April 13 (Reuters) - European chemical companies are expected to report weaker first-quarter results, shedding light on how deep the impact from the war in the Middle East has been on an industry largely seen as one of the most exposed to it.
The U.S.-Israeli war with Iran has disrupted fuel and feedstock markets, driving up prices for the energy‑intensive chemical industry.
"Compared with other industries, the chemical sector is particularly affected by the dramatic increase in energy and raw material costs, as it predominantly relies on oil and gas as feedstocks," German chemicals association VCI said.
A war-driven surge in energy prices worsened already weak conditions seen at the start of 2026 in a sector that has struggled for years with subdued demand, high energy costs, supply-chain disruptions and a sluggish broader economy.
COMPANIES HIKE PRICES TO SHIELD MARGINS
To offset higher costs, chemical companies including Brenntag, Wacker Chemie, Lanxess, BASF, Evonik, EMS Chemie and Sika have raised their prices, in some cases multiple times across different products.
The finance chief of Germany's BASF said during a JPMorgan chemicals conference in March that he expected pricing to more than offset cost inflation in the second quarter of the year, according to a note from the brokerage. Brenntag's CFO meanwhile said that price increases had so far been accepted by customers.
While rising energy costs are a global issue, higher energy bills combined with an already delayed economic recovery has hit demand harder in Germany and other European countries, said Research Director Martin Gornig from the German Institute for Economic Research (DIW).
Asian rivals, meanwhile, retain an advantage thanks to their structurally lower cost bases, which helps them cushion the effects of weak demand, mwb Research said in a recent note.
"Higher prices further weaken the competitive position of European producers versus Chinese suppliers," said industry specialist Anna Wolf from Germany's Ifo Institute for Economic Research.
VCI said feedback from companies had so far been mixed, as concerns over supply shortages were driving demand in some segments, while others saw dampened purchasing activity due to higher prices.
Analysts warned that any gains may prove fragile and they do not expect pricing alone to drive a meaningful earnings recovery in the near term.
Wolf said volatile prices and rising uncertainty risked weakening demand further. "The recent price increases have been, given the generally weak demand and sluggish business confidence, unexpectedly sharp."
NO IMMEDIATE RELIEF FROM TWO-WEEK CEASEFIRE
Although the recently announced two‑week ceasefire deal has eased immediate pressure on energy markets, cost levels remain structurally high and volatility elevated.
"Even if the crisis is temporarily resolved, a rapid normalization of energy prices is unlikely," VCI said.
In a prolonged ceasefire scenario, which assumes improving feedstock availability and lower oil prices, some reversal in chemical prices would be plausible, Berenberg analyst Sebastian Bray said.
Reporting by Anastasiia Kozlova and Amir Orusov in Gdansk, editing by Milla Nissi-Prussak
Source: Reuters