Global financial markets experienced a volatile week, marked by concerns regarding the valuation of technology companies, rising energy prices, and shifting credit risks. Driven by escalating geopolitical threats in the Middle East, Brent crude oil surged to $116 per barrel, immediately driving up raw material costs and energy-intensive production expenses across value chains in the chemical sector. Simultaneously, persistent inflation concerns pushed one-year inflation expectations in the U.S. to 4.7%. Despite stock market fluctuations, key U.S. macroeconomic indicators remained surprisingly resilient, with initial jobless claims falling to 194,000. The U.S. PMI rose to 56.0; however, strong industrial demand led to an extension in supplier delivery times—the sharpest increase since July 2022—signaling longer lead times for chemical products. A “flight to quality” within the fixed-income market triggered a major rally in U.S. bonds, even as traditional buyers of government securities pulled back. Higher global yields have exposed significant fiscal instabilities in Europe, where France’s sovereign spread against Germany has widened to 170 basis points, also pushing up Italian spreads. This credit strain in Europe presents an emerging counterparty risk for traders dealing with mid-sized buyers in the Eurozone. Regionally, China’s GDP exceeded forecasts at 4.5%, offering a stabilizing signal regarding demand from Asian manufacturing hubs. In the United Kingdom, inflation accelerated to 3.5%, while the Eurozone PMI fell to 51.9, as high energy costs continued to weigh on European industrial production.

What to expect this week

Looking ahead, trading desks face a critical week packed with significant economic data, central bank announcements, and key corporate earnings. Both the Federal Reserve and the European Central Bank are expected to keep interest rates steady during their respective monetary policy meetings, even though markets continue to price in future rate hikes in the United States. Persistently high interest rates will keep the costs of carrying inventory and financing working capital elevated for trading firms. The Fed’s decision will be closely followed by US PCE inflation data—forecast at 3.6%—along with third-quarter GDP figures. Insights into upstream demand will also be gleaned from US durable goods orders, consumer confidence indicators, and regional Federal Reserve surveys. In Europe, market participants will be closely monitoring the Eurozone’s third-quarter GDP, flash inflation readings, and UK housing data (following the budget announcement) to gauge the resilience of regional consumption. In Asia, upcoming official Chinese PMI figures for the manufacturing and non-manufacturing sectors will provide a crucial signal regarding the capacity for industrial chemical absorption. Meanwhile, data releases for the Japanese economy—including PPI inflation and industrial production—will indicate whether the Bank of Japan is accelerating its tightening cycle. Finally, major earnings reports from the industrial, telecommunications, airline, and technology sectors—including GE, Meta, and Tesla—will shed light on global capital expenditure trends for the coming quarter.

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Exports Remain High, but the Trend Is Changing

In 2025, EU exports of chemicals and related products to countries outside the Union reached €605 billion, an increase of 7% compared with the previous year. The sector recorded a trade surplus of €257 billion.

However, the picture deteriorated in 2026. According to Cefic, EU chemical production fell by 2% between January and July compared with the same period in 2025, while the value of exports to non-EU markets declined by 4.2%.

These figures highlight the difficulties facing the sector as it attempts to sustain growth amid weak demand and intensifying international competition.

What Are the Main Causes?

European manufacturers face high production costs, uncertainty over raw material supplies, and competition from producers outside Europe. As a result, some companies are reducing output, while pressure on profit margins continues to increase.

For chemical traders and buyers, this may lead to changes in product availability, prices, and delivery terms. At the same time, weaker demand could create opportunities to negotiate more competitive prices for certain products.

What Can We Expect?

In the coming months, the performance of the European chemical sector will depend on a recovery in demand, raw material price movements, and manufacturers’ ability to improve their competitiveness.

The main challenge for Europe’s chemical industry is to preserve its production base and international market position amid increasing competitive pressure.

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Recent developments indicate a clear softening across major importing markets:

• Sulphur prices have fallen by approximately $40–150/tonne in several importing markets.
• Middle Eastern producers reduced September contract values by up to $40/tonne compared with August.
• Kazakh sulphur cargoes have returned to international markets, with shipments reported to Morocco and Mediterranean destinations.

Prices have weakened in major markets including India, China and Indonesia, while offers from Middle Eastern and Canadian suppliers have also eased. September contract settlements in the Middle East were either rolled over or reduced by $10–40/tonne, reflecting weaker import-market fundamentals.

The main factor behind the downturn is the deterioration in fertilizer economics. Higher sulphur costs have compressed margins for phosphate producers, encouraging some manufacturers to reduce operating rates or delay purchases.

The situation is also affecting individual producers. In South Africa, Foskor has returned to the sulphur market after abandoning an earlier tender because of high offers. The company has reportedly been unable to produce MAP since April due to sulphur shortages. Meanwhile, Libya’s NOC recently awarded a sulphur tender at lower price levels.

