
EUR Chemicals Cheat Sheet: 3Q25 Preview
Laurent Vergnault - Head of Chemicals, Paper & Packaging, CreditSights
22 October 2025
Insights into European Chemicals 3Q25 Preview, including:
Market dislocation and yield expansion: Why European HY Chemicals yields jumped 100bp to 7.5% in October 2025—exceeding April Liberation Day levels—with the sector underperforming the Index by 230bp versus 140bp in September, driven by petrochemical producer weakness rather than sudden fundamental deterioration.
Petrochemical structural oversupply: How companies with high petrochemical exposure—including Dow, LyondellBasell, Westlake (IG), and Kem One, Synthomer, INEOS entities (HY)—face persistent margin pressure from structural overcapacity continuing into 2026 and beyond, with negative rating actions across multiple issuers.
EBITDA guidance revision cycles: Why analysts have revised 2025 EBITDA projections downward post-2Q25 for Covestro (-12%), BASF, Akzo Nobel, Sika (-2%), Arkema (-2.8%), and Syensqo (-3.6%), with Covestro’s consensus now at €810mn versus original €900mn mid-point guidance excluding Dormagen incident impact.
Specialty chemicals defensive positioning: How producers with lower commodity cyclicality—including Air Liquide, Linde, Syensqo, and Arkema—demonstrate more resilient earnings profiles despite macroeconomic uncertainties affecting automotive, construction, manufacturing, and crop science end-markets.
Event risk and activist pressure: Which companies face heightened credit deterioration risks from M&A leverage (BASF’s €7.7bn Coatings sale to Carlyle, Air Liquide’s €2.85bn DIG Airgas acquisition), activist shareholder demands (Cevian’s 5% Akzo Nobel stake), and refinancing pressures (INEOS Quattro’s €800mn debt due January 2027).
Executive Summary
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- In this piece we highlight the main updates in our EUR Chemical coverage (IG & HY) since the 2Q25 results, and what to look out for ahead of the release of the 3Q25 results. We focus on market conditions, expected operating performance, and ongoing or potential strategic projects.
- European chemicals bonds have been hit hard in October, with a dramatic increase in yields in the EUR HY Chemicals space exceeding the levels from April after the Liberation Day sell-off. The sector has experienced significant repricing during this period.
- The sell-off has most likely been driven by negative developments on specific companies including readacross from Braskem, news on INEOS and other petrochemicals producers. The restart of the US-China trade tensions has also contributed, rather than a sudden deterioration in the fundamentals of the chemicals industry.
- The 3Q25 results and updates on outlooks will help confirm whether the hit taken by chemicals bonds in October has been justified. Market participants will assess whether this represented an overreaction from the market.
- Most companies have guided for similar market conditions in 2H25 compared to 1H25, marked by continued soft global demand, tariff uncertainties, and FX headwinds. Petrochemicals producers remain at the greatest risk.
- M&A plans have been progressing well for Air Liquide and BASF, while ADNOC has worked on remedies to obtain EU’s approval for the takeover of Covestro. We remain wary of activist Cevian’s plans, which has increased its stake in Akzo Nobel.
- There have been several rating changes in our coverage since our last preview report across both investment grade and high yield issuers. We have withdrawn coverage of OCI following the redemption of its outstanding bond.