Zhu Tong

Deputy Director of the International Cooperation Department of the Chinese Chemical Society

The global chemical industry has undergone a series of key transformations and upgrades, among which cost reduction and efficiency improvement, sustainable development, high-end chemical research and development, and supply chain resilience construction have become the four core trends leading the industry forward. In 2025, China's chemical industry is expected to achieve sustained recovery and maintain moderate growth, but enterprises still need to actively seek new market drivers to balance short-term benefits with long-term development.

With the continuous changes in the market environment and the rapid advancement of science and technology, the global chemical industry has ushered in a series of key transformations and upgrades, among which cost reduction and efficiency improvement, sustainable development, high-end chemical research and development, and supply chain resilience construction have become the four core trends leading the industry forward.

In recent years, after experiencing a destocking cycle, the market demand for products in China's chemical industry has gradually recovered, and production capacity and level have steadily rebounded. According to the 2024 industry survey, expert recommendations from various industry conferences, and my observations, China's chemical industry is expected to achieve sustained recovery and maintain moderate growth by 2025. However, companies still need to actively seek new market drivers to balance short-term benefits with long-term development. In addition, the global macroeconomic environment, policy changes, technological innovation barriers, and geopolitical risks still pose uncertainties and challenges to industry development.

Four core trends in the development of the chemical industry

（1） Reducing costs and increasing efficiency has become a long-term operational management approach for enterprises

Due to fundamental structural factors such as low birth rates and aging populations, as well as restrictions on global trade caused by economic fragmentation, although global GDP will continue to grow moderately, the overall sluggish environment is expected to persist. Most chemical companies have developed sustainable survival strategies to adapt to the long-term low growth period of the economy.

The pressure faced by chemical companies varies in different regions of the world. European chemical companies have faced challenges from inflation and high energy prices in the past two years, putting direct pressure on their profit margins. As a result, most companies have continued to announce cost cutting plans to align their spending levels with macroeconomic conditions.

Chinese chemical enterprises have significant advantages in cost and scale integration. Domestic chemical enterprises actively promote the integration of the industrial chain layout, by introducing advanced refining technology and processes, integrating the refining and chemical production links. On the one hand, it effectively reduces cost pressure during fluctuations in crude oil prices, and on the other hand, it also promotes the development of high value-added chemical products. In addition, many enterprises have adopted measures such as promoting greenization and intelligence in order to improve operational efficiency, control costs, and enhance profitability in various links of the industrial chain.

（2） Enterprises are laying out in the field of sustainable development

Against the backdrop of increasingly prominent global climate change issues, governments around the world are continuously strengthening their environmental regulations for the chemical industry to address the climate crisis. In this context, the growth potential and operational sustainability of chemical enterprises increasingly rely on their ability to adapt to the constantly emerging environmental policies and regulations.

On the European side, the EU has introduced the EU Carbon Border Adjustment Mechanism (CBAM) and placed the core role of the chemical industry in achieving the goals of the EU Green Deal at the forefront of its policy agenda, aiming to promote investment by European companies in green and low-carbon areas. In the United States, the Inflation Reduction Act (IRA) has become an important driving force for promoting low-carbon technology and circular economy solutions. With Trump taking office as president in January 2025, there is still uncertainty about whether this policy will be adjusted. However, implementing strict environmental regulations to protect local industries has become an important measure of trade protectionism in Europe and America. To cope with this trend, European and American companies are increasingly relying on policies and regulations, focusing on market incentives and carbon pricing mechanisms, emphasizing the transparency of the entire supply chain, and reducing indirect carbon emissions generated by upstream and downstream activities in the industrial chain (Scope 3). From the market perspective, the European and American markets have a strong demand for sustainable products and high price acceptance, so there is room for companies to focus on research and production of chemical recycling and biomaterials.

The adjustment of China's environmental protection regulatory system is providing strong support for the expansion and transformation of the chemical industry towards green environmental protection business. Based on the government's advocacy and support, as well as the vast domestic market demand, China has maintained and may continue to maintain a global leading position in the field of new energy vehicles and batteries. The installation of new low-carbon energy facilities (especially wind and solar energy) has reached a historical high, which is sufficient to meet and exceed the average annual growth of electricity demand. With the continuous breakthroughs in clean energy technologies such as hydrogen energy and controllable nuclear fusion, the future role of the petrochemical industry in the energy structure will focus more on the production of chemicals and new materials. However, compared with the development direction of European and American enterprises, domestic chemical enterprises still tend to adopt a catch-up model in terms of layout and technology application towards sustainable development, with a focus on large-scale production. The management of carbon emissions focuses on the direct control of emissions by enterprises (Scope 1&2). Although the demand for circular economy in China is still strong, due to factors such as high customer price sensitivity, although resource recycling and carbon reduction have become key directions for the development of the chemical industry, domestic enterprises tend to adopt physical recovery technology in the field of carbon dioxide capture, utilization and storage (CCUS), and the research and application of chemical recovery technology is still in its infancy.

