Global Chemical Trade Faces Policy Shifts and Market Volatility in 2025

The global chemical trade landscape is undergoing significant transformations in 2025, shaped by regulatory reforms, supply chain disruptions, and emerging market dynamics. From Europe’s carbon border tax adjustments to China-ASEAN trade pacts, industry stakeholders are navigating a complex environment marked by both challenges and opportunities.

1. EU Carbon Border Tax Reshapes Trade Flows

The EU’s Carbon Border Adjustment Mechanism (CBAM), set to fully take effect in 2026, is already altering trade patterns. While 80% of small importers are exempted from the tax under revised rules, major exporters of high-carbon products like fertilizers and aluminum face steep compliance costs . For instance, Asian manufacturers of fertilizers—a sector with high energy intensity—must accelerate low-carbon technologies to remain competitive in European markets. Meanwhile, EU-based chemical firms, such as BASF, are investing in green hydrogen and electrified production processes to reduce their carbon footprint .

The CBAM’s transitional phase (2023–2025) requires exporters to report emissions, creating administrative burdens for global suppliers. Chinese exporters, who account for a significant share of EU chemical imports, are adopting renewable energy and carbon capture technologies to mitigate risks . However, smaller enterprises may struggle to meet these standards, potentially widening the gap between industry leaders and competitors.

2. China-ASEAN Free Trade Agreement 3.0 Boosts Regional Integration

The conclusion of the China-ASEAN Free Trade Area (CAFTA) 3.0 negotiations in late 2024 signals a new era for chemical trade in Southeast Asia. The agreement, set to be ratified in 2025, focuses on digital trade, green industries, and supply chain resilience . Key highlights include:

• Lower tariffs on specialty chemicals, polymers, and agrochemicals.

• Streamlined customs procedures, reducing clearance times for cross-border shipments.

• Collaboration on green chemistry, such as bio-based materials and circular economy initiatives.

For example, China’s export of lithium-ion battery materials to ASEAN—driven by electric vehicle demand—is expected to surge under the agreement. Meanwhile, ASEAN’s palm oil-based chemicals, including surfactants and biodiesel, will gain better access to Chinese markets .

3. Commodity Price Volatility and Supply Chain Risks

Global chemical markets are grappling with price swings and supply chain bottlenecks. In March 2025, bromine prices surged 12% to $2,800 per ton due to delayed imports from Israel and Jordan amid Middle East tensions . This disruption, combined with declining domestic production in China, has strained downstream industries like flame retardants and pharmaceuticals.

Organosilicon products, critical for electronics and renewable energy, are also experiencing recovery. After years of oversupply, prices of dimethyl carbonate (DMC)—a key organosilicon intermediate—rose 9.88% in February 2025, driven by reduced output and seasonal demand . Analysts predict further gains as capacity expansions slow and applications in solar panels and 5G infrastructure grow .

4. Emerging Markets and Technological Innovation

India and the Middle East are emerging as growth engines. India’s chemical sector, projected to reach $300 billion by 2025, is attracting investments in specialty chemicals and agrochemicals . Meanwhile, Middle Eastern producers like Saudi Basic Industries Corporation (SABIC) are diversifying into high-value products, such as bio-based polymers and green hydrogen .

Technological breakthroughs are reshaping production. China’s Wanhua Chemical, a global polyurethane leader, is investing $2.3 billion in a lithium iron phosphate battery material park in Shandong, targeting the EV and energy storage markets . Additionally, bio-based materials like cellulosic ethylene glycol—produced from agricultural waste—are gaining traction, with China achieving pilot-scale production in 2024 .

5. Sustainability and Circular Economy Trends

Governments and corporations are prioritizing