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Predicting what 2025 will bring to the chemicals industry feels like predicting the outcome of different worlds colliding. In almost every area, from financial results to emissions and regulations, geographical blocks are on diverging paths.

For the past three years, Europe’s chemical sector has suffered from various ailments ranging from supply chain disruptions to higher labor costs and energy prices, increased competition from China and weak domestic demand. 2024 ended on Adnoc’s €14.7bn deal to buy German chemicals firm Covestro - a deal that could announce further attempts by cash-rich oil groups to invest in petrochemicals to future-proof their business, and a reminder that European firms could increasingly be the target rather than the predator.  

The main question is whether 2025 will continue this trend or mark the year the tide starts turning and investments in technologies, sustainability and circularity pay off. Here are five predictions for the coming twelve months:

1. European Firms Hope Performance Push Can Restore Competitiveness   

One of the key reasons why Europe’s chemical sector has suffered is higher energy costs. In the first half of 2024, for example, European natural gas prices were nearly four times higher than in the U.S, leaving Europe at a competitive disadvantage. 

While the situation predates the Russian invasion of Ukraine and can be traced back to the need for European countries to import energy, the loss of competitiveness has intensified since 2022 as U.S. firms could rely on abundant shale gas while EU firms still face gas prices that remain 70% above their pre-crisis levels. Sectors that are very energy-intensive, such as petrochemicals, fertilizers, and polyurethanes, have been particularly impacted.  

In 2025, we expect the trend to have several consequences. First, large companies will likely pursue asset rationalizations, close plants in Europe, and redirect investments to other regions. Second, European facilities will undergo performance pressures and leverage automation, data and digital technologies to cut their labor and energy costs. Lastly, energy transition pressures will accelerate, with producers pushing for electrification and greater use of renewables. 

2. Chemical Producers Invest in Smart, Highly Automated Factories 

This challenging context pushes chemical manufacturers to seek tools that can drive down labor costs, reduce downtime and deliver double-digit productivity gains. Adoption of three technologies is notably on the rise: digital twins, AI, and predictive maintenance. 

Perstorp Group, a Swedish specialty chemicals producer, exemplifies this trend. By making digital twins a cornerstone of information management at its facilities, Perstorp improved plant reliability and optimized asset performance, reducing the likelihood of unplanned outages and enhancing operational safety. 

Digital twins are also part of a broader trend of centralizing information and leveraging AI to improve its trustworthiness through the capture, consolidation and contextualization of validated information. A recent Digital Twin survey showed that 8 out of 10 respondents believe AI has made digital twin technology more relevant for their organizations. 

Overall, AI adoption will rise significantly in 2025. In petrochemicals, for example, 30% of workers say they already use AI in their job, with automated workflows and workplace collaboration named as the top use. 24% of professionals report that their company also uses AI for inspections and safety improvements. This reduces the need for physical field verification and enhances confidence in decision-making.  

With such capabilities, companies will intensify their efforts to reduce labor costs. Remote operations and centralized control rooms are already enabling professionals to oversee multiple sites simultaneously, addressing labor shortages. Additionally, partnerships with tech firms and start-ups are accelerating innovation deployment.  

3. Regulations and Public Sentiment Will Support Shift to Green Chemical Initiatives 

Could shifts in regulatory pressures and consumer demand help Europe’s chemical sector regain its competitiveness? The EU has long viewed sustainability regulations as a potential driver of competitiveness rather than a hindrance.  

A striking example of this approach is the Corporate Sustainability Reporting Directive, whose scope will significantly broaden on January 1, 2025. Dubbed a “game-changer for chemicals,” the directive will gradually impact over 50,000 companies in the EU and 10,000 outside it, requiring them to disclose detailed data on chemical usage, including substances of concern (SoC) and substances of very high concern (SVHC). Companies must also report waste, emissions, and their efforts to minimize or phase out harmful substances. This shift is expected to drive the adoption of platforms like Enterprise Asset Management (EAM) software, which can help firms measure emissions and optimize energy use. 

Questions linger about whether the EU’s regulatory push will strengthen its competitiveness in the long-term or benefit regions like the Middle East, where looser regulations prevail. As of today, other key markets appear unlikely to follow Europe’s lead; The United States, in particular, seems on a path to reduce, not increase federal oversight of emissions and pollutants in 2025. However, recent global media attention on topics such as PFAS or “forever pollutants” could still spur a consumer-driven push for stricter regulations and sanctions. 

4. Innovations in Circularity Will Help Transform Waste into Worth 

While these questions could affect the industry’s sustainability as a whole, they should not slow down the circularity revolution currently underway. From Mercedes-Benz to Technip Energies, hardly a week goes by without a lerge industrial organizations announcing a major waste-to-eregy initiative or milestone. 

The shift to circularity is supported by breakthroughs in chemical recycling. For instance, technologies like pyrolysis are enabling the recovery of high-quality feedstocks from plastic waste. Recent advances have enabled the use of a wider variety of waste and residues, including non-recyclable and difficult-to-recover waste, such as tyres, contaminated plastics or used cooking oils. 

Compared to other strategies to reduce the industry’s environmental footprint, circularity’s attractiveness is obvious. Chemical producers can benefit economically, for example by reducing their dependence on fossil fuels. At the same time, governments see it as a potentially cost-effective way to deal with thorny environmental issues, such as dealing with non-recyclable agricultural and food waste.  

In 2025, we expect the trend to have several consequences. First, many industrial players will convert their facilities from brown to green - a trend recently exemplified by Shell in Moerdijk, for instance. Second, governments will encourage the shift through labelling schemes, subsidies and regulations. Lastly, companies will increasingly attempt to monetize sustainability through transparent “green premiums,” aligning pricing strategies with consumer expectations and regulatory demands.

5. With 20% of the Workforce Due to Retire, the Time to Reinvent is Now

While the shift to circularity offers a vision of sustainable growth, its success depends on the availability of skilled workers to implement and maintain new processes, a growing concern given demographic trends.  

For years, the chemical industries has struggled to attract a younger workforce. In Germany, for example, over 35% of chemical industry employees are over 50, with up to 30% retiring by 2030​. Even relatively younger geographies and specialties are concerned: globally, one in five workers in petrochemicals is over 55, for example. 

The challenge facing the industry is twofold. First, it needs to address widening digital skill gaps by investing heavily in upskilling and reskilling programs. So far, the industry’s aging has resulted in increased competition for in-demand profiles - 11% of petrochemical workers report being contacted more than 20 times last year for new job opportunities - but companies that are able to grow these profiles in-house will have a clear competitive advantage. Second, the industry needs to adapt tools, such as LXPs and procedure management platforms, to digitize knowledge and reduce the learning curve faced by new hires. 

While the trend has been coming for a long time, the industry now the industry now faces mounting pressure—but this may also be its best chance for transformation. Whether it’s chasing efficiencies, sustainability or fresh talent, Europe’s chemical sector enters 2025 with plenty of raw materials for reinvention.