（3） Continuous increase in research and development investment in high-end chemicals

Global chemical companies continue to increase their investment in high-tech, clean energy, and other high growth, high value-added chemical products. According to data from the Federal Reserve Board of the United States, industries such as semiconductors and electronic components, oil and gas extraction, building and structural metals, and plastics and rubber have shown significant growth trends since 2024. The American Chemical Council (ACC) predicts that semiconductors (chips) will continue to be the main driving force behind demand growth in the chemical industry. To cope with the intensification of competition in the traditional chemical product market and the compression of profit margins, international chemical enterprises have increased their research and development investment in high-end chemical products such as polymer materials, specialty chemicals, and engineering plastics, and hope to enter segmented markets with high technological barriers, thereby enhancing their market competitiveness.

Chinese enterprises are in the midst of the evolution of the chemical industry environment, facing inherent challenges such as high value-added chemicals relying heavily on imports, a single investment structure, and insufficient original research and development capabilities. The government and industry have recognized this challenge and are striving to promote the development of innovative fine chemicals to cope with it. At present, compared with the high cost global operation system of multinational corporations, leading domestic chemical enterprises are able to conduct product research and development and services at lower prices, which has enabled them to gain a leading position in the research and development of high-end chemical sub sectors such as functional coatings, high-end polyolefin materials, and synthetic rubber.

Compared with high innovation industries such as biotechnology or software, the overall innovation speed of the chemical industry is relatively slow. At present, there are about 300000 existing chemicals worldwide, while only about 2000 new chemicals are developed each year, with an innovation rate of only 6 ‰. Although multinational corporations still dominate the supply chain of high-tech and high-end chemical products, Chinese chemical enterprises are gradually gaining market share through measures such as increasing research and development investment, optimizing investment structure, attracting foreign investment, and leveraging price advantages, with the potential to catch up and become leaders in high-end chemical research and development.

（4） Responding to Geopolitical Changes and Enhancing Supply Chain Resilience

Since the COVID-19 epidemic, especially the Russia-Ukraine conflict, the global chemical industry has faced multiple impacts such as increased geopolitical tensions, fluctuations in global energy demand, fluctuations in international oil prices, and increasingly stringent environmental protection laws and regulations, which put forward higher requirements for the toughness and flexibility of the supply and marketing chain of chemical enterprises.

In 2025, the global chemical supply chain will still face many difficulties. The Russia-Ukraine conflict, the situation in the Middle East, the drought in the Panama Canal and other factors may still push up the prices of upstream products such as oil and natural gas, and cause cost pressure on global trade and transportation. Meanwhile, factors such as import tariffs, emission regulations, and regional trade disruptions may allow some European and American chemical products to regain customers from their own countries and third world countries. To cope with these changes, European and American companies have re examined and adjusted their purchasing and sales strategies.

For China's chemical industry, the constantly changing global situation is both a challenge and a development opportunity. On the one hand, the uncertainty of the international supply chain will still affect China's pricing system for crude oil imports and raw materials; On the other hand, domestic enterprises still occupy the vast domestic chemical market and strong demand for chemical products, and can exploit the chemical product market of emerging countries through the construction of the "the Belt and Road". In some chemical fields such as new energy vehicles and batteries, there has been a trend towards regionalization. Therefore, while continuously promoting supply chain integration, Chinese chemical enterprises should also enhance the flexibility and resilience of supply and marketing management, focus on localized production capacity and regional investment layout, and better resist external interference and changes.

Key areas to focus on in 2025

2025 remains a crucial turning point and opportunity period for domestic chemical enterprises. Based on the previous trend viewpoints, Chinese chemical enterprises not only need to deeply understand and adapt to these changes, but also need to proactively layout.

（1） Coping with the slowdown of macroeconomic growth - creating a product and service system that meets customer needs

In the chemical industry, the slowdown in macroeconomic growth and continuous changes in market preferences are forcing companies to transform their business models. Large leading enterprises can leverage resource integration and economies of scale to reduce costs and increase efficiency through integrated refining and chemical processes. In contrast, small businesses must shift towards a more customer-centric strategy and enter the chemical segmented product and service track to strengthen customer relationships and gain pricing power to enhance market competitiveness.

Customer co creation not only promotes product innovation and differentiation, but also strengthens the connection with customers, breaks the traditional one-way product development process, and allows customers to participate in the design and improvement of chemical products, thereby ensuring that chemical products are more in line with market demand. Customized solutions have also become an important means for chemical enterprises to enhance customer experience and satisfaction. Good service effectively increases customer loyalty to the enterprise and lays a solid foundation for its long-term development.

