For the highly cyclical chemicals sector, managing credit risk is paramount. While the APAC region drives much of the global output, the overall sector rating globally and in APAC remains at Medium Risk. This suggests that despite growth, underlying financial vulnerabilities persist, amplified by oversupply, geopolitical conflicts, and rising insolvencies. This data deep dive examines the key financial and market risks that chemicals companies must monitor in 2025, with a focus on regional financial health.
Summary
Key takeaways
Global Risk: The global and APAC chemicals sectors are rated Medium Risk for 2025.
Insolvency Wave: Taiwan (+8%) and New Zealand (+5%) are expected to see the highest growth in business insolvencies in 2025. Investment Shift: Asia (led by China) is the undisputed leader in CAPEX, responsible for 70% of total capital spending globally.
The chemicals sector is highly exposed to external shocks, particularly geopolitical risks like the Ukraine and Israel conflicts, which continue to disrupt energy prices and shipping routes. This has contributed to a dramatic redistribution of powers, with Europe losing industrial competitiveness due to high energy costs (European natural gas prices were 3.9x higher than the US last year). While Asian and US companies benefit from competitive cost advantages , the segment is still struggling with low pricing power, especially for bulk chemicals like petrochemicals, due to oversupply.
China is the world's leading consumer and producer. Its market share has significantly expanded in the last decade (from 34% to 43% of global sales). However, this rapid growth, particularly in production, has been exceeding demand levels, creating an oversupply that is putting downward pressure on prices across the region. This excess capacity is a key reason why major firms in South Korea and Japan are struggling and pivoting their strategies towards higher-value specialty chemicals.
Explore key 2025 trends in the Asia-Pacific chemicals sector, from industrial growth and sustainability to diversified supply chains shaped by post-COVID and geopolitical shifts.
The APAC region is set to see a +5% year-on-year increase in business insolvencies in 2025. While some countries that hit highs in 2024 are expected to reverse the trend (e.g., Australia at -2%, Singapore at -4%), others are seeing significant upticks due to weak external demand and the lagging effects of high interest rates. Taiwan (+8%) and New Zealand (+5%) are among those expected to see the largest growth in insolvencies. Companies must therefore carefully monitor the financial health of their suppliers and clients, as the structural shifts and trade wars could set a new record for large insolvencies, raising the risk of a domino effect.
The data shows that 2025 will be a year defined by high investment (Asia accounts for 70% of global CAPEX) and elevated risk. For chemicals players, successfully navigating the year requires not just focusing on growth markets like India and specialty chemicals, but also implementing robust risk management strategies to safeguard cash flow against the rising tide of insolvencies across the region.
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