The global chemical industry is undergoing a significant downturn, primarily due to an oversupply of capacity. In contrast to Europe and Japan, where numerous petrochemical and specialty chemical plants have closed, the United States has largely avoided such drastic measures. Despite relatively low energy costs, the US chemical sector is grappling with an array of economic challenges that are stifling growth.
According to the American Chemistry Council (ACC), tariffs are impacting trade, while rising unemployment and a stagnant industrial sector are further complicating the landscape. The ACC’s latest outlook report highlights that “high interest rates, higher prices for imported equipment and materials, and a highly uncertain economic landscape have curtailed or delayed investments.”
Despite these challenges, there are areas of growth within the sector. The rapid expansion of data centers fueled by artificial intelligence (AI) is creating opportunities for business investment. The ACC report noted that “business investment has also been a tale of two segments—AI and non-AI.”
In the automotive sector, Cox Automotive reported that 2025 was the strongest year for US vehicle sales since 2019, with 16.3 million new vehicles sold. However, projections for this year estimate a decline to 15.8 million sales, driven by slower economic growth, reduced job creation, and the absence of tax incentives for electric vehicles.
Economists at the National Association of Realtors anticipate a rebound in the US housing market, predicting a 5% increase in new home sales in 2026, spurred by declining interest rates that may make mortgages more affordable. Neil Ghosh, global head of chemicals at Truist Securities, emphasized the potential benefits of a housing market recovery for chemical manufacturers. He stated, “If the housing market comes back, that is going to be a direct impact on many niche chemicals, whether it is adhesives, it’s sealants, it’s coatings, even additives.”
Despite the potential for a housing rebound, the ACC forecasts only a modest 0.3% growth in US chemical output for 2026, a decrease from the 0.7% growth recorded in 2025. A more significant recovery is not anticipated until 2027, when the industry is projected to expand by 2.3%. “You can have cycles within the broader economic cycle that are specific to manufacturing and industry,” noted Martha Gilchrist Moore, the ACC’s chief economist.
Moore expressed optimism regarding the US petrochemical sector. She believes that the production cost advantages established since the early 2010s will 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 remarked. Notably, US exports of plastic resins rose by 2.7% in the first nine months of 2025, indicating a positive trend in trade.
Despite these encouraging signs, the development of new large-scale projects in the US has slowed significantly since the boom years of the late 2010s. The $8.5 billion Golden Triangle Polymers joint venture in Texas, a collaboration between Chevron Phillips Chemical and QatarEnergy, is among the few major projects nearing completion. Shruthi Vangipuram, principal analyst of base chemicals at Wood Mackenzie, pointed out that the slowdown in large-scale projects is concerning.
Over the past year, major companies like ExxonMobil have opted to “slow the pace” of development on projects in Texas, while Dow has delayed plans for a significant project in Canada. Vangipuram remarked, “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.”
In summary, while the US chemical industry faces several economic hurdles, there are signs of potential growth driven by specific segments like housing and AI. However, the overall outlook remains cautious, with the ACC projecting only modest growth in the near term.
