Chemical Sector Update: Global commentaries- stress continues unabated by Prabhudas Lilladher Ltd
Global commentaries- stress continues unabated
Quick Pointers:
* As per Q3CY25 commentaries from several global chemical companies, including Dow, LyondellBasell and FMC, near-term demand is likely to remain soft.
* The commentaries underscore persistent tariff uncertainty and shifting policy dynamics. These headwinds are limiting demand visibility and contributing to cautious near-term guidance.
Global chemical companies delivered a mixed performance in Q3CY25. Top 10 global players reported a 5% sequential and 3% YoY decline in revenue, reflecting continued weakness in underlying demand. In contrast, our coverage companies recorded a slight rebound, with revenue rising 2% QoQ and 2% YoY.
Production in the EU remained largely stagnant due to muted demand across major end-use segments. Additionally, plant shutdowns and industry-wide overcapacity continued to weigh on realization. Recent management commentaries from leading global players suggest that demand softness is likely to persist in Q4CY25, driven by subdued demand conditions and ongoing pricing pressures.
However, we remain positive on Navin Fluorine as well as Fine Organics. Fine Organics continues to offer strong growth visibility through its Rs7.5bn SEZ project and expanding global presence. Navin’s outlook is supported by a robust CDMO pipeline, steady agchem momentum, and upcoming HF and refrigerant capacity addition, positioning the company for sustained multi-year expansion.
* Global chemical companies see 21% YoY and 29% QoQ EBITDA drop in Q3CY25: Global companies’ revenue declined by 5% QoQ and 3% YoY, while EBITDA dropped by 29% QoQ and 21% YoY. The decline was driven by unfavorable pricing, lower realization, subdued demand across the EU market, and temporary plant shutdowns. Despite sustained margin pressures, revenue of major companies was partly supported by acquisitions, commissioning of new assets, and new product launches.
* PL coverage universe sees flat QoQ and YoY growth in topline: In Q2FY26, Indian companies reported 2% QoQ and YoY increase in revenue, while EBITDA grew by 4% QoQ and 8% YoY. However, margin pressures persisted for most of the companies under our coverage driven by US tariff-related headwinds, lower realization, subdued demand, and rising competition from low-cost imports.
* Selective resilience among top 10 global chemical majors: Amid a challenging demand environment, a few leading global chemical companies delivered moderate growth in Q3CY25. Linde reported stable performance supported by pricing and contribution from recent acquisitions. 3M witnessed QoQ and YoY improvement driven by robust demand across electrical, industrial adhesives, safety, electronics, and aerospace segments, supported by new product launches and improved service levels.
* Selective strength among our coverage universe: A few Indian chemical companies within our coverage universe delivered resilient performance in Q2FY26. Navin Fluorine’s revenue rose 46.3% YoY/4.6% QoQ and EBITDA jumped 129.3% YoY/19% QoQ, driven by strong CDMO and refrigerant demand, better realization, and contributions from the new Fluor specialty plant. Aarti Industries posted strong growth, driven by a 65% QoQ rise in MMA volume and a 118% YoY/48% QoQ increase in the Energy business, with overall margin expanding 190bps YoY, supported by a favorable gasoline–naphtha crack.
* Plant closures in 2025: The year witnessed a series of global chemical plant closures as major producers rationalized assets in response to elevated cost pressures and persistently weak demand. Companies including Arlanxeo, Trinseo, Lion Elastomers, Evonik, BASF, Sasol, Huntsman, and INEOS announced shutdowns across facilities producing synthetic rubber, MMA and acetone cyanohydrin, butadiene elastomers, fumed silica, hydrosulfites, phenolics, maleic anhydride, linear alkyl benzene, and synthetic ethanol. These closures were largely concentrated across Europe and North America, reflecting the structural challenges of high energy costs, overcapacity, and tightening regulatory requirements in the regions. We list down few possible Indian beneficiaries of the same in Exhibit 2.
* Valuation and view: We continue to remain positive on Fine Organics as it executes the Rs7.5bn greenfield SEZ project at JNPA, slated to begin production by FY27/FY28 with peak revenue potential of Rs26bn, which could double its topline by FY29/FY30. Its newly formed subsidiaries in the USA and UAE further strengthen manufacturing and supply-chain capabilities. We also remain positive on Navin Fluorine, which is entering a strong multi-year upcycle driven by a robust CDMO pipeline, expanding refrigerant gas capacity, steady agchem momentum, and peak visibility from contact with Fermion (~USD60mn opportunity).
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