Citi sees hope for the European chemicals sector in 2026

Covestro AG

11/12/2025 09:29

** Citi identifies several factors which could turn the tide on a challenged European diversified chemicals sector in the next year

** Although it acknowledges the sector is facing "structural and cyclical" difficulties, the broker sees the average 3% further downside to forecasted 2026 EBITDA as already reflected in share prices

** Broker notes how underlying demand in key end markets "should eventually improve" as signals for a cycle turn are on the horizon

** Sector should also indirectly benefit from fall in gas and power prices, as well as from subsidised industry power price in Germany, it says

** Protection of EU industry from Chinese imports, although unlikely on a broad basis, "could lead to upside" in individual cases, it adds

** As for corporate action, most companies are undergoing savings programs and the broker sees further possibilities for consolidation

** It sees Lanxess LXSG.DE, BASF BASFn.DE and Arkema AKE.PA coming out on top of its risk/reward assessment

** It cuts Clariant CLN.S to "neutral" from "buy" due to concerns for its ethylene price-fixing cartel litigation

** It upgrades Covestro 1COVG.DE to "buy" from "neutral" following closure of the deal with ADNOC

 (Reporting by Emanuele Berro)

 ((emanuele.berro@thomsonreuters.com))