The global chemical industry is grappling with a significant downturn due to an oversupply of new capacity. While Europe and Japan face numerous plant closures in both petrochemical and specialty sectors, the situation in the United States is somewhat different. Despite low energy costs allowing US chemical manufacturers to maintain operations, the industry is not experiencing robust growth.
The American Chemistry Council (ACC) highlights in its recent outlook report that the US economy is facing multiple challenges, including rising tariffs that are restricting trade, a gradual increase in unemployment, and an extended slump in the broader industrial sector. The report states, “High interest rates, higher prices for imported equipment and materials, and a highly uncertain economic landscape have curtailed or delayed investments.”
Despite these challenges, the chemical sector has seen some positive developments. The ACC notes that business investment has been significantly influenced by the expansion of data centers to support artificial intelligence (AI). This has led to a divergent trend within business investment, where sectors tied to AI are thriving while others lag behind.
Consumer spending has also been buoyed by higher-income individuals benefiting from the AI boom. According to Cox Automotive, the year 2025 marked the strongest performance for the US auto industry since 2019, with 16.3 million new vehicle sales. However, the firm projects a decline in sales to 15.8 million in 2026 due to slower economic growth, reduced job creation, and the absence of tax incentives for electric vehicles.
Economists from the National Association of Realtors forecast a turnaround in the US housing market, predicting a 5% increase in new home sales for 2026 as declining interest rates make mortgages more affordable. Neil Ghosh, global head of chemicals at Truist Securities, suggests that a rebound in the housing market would significantly benefit chemical manufacturers. “The construction end market, which is a big buyer of chemicals—you almost have to think that the only way that market will go is up,” he remarked. Ghosh anticipates that a recovery in housing will directly impact demand for niche chemicals, including adhesives, sealants, coatings, and additives.
Despite these potentially positive developments, the ACC projects only 0.3% growth for US chemical output in 2026, which is a slight decline from the 0.7% growth achieved in 2025. A more substantial recovery is not expected until 2027, when the industry is predicted to grow by 2.3%. “You can have cycles within the broader economic cycle that are specific to manufacturing and industry,” stated Martha Gilchrist Moore, chief economist at the ACC. She expressed optimism that after four years of lackluster growth, a recovery is finally on the horizon.
Moore also highlighted that the production cost advantages for US petrochemical manufacturers, established since the early 2010s, are likely to persist. “With continued gains in ethane production driven by continued gains in natural gas production, our competitiveness remains very, very positive for US chemical manufacturing,” she noted.
In terms of exports, US exports of plastic resins saw a modest increase of 2.7% in the first nine months of 2025, indicating that favorable energy fundamentals are contributing to trade performance.
However, Shruthi Vangipuram, principal analyst of base chemicals at the consulting firm Wood Mackenzie, pointed out a slowdown in the development of large-scale projects in the US since the rapid expansion of the late 2010s. The $8.5 billion Golden Triangle Polymers joint venture in Texas, a collaboration between Chevron Phillips Chemical and QatarEnergy, is expected to be completed this year. “Besides that, though, there’s really no major projects,” Vangipuram remarked.
Over the past year, companies such as ExxonMobil and Dow have opted to delay or slow down their project timelines, suggesting a cautious approach within the industry. “So that’s very telling that, yes, the US remains shielded from rationalization, but at the same time the investment pipeline is really, really thin or almost nothing,” Vangipuram concluded.
The outlook for the US chemical industry is marked by a complex interplay of economic factors, with slow growth anticipated in the near term. The potential for recovery hinges on broader economic conditions, particularly in the housing and automotive markets, which are significant consumers of chemical products.
