price target on Akzo Nobel shares to €64 from €70.
Among least-favored names are K+S AG (ETR:SDFGn), Umicore (EBR:UMI), and Victrex (LON:VCTX), where UBS flagged structural or end-market headwinds.
The report also highlights macroeconomic drag from U.S. and Chinese slowdowns, with UBS forecasting 2025 and 2026 global GDP growth to be 60 bps below 2024 GDP, primarily driven by the impact of tariffs.
Inventory levels remain elevated across key end-markets such as healthcare and construction, further reducing the likelihood of a sharp volume rebound in the near term.