Recently, BASF and Covestro simultaneously lowered their full-year profit expectations. This trend highlights the fragility of current global economic growth. With the possibility of the United States imposing high tariffs on the European Union, the global market is expected to continue to face pressure.
On July 11th, the two German chemical giants, BASF and Covestro, simultaneously lowered their full-year growth expectations and both attributed it to the weak macroeconomy. BASF lowered its global GDP growth forecast for 2025 from 2.6% to 2.0% – 2.5%, and believed that this would lead to a reduction in its full-year earnings before interest, taxes, depreciation, and amortization (EBITDA) from 8.0 – 8.4 billion euros to 7.3 – 7.7 billion euros. Facing the fluctuations in the US tariff policy, BASF executives emphasized the advantages of its global layout: 90% of its sales revenue in the European market comes from local production, in the North American market it is 90%, and in the Asia-Pacific region it is 80%. With the commissioning of the Zhanjiang integrated base in China, the proportion of local production in the Asia-Pacific region will also increase. However, this regional resilience cannot offset the demand contraction in the global manufacturing industry due to trade barriers and economic turmoil. Other preliminary data from BASF show that in the second quarter of 2025, sales declined by 2.1% to 15.77 billion euros; EBITDA excluding special items was 1.77 billion euros, in line with the average forecast of analysts, but lower than the level of the previous year; net profit was 0.08 billion euros, far below the average forecast of analysts and also significantly lower than the level of the previous year.
Covestro also lowered its full-year EBITDA forecast from 1.0 – 1.4 billion euros to 700 – 1.1 billion euros, although its 2.7 billion euro profit in the second quarter was close to the upper limit of the estimate. Notably, its EBITDA in the first quarter, although halved year-on-year, still exceeded expectations, suggesting that the situation in the second half of the year may be more severe.
In the context of global economic growth slowdown, BASF’s latest GDP forecast has significantly fallen below the 2.8% predicted by the International Monetary Fund (IMF) in April. The current complex situation makes economic predictions extremely difficult, but the continuous downward revisions of expectations by various institutions have become a trend.
It is notable that the shadow of US tariffs has reappeared. Recently, the United States announced plans to impose a 50% tariff on imports from Brazil, Vietnam faces a 20% – 30% tax rate, and the European Union may bear a 30% tariff. These tariffs may come into effect on August 1st. Although the market expects an agreement between the United States and Europe, EU Trade Minister Schaeffroth on July 14th stated that a 30% tariff “effectively blocks bilateral trade” and condemned the US for suddenly increasing the tariff during the negotiations. Currently, the EU has postponed its first round of tariffs of 21 billion euros against the United States and is planning a larger countermeasure plan of 72 billion euros. At the same time, the EU is accelerating trade negotiations with Indonesia, Thailand, the Philippines, Malaysia, and India, in an attempt to diversify market risks.
Analysts pointed out that although tariffs between the United States and Europe may be reduced through negotiations, the uncertainty of multiple trade negotiations in the third quarter may continue to drag down economic growth. Even if tariffs are eventually reduced, the ongoing uncertainty will still suppress economic growth in the third quarter. The cautious sentiment of investors and the delay in major investment decisions have become the main theme of the 2025 market. This trend will continue to drag down chemical demand. Although European chemical companies are striving to transform into high-value-added specialty chemicals, industry growth is still highly tied to GDP. In the current situation of uncertainty in demand leading buyers to maintain low inventories, enterprises have very limited room for excess growth.
Current indications show that global growth in the next two years is likely to be lower than the level in 2024, and the recovery path of the chemical industry will become increasingly difficult.
To strengthen the competitiveness and modernization development of the chemical industry, the European Commission recently announced the “Chemical Action Plan”, aiming to solve problems such as high energy costs and weak demand, while promoting investment in innovation and sustainability of the industry. The specific measures include establishing a key chemicals alliance to address the risk of capacity closures in the chemical industry, and taking trade protection measures to ensure fair competition; rapidly implementing an affordable energy action plan to help reduce high energy and raw material costs; emphasizing fiscal incentives and tax measures to promote the demand for clean chemicals, etc. The plan also includes a “Chemicals Simplification Comprehensive Bill”, aiming to further simplify the EU’s key chemicals legislation, including simplifying the rules for dangerous chemical labels; clarifying the EU cosmetics regulations and simplifying the registration of EU chemical fertilizers, etc. The European Commission estimates that these measures will save the chemical industry at least 363 million euros annually. The plan has been welcomed by industry associations, but has been criticized by some enterprises.