A simple indicator for chemical companies to measure their products and services is bargaining power. As global economic growth slows down, the bargaining power of chemical product customers is gradually increasing. Especially in the downstream markets of refined oil and chemical products, customers are more sensitive to prices. The rise of new energy technologies has further enhanced customers' bargaining power over traditional petrochemical enterprises. Therefore, when formulating product and service strategies, chemical enterprises need to fully consider their bargaining power in order to feel the changes in market demand.

（2） Layout in the field of sustainable development - interdisciplinary cooperation

Some domestic chemical companies have gradually withdrawn from businesses that have reached their development limits and turned to sustainable development fields such as energy storage, materials, and plastics that are benefiting from policy dividends. However, this has also caused new industrial crowding and exclusion phenomena. The future chemical industry will highly rely on interdisciplinary cooperation, and the combination of chemistry and biotechnology, materials science, and information technology will drive the research and development of new products and solutions to address global challenges such as energy shortages and green and low-carbon development.

A hot topic is the empowerment of artificial intelligence in the chemical industry. With the iteration and advancement of artificial intelligence, enterprises can now use AI technology to monitor data from various stages of research and development production in real time, and make proactive risk predictions based on this, in order to proactively respond to enterprise risks and reduce potential losses. In addition, artificial intelligence has greatly accelerated the research and development speed of environmentally friendly processes and materials. Similar to exploring the combined effects of materials and chemical compounds through analyzing and integrating large amounts of data, artificial intelligence is becoming the most revolutionary technological research and development tool after microscopes and papers.

（3） High end chemical research and development - focusing on new materials

Considering feasibility and economic benefits, among the many research and development directions of chemical products, the author is relatively optimistic about the development of new materials science in the short term.

Intelligent materials have broad application potential in multiple fields. For example, shape memory alloys can restore their original state after undergoing significant deformation, which makes them highly suitable for manufacturing precision devices such as micro actuators. German startup Memetis has successfully developed ultra compact micro actuators using this principle, bringing innovation to fields such as microelectromechanical systems (MEMS). Similarly, SorexSensors in the UK has also achieved significant results in the field of smart materials. They achieved piezoelectric effect by manufacturing highly sensitive MEMS sensors on silicon chips, utilizing thin film piezoelectric materials and FBAR technology. This type of sensor can quickly respond to external stimuli such as pressure or vibration, and has broad application prospects, such as environmental monitoring, medical equipment, and consumer electronics.

Realizing net zero cycle molecules/materials is also one of the important directions in current materials science. Traditional materials such as steel, aluminum, and chemicals often generate large amounts of waste and emissions during production and use, causing serious environmental impacts. Therefore, developing net zero cycle molecules/materials that can be recycled is of great significance for promoting sustainable development and environmental protection. By 2025, it is expected that recycled net molecules/plastics will receive renewed attention and may become a cutting-edge topic on the global agenda. This is not only due to the development trend of circular economy, but also because with technological progress and cost reduction, the commercial application of net zero cycle molecules has become possible.

（4） Responding to Geopolitical Changes - Enhancing International Cooperation

The geopolitical uncertainties such as the world order and China US relations in 2025 remain severe, but instead of adopting conservative policies to avoid risks, it is better to actively enhance international cooperation from a long-term strategic perspective. At present, the global chemical market is gradually shifting towards emerging economies, especially in Southeast Asia, the Middle East, and Africa, attracting the attention of global investors.

In this context, cross-border asset integration and technology introduction have become one of the means for chemical enterprises to enhance international cooperation. Through mergers, acquisitions, or internal expansion, enterprises can gradually control the supply of raw materials and the terminal sales channels of products, thereby reducing dependence on external suppliers and enhancing their control over market supply and demand relationships. Moreover, by introducing and absorbing advanced technology and management experience from around the world, it not only helps enterprises improve product quality and service levels, but also accelerates the technological progress and industrial upgrading of the industry.

China's large petroleum and petrochemical enterprises have taken the lead in establishing business networks in multiple countries and regions around the world, with a particular emphasis on long-term planning and cooperation. They have signed long-term agreements with buyers to ensure a stable source of income for investing in decarbonization technology, laying the foundation for sustainable development. Some companies continue to make new progress and breakthroughs in fields such as agricultural technology and biotechnology through mergers and acquisitions. In recent years, there have been numerous examples of introducing chemical financial services, engineering construction, and other related services through international cooperation. As a result, domestic chemical enterprises have diversified their sources of income, reduced operational risks, and improved profitability.

China's chemical industry chain has a good development foundation and broad market space. Facing the critical period of rapid transformation and innovation in the global chemical industry in 2025, the chemical industry must keenly seize historical opportunities, integrate technological innovation resources, strengthen international cooperation, lead the development of strategic emerging and future industries, promote industry transformation and upgrading, accelerate the cultivation and formation of new quality productivity.

(Editor in charge: Song Yuchun)