US Chemical Industry Faces Slow Growth Amid Economic Challenges

The global chemical industry is grappling with a significant downturn, primarily due to an oversupply of new production capacity. While US chemical manufacturers have largely avoided the closures seen in Europe and Japan, they are not experiencing robust growth. The industry faces various economic pressures, including rising tariffs, an uptick in unemployment, and a prolonged slump in the broader industrial sector.

Economic Pressures and Industry Outlook

The American Chemistry Council (ACC) highlights these challenges in its latest outlook report, stating that “high interest rates, higher prices for imported equipment and materials, and a highly uncertain economic landscape have curtailed or delayed investments.” Despite these hurdles, there are areas of investment growth, particularly in data centers supporting artificial intelligence, which have provided a boost to certain sectors.

According to the ACC, the investment landscape is divided, with AI investments thriving while traditional sectors struggle. The report notes a dual narrative in business investment, emphasizing the stark contrast between AI-driven growth and declines in other areas. Stocks have surged, largely fueled by the AI boom, leading to increased consumer spending among higher-income individuals.

Market research firm Cox Automotive forecasts a decline in vehicle sales, projecting that the US auto industry will see sales drop from 16.3 million units in 2025 to 15.8 million in 2026. Factors contributing to this decline include slower economic growth and the absence of tax incentives for electric vehicles.

Housing Market and Chemical Demand

Despite these challenges, economists at the National Association of Realtors predict a recovery in the US housing market, forecasting a 5% increase in new home sales by 2026 as declining interest rates make mortgages more affordable. Neil Ghosh, global head of chemicals at Truist Securities, suggests that a rebound in housing would positively impact chemical manufacturers, particularly in the construction sector, which heavily relies on chemical products such as adhesives, sealants, and coatings.

Nevertheless, the ACC anticipates only 0.3% growth in US chemical output for 2026, a decline from the 0.7% growth recorded in 2025. A more significant recovery is not expected until 2027, when the industry is projected to grow by 2.3%. According to Martha Gilchrist Moore, the ACC’s chief economist, “after four years of really lackluster growth, we’re going to finally see that recovery take traction.”

Moore also reassured that the cost advantages for US petrochemical manufacturers, established since the early 2010s, are likely to persist. “With continued gains in ethane production driven by natural gas production, our competitiveness remains very, very positive for US chemical manufacturing,” she added.

In the first nine months of 2025, US exports of plastic resins increased by 2.7%, indicating that strong energy fundamentals are translating into trade opportunities. However, Shruthi Vangipuram, principal analyst of base chemicals at Wood Mackenzie, noted a slowdown in the development of new large-scale projects in the US since the late 2010s.

The ongoing $8.5 billion Golden Triangle Polymers project in Texas, a joint venture between Chevron Phillips Chemical and QatarEnergy, is set for completion this year. Yet, Vangipuram points out that there are currently no major projects on the horizon. “Over the past year, ExxonMobil has elected to slow the pace of a project in Texas, while in Canada, Dow delayed a significant project,” she stated, emphasizing the thin investment pipeline.

As the chemical industry navigates these complex economic currents, the outlook remains cautious, with growth expected to be gradual and dependent on broader economic recovery trends. The interplay between various sectors will significantly influence the pace and nature of recovery within the chemical manufacturing landscape.