However, the market may not be heading toward a sharp correction. Sulphur inventories remain relatively tight, and a prolonged reduction in sulphur purchases could eventually constrain phosphate production. This could provide a floor to the decline in sulphur prices.

Sulphur price movement

The reported decline of $40–150/tonne across importing markets illustrates the magnitude of the recent correction.

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Despite the World Cup and a shortened week due to the US Independence Day holiday, last week delivered a slew of interesting economic data and market action. The overarching themes were a cooling of the US labor market, which helped moderate recent rate-hike fears, mixed legal judgments regarding the outlook for Federal Reserve independence, and further equity market rotation amid somewhat higher yields.

America’s June jobs report, released on Thursday due to the federal holiday, was the marquee data release. Nonfarm payrolls increased by 57,000, about half the consensus forecast, while the estimates for the previous two months were revised lower. The unemployment rate ticked down to 4.2% from 4.3%, as the labor force participation rate slipped from 61.8% to 61.5%. Combining all these numbers with solid earnings growth suggests that the supply side is currently the dominant driver of the labor market.

The Federal Reserve remained a focal point throughout the week, and not just because of less hawkish market expectations for rate hikes this year. New Fed Chair Kevin Warsh made it clear again that he is shifting the central bank away from explicit forward guidance. Judging from the remarks of governors attending the annual ECB Forum in Sintra, his reform-oriented approach seems to be acting as a catalyst for other major central banks – including an ongoing shift, to quote ECB President Christine Lagarde, from forward guidance to framework guidance. Meanwhile, at home, the Supreme Court opted by a narrow majority of one for a “procedural judgment” on the Lisa Cook case, preserving her job at the Fed but sending ambiguous signals about some underlying issues.

On trade, the US opted not to renew the agreement with Canada and Mexico in its current form. This will shift the USMCA to annual reviews.

After weeks in the co-pilot seat, the Strait of Hormuz took a back seat last week with the further relaxation of production and shipping constraints. This continued to deflate the oil risk premium, sending Brent crude prices to the low $70s per barrel and WTI below that level. This is a welcome respite for the global inflation outlook, which was supported last week by better-than-expected readings out of Europe and some other countries.

Despite the softer jobs data easing rate expectations, risk assets had a turbulent week beneath the surface. The AI and semiconductor trade remained volatile, both in the US and especially in Korea. This followed a solid end-of-quarter performance for stocks overall—an outcome not shared by Bitcoin, gold, and oil.

The Week Ahead

Looking ahead to the coming week, the markets return from the long US holiday weekend to a calendar focused on the health of the services sector, central bank minutes, and early consumer-facing earnings.

The US ISM Services PMI will serve as a gauge of whether the services sector is keeping pace with AI in driving economic expansion. This will come just before the release of the Fed minutes from the June 16-17 FOMC meeting, which will provide the first (partial) behind-the-scenes look at the committee’s deliberations under Chair Warsh. Recall that the Chair opted out of the dot plot—signaling his distaste for this approach to communication—and that there remains a tricky balance within the FOMC between those worried about sticky inflation and those more focused on potential labor market vulnerability.

As the UK heads toward appointing a new Prime Minister this month, this week’s report on fiscal issues by the Office for Budget Responsibility (OBR) will provide a sense of the new government’s room for maneuver. We also get the Bank of England’s Financial Stability Report, which is always an interesting and important read.

China releases its June CPI and PPI figures, offering further insight into the health of the domestic economy. China’s data release is one of several price-related releases this week.

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One of the most significant trends is the increasing use of artificial intelligence across the chemical value chain. AI-powered tools are helping manufacturers optimize production processes, improve predictive maintenance, accelerate product development, and enhance supply chain management. While adoption remains uneven, industry experts expect AI to become a major competitive advantage over the coming years.

Sustainability continues to influence investment decisions. Chemical producers are expanding efforts in recycling technologies, renewable feedstocks, carbon reduction initiatives, and circular economy projects. Customers and regulators increasingly expect products with lower environmental impact, encouraging companies to invest in greener solutions.

At the same time, the industry faces ongoing pressure from global overcapacity in several petrochemical segments, particularly due to capacity expansions in Asia. This has resulted in margin pressure and production rationalization in Europe and other regions. Several manufacturers have announced restructuring programs, plant closures, or capacity reductions in response to challenging market conditions.

Supply chain resilience remains another strategic priority. Geopolitical tensions and regional conflicts have highlighted the importance of secure sourcing, diversified suppliers, and logistics flexibility. Many companies are reassessing procurement strategies to reduce risks associated with global disruptions.

Looking ahead, the chemical sector is expected to remain focused on innovation, operational efficiency, and sustainability. Companies that successfully combine technological advancement with resilient supply chains and environmental responsibility are likely to be best positioned for long-term growth.

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1. Fertilizers: Geopolitical Supply Shocks & Price Surges
The fertilizer sector is heavily exposed to the escalation of the Middle East conflict, creating highly tight, supply-led market conditions.

The Strait of Hormuz Blockage: Roughly one-third of the global fertilizer trade and 20% of global oil supplies transit through the Strait of Hormuz, where maritime shipping has faced heavy disruptions.

Urea Price Spikes: Since shipping bottlenecks intensified, global urea prices have surged by 45% to 55%. Major benchmarks like Egypt FOB (Freight on Board) have strengthened toward the high-USD 480s per tonne, and Brazil CFR (Cost and Freight) has moved firmly into the mid-USD 450s.

The Margin Squeeze & Probes: Soaring fertilizer and fuel costs are pushing global farmers to a breaking point, sparking a major industry-wide investigation by the US Federal Trade Commission (FTC) into potential anticompetitive pricing by major domestic fertilizer cartels.

The Bio-Fertilizer Shift: Because chemical fertilizers are hit by severe structural cost inflation, global agricultural sectors are accelerating a pivot toward soil biology. Agritech firms are rolling out bio-fertilizers that help farmers reduce their chemical fertilizer reliance by up to 40% while maintaining crop yields.

2. Global Chemicals: Overcapacity and Asset Rationalization
In stark contrast to tight fertilizer supplies, the broader chemicals sector is navigating a prolonged downcycle characterized by historic overcapacity and tepid demand.

The Capital Cycle Trough: Experts from Deloitte and S&P Global indicate that global chemical production growth will remain sluggish at roughly 2.0%. Profit margins have been severely squeezed because global capacity expansions have vastly outpaced actual demand.

The Rise of China’s Chemical Dominance: China’s aggressive domestic self-sufficiency policies have expanded its global chemical market share to an astonishing 46%. Its heavy build-out of basic polypropylene and petrochemical capacity has created a massive wave of low-priced imports flooding Western markets.

Plant Shutdowns and Restructuring: Unable to compete with cheaper, low-cost feedstock operations in the US and Qatar, higher-cost regions like Europe are experiencing major asset rationalization. Massive infrastructure closures—such as ExxonMobil’s permanent shutdown of its Mossmorran ethylene cracker—are accelerating as companies aggressively cut structural costs.

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The measure is expected to improve supply and reduce prices for nitrogen fertilizers, which are essential for grain and crop production. However, import restrictions on Russia and Belarus remain in force.

According to experts, the move could help stabilize the fertilizer market and limit further increases in food prices across Europe.

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Wishing you a joyful Easter filled with peace, hope and harmony. May this season bring continued success and prosperity to our partnership.

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One of the main drivers of instability is geopolitical conflict affecting key trade routes and producing regions. Recent tensions involving Iran have raised concerns about shipping through the Strait of Hormuz, a critical passage for fertilizers and related inputs such as sulfur and ammonia. Nearly half of global urea and sulfur trade and about 20% of the natural gas used in fertilizer production pass through this corridor, meaning disruptions could quickly raise costs worldwide.

At the same time, the industry continues to feel the lingering effects of the Russia–Ukraine war, which significantly disrupted nitrogen fertilizer exports and reshaped global trade flows. Reduced Russian exports and new tariffs in Europe have redirected supplies toward markets such as Brazil and India, tightening availability elsewhere and contributing to price volatility.

Prices are already showing signs of renewed pressure. In early March 2026, global fertilizer prices rose by about 6.5% within days, surprising analysts who expected stabilization alongside cooling commodity markets. Higher fertilizer costs are increasingly being viewed as a potential driver of global food inflation, especially during key planting seasons.

Farmers around the world are feeling the impact. In the United States, fertilizer expenses for major crops such as corn are expected to increase again in 2026, with average costs projected around $166 per acre, up more than 5% from the previous year. Higher input costs combined with lower crop revenues are squeezing farm margins and forcing producers to reconsider planting strategies.

Despite these challenges, the industry is also undergoing structural change. Countries heavily dependent on imports are investing in domestic fertilizer production to improve supply security. For example, Brazil is expanding projects that convert agricultural waste into fertilizer, aiming to reduce reliance on imports that currently account for about 85% of the country’s fertilizer consumption.

At the same time, technological and environmental trends are reshaping the sector. The market for sustainable and organic fertilizers is growing rapidly, and analysts expect eco-friendly products to capture a larger share of the global market in the coming years.

Looking ahead, analysts believe fertilizer markets will remain sensitive to geopolitical events, energy prices, and trade policies. While some forecasts suggest prices could ease if export restrictions relax and supply improves, ongoing conflicts and concentrated global production mean volatility is likely to remain a defining feature of the fertilizer industry in the near term.

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