The chemical sector is creeping toward distress as slowdowns in construction and housing exacerbate problems that have been weighing on the industry since the pandemic.
Destocking sparked by the fallout from Covid-19, competition with Chinese and Asian manufacturers, and trade uncertainty sparked by US tariff policy are leading companies to flash warning signs and seek solutions as the headwinds mount.
This week, 9fin reported on two chemical companies seeking funding to address their liquidity needs. Whitening agent maker Tronox is in talks with Goldman Sachs about potentially raising a $300m senior secured bond while existing lenders and third parties are evaluating lending to KIK Consumer Products as its stares down its own potential cash crunch, with that company likely needing $100m to $200m.
Other companies in the space are feeling the pain. The chemical sector is among the worst-performing segments in the S&P 500 in the last year, down 3.9% over the last 12 months while the index is up around 19% for the same period.
The pressure is particularly acute for basic or commodity chemical manufacturers, which mass produce substances used as raw materials across industries. Specialty chemical makers that produce more bespoke formulations are better insulated from the trends hurting the commodity names.
“For the specialty guys, at least the margins are there,” said a buysider familiar with the sector. “But for the commodity chemical companies, it’s much more competition from China that’s flooding certain markets.”
Housing slump
Pricing on products such as titanium dioxide, epoxy resins, and most performance additives have slid, hurting the bottom line even as companies grapple with bloated inventories that have dogged them since the Covid era.
For instance, titanium dioxide prices in North America have dropped from around $3,500/ton in February 2022 to around $2,570/ton in September 2025 and are expected to decline further to around $2,300/ton over the next 12 months. Epoxy resin has followed a similar trend, dropping from $5,430/ton in February 2022 to $3,430/ton currently and is expected to slide down further to $2,620/ton over the next 12 months.
Weakness in end-user segments, particularly the housing construction industry, aren’t helping matters. Those sectors have seen a prolonged slowdown due to high interest rates, lower confidence among new buyers, elevated materials costs and a general apprehension about the housing market amongst most builders.
In May, new housing starts, an indicator of construction activity, reached a five-year low while permit applications, especially for single-family homes, has been on a continuous downward trend, indicating fewer new projects planned. The general pessimistic outlook towards the construction industry has been one of the big reasons for the slowdown in volume offtakes in the chemical industry.
The manufacturing industry, another major end-user segment for chemicals, also faces similar problems with a global economic slowdown leading to decreased production, which has hit demand for resins and specialty chemicals particularly hard.
‘Economic malaise’
Bankrupt nylon maker Ascend Performance elaborated on some of those challenges in stark terms in its first day declaration filed 21 April.
“Despite its strong performance and leading position in the industry, Ascend has faced significant headwinds since mid-2022 due to global economic malaise, reduced demand, and increased competition out of China,” chief restructuring officer Robert Del Genio wrote.
“Several of the key end markets for Ascend’s downstream and chemical intermediates businesses, including the manufacturing industry, have been slow to recover to pre-pandemic levels of production due to destocking, inflation, labor shortages, and supply chain issues.”
A key problem for Ascend was competition from China. Del Genio wrote that over the past six years, production capacity in China for chemical intermediates — chemicals used as building blocks to produce other substances — grew 93%.
To gain a foothold in international markets, Chinese chemical firms have sold intermediaries and downstream products at a loss or with support from government subsidiaries. Ascend’s customers in turn demanded prices that matched the ones offered by Chinese competitors, forcing the company to choose between ceding customers or losing out on pricing, according to the declaration. Other chemical makers are contending with similar issues.
Anti-dumping laws and tariffs
Some economies are trying to rein in the influx of chemicals with anti-dumping measures, but some of the policies also target US companies.
In July, the European Commission imposed anti-dumping duties on epoxy resins from China, Taiwan, and Thailand. Brazil put similar levies in place for polyethylene resin coming out of the US and Canada and on polyether polyols coming from the US and China, though Chinese producers will face higher duties in Latin America’s largest economy.
China itself is trying to curtail domestic price competition contributing to deflation by implementing a so-called anti-involution program that has prompted some optimism among chemical executives. On Trinseo’s second quarter earnings call last month, Chief Executive Officer Frank Bozich identified the move as “positive regulatory reforms” that “could result in the closure of older noncompetitive assets and reduced destructive industry pricing.”
At the same time, the company acknowledged that tariffs and trade uncertainty harmed sales and volumes, with the company’s debt trading lower after it reported a $67m year-over-year drop in EBITDA and a decline in net sales.
