PwC Outlook Reveals Industry Under Pressure as Perfect Storm Builds

On the most significant findings from the report:

The chemicals sector is full of uncertainty, Fiore said. Commodity prices have plummeted due product flooding the market from China, which has been unloading its overcapacity into the global market. The lower prices have had a negative impact on most industry earnings.  

“Given that there are very few pure-play chemical producers, they're all impacted by the fact that commodity prices are being driven so low right now,” Fiore said. “The chemical sector typically follows the industrial sector in terms of its cycle. While we're seeing an industrial cycle that looks interesting and has some promise and is obviously seeing some benefits from AI, electrification, policy-backed things happening in aerospace and defense and even the uptick in reshoring in the U.S., it is not yet there.”

But the gains achieved in the general industrial sector haven’t yet led to increased demand for the chemical industry, Fiore added. The one exception is in specialty chemicals, with many of the mega deals involving producers in this space, such as BASF’s sale of its coatings business to global investment firm Carlyle and the OxyChem sale.

“Specialty looks OK, and that's where a lot of people placing their bets, including private equity,” Fiore said.

In Europe, many producers are opting to shutter facilities due to the regulatory climate. Many manufacturers in volatile markets like Europe are evaluating whether it makes more sense to exit an underperforming facility or seek a deal. The deals are not happening overnight, Fiore said, with many taking 18-24 months to materialize.

“They're going through a lot of permutations and combinations before they actually do get contemplated into a real transaction of assets,” he said.

In the near-term, more carve outs are likely on the horizon versus full-scale acquisitions.

On policy tailwinds and reshoring:

Some deal activity in the U.S. is aligned with initiatives to bring manufacturing closer to home. Federal incentives for advanced materials, energy transition inputs and domestic manufacturing are building momentum for investment in downstream specialties. These incentives are also prompting multinationals to reassess global footprints, further fueling the trend toward simpler, more regionally focused portfolios, according to the PwC report.
“It ties back to the broader case of the carve outs within chemicals that we see happening and the overall movement and shedding of assets here and there,” Fiore said. “Within the U.S., I think there's a general push for more production.”

On the role of AI and digital tools in M&A evaluations:

PwC noted that AI-enabled tools are transforming how buyers assess operational performance and value creation potential. Many buyers are using artificial intelligence to analyze advanced scenarios or generate data-driven margin forecasting. These early adopters are achieving faster diligence, tighter integration, and better execution across increasingly complex separation environments.

“AI isn't telling them what to do; it's helping them run analysis and look at more scenarios as they plan,” Fiore said. “In terms of what we are seeing at PwC as we conduct diligence for chemical companies who are looking at assets as well as private equities who are looking in the space, AI is weaving its way in through all of our core diligence.”

For example, PwC looks at portfolios of large chemical companies and trends within their value chains to identify potential deals and the financial result.

“So we might take an asset out of a larger portfolio and look at what would be the P&L around that asset? What would it look like on its own if a private equity were to run it standalone, or what would those synergies potentially be if another large chemical company either bought that asset or integrated it into their footprint?” 

On 2026 projections:

“I can't talk about specific deals, but I will tell you that we're engaged right now with both private equities looking at transactions as well as corporates looking at acquisitions and divestitures,” Fiore explained. “They're actively looking at their portfolio, and they're considering various deals. Private equity is significantly more targeted and focused on assets that they believe are either underappreciated or have not had the proper investment within the portfolio of the larger companies. On the corporate side, it's a game of uncertainty. They are thinking about what are the things that give them clarity. So, again, they look at the market, and they will all tell you the overproduction and the dumping that's coming out of the China supply is affecting the way they think about the market. There are assets within their portfolio that they have more clarity or more line of sight to the future, and they’re saying OK, this is a keep and we're going to hold this and maybe we can't invest on it significantly right now because we don't have the prices across our portfolio that's going to let us reinvest, but we're going to hold that because we believe there's value there. Just the same, there are other assets they believe that are truly non-core and it doesn't help them in any way.”

Fiore speculated that major chemical companies whose stock prices have fallen considerably could become acquisition targets as commodity producers look to enable further efficiencies and drive down costs by scaling their regional footprint.

While Fiore said he has no direct knowledge of specific major transactions in the pipeline, he believes such deals are possible given current market conditions. Companies with stronger, more balanced portfolios that blend specialty and commodity chemicals could pursue large acquisitions of undervalued competitors. Private equity firms are also evaluating take-private scenarios where they would aggressively restructure operations, reduce costs and tightly manage businesses through the downturn.

“I think that they're looking at that right now,” Fiore said.

Read the full report from PwC.