European Chemical Firms Face Pressure on First-Quarter Earnings as the War Shock Continues to Spread

The first-quarter report cards that Europe’s chemical companies are about to deliver do not look encouraging. On April 13, Reuters, citing several institutional analyses, reported that first-quarter earnings across European chemical companies are generally expected to be weak, with the impact of the Iran war now being transmitted in a very real way from raw materials and energy costs into profit statements.

Cost pressure: a double squeeze from energy and raw materials

The chemical industry is inherently energy- and feedstock-intensive, and turmoil in the Middle East has directly disrupted both fuel and raw material markets. Germany’s chemical industry association VCI has made it clear that the sector is especially sensitive to surging energy and raw material prices, because it relies heavily on oil and gas as feedstocks.

What makes the situation even more severe is that European chemicals were already entering 2026 under pressure from weak demand, high energy prices, and unstable supply chains. The war has pushed energy prices up once again, adding another layer of strain to an industry that was already under stress. Germany’s economic research institute pointed out that the problem is even more serious in Germany and Europe because these higher costs are hitting at a time when economic recovery was already slow, making the damage to the demand side even more visible.

Corporate response: repeated price hikes to protect margins

Facing cost pressure, European chemical giants including BASF, LANXESS, Evonik, WACKER, Brenntag, EMS-Chemie, and Sika have all raised prices multiple times across different product lines. BASF’s CFO said at JPMorgan’s chemicals conference in March that second-quarter price increases are expected to outpace cost inflation. Brenntag’s CFO also said that, so far, customers have been accepting the higher prices.

But the market has not relaxed because of that. Analysts say that the current scale of price increases looks striking in an environment of weak demand and poor business confidence, yet these increases may still fail to deliver any meaningful earnings recovery, because the demand base remains fragile and customers’ ability to absorb higher prices has limits.

Demand divergence: stockpiling and pullback at the same time

Feedback collected by the German chemical industry association shows a clear split. Some segments are stepping up purchases out of concern over supply shortages, while others are being forced to cut procurement because prices have become too high. That divergence reflects the complexity of the current market: the same price increase can trigger completely different reactions depending on the company and the product.

Competitiveness concerns: structural disadvantages are becoming more visible

Another difficult problem facing Europe’s chemical sector is competitiveness. Reuters noted that Asian competitors still retain a lower structural cost base, which makes them more resilient in periods of weak demand. An industry expert at the Ifo Institute said plainly that higher prices will further weaken the competitive position of European producers relative to Chinese suppliers.

That judgment goes straight to the deeper problem in Europe’s chemical sector: costs are rising and prices are rising, yet global competitive positioning may actually become even more passive. That is also why the European chemical industry has, in recent years, consistently given the impression of struggling to regain momentum.

Outlook: no clear improvement in sight for now

What is even more concerning is that this latest round of pressure does not appear likely to ease meaningfully in the short term. U.S.-Iran talks failed to produce an agreement to end the war, and the fragile two-week ceasefire could break down at any time. Without an agreement, Iran’s blockade of the Strait of Hormuz is likely to continue, which means oil and gas prices will keep exerting pressure on the chemical industry.

Ifo Institute expert Anna Wolf put it in particularly stark terms: even if the Strait of Hormuz reopens, conditions would only move from “very bad” to “bad,” because structural problems such as high energy costs, insufficient energy-transition infrastructure, and heavy bureaucratic burdens have not gone away.

What to watch in earnings: how the pressure is flowing through

When the first-quarter results are released, what may matter most is not just how large the declines are, but where exactly companies show the pressure: whether costs are hurting more, or volumes are weakening more; whether price increases have offset part of the shock, or whether customers have already begun cutting orders; whether some specialty segments are still holding up on supply tightness, or whether more business lines are being dragged down by weak demand.

From where things stand now, the problems facing Europe’s chemical sector are clearly not one-dimensional. They reflect the combined effect of costs, demand, competitiveness, and the broader macro environment. This round of weaker earnings looks more like another confirmation of structural problems that Europe’s chemical industry has still not resolved.

High energy costs, slow demand recovery, heavy transition expenses, bureaucratic burdens, and intensifying global competition were already difficult enough in normal times. With the added uncertainty in raw materials and transport caused by the war, companies have been pushed into an even more vulnerable position. Price increases may provide temporary relief, but they are unlikely to change the industry’s overall weak underlying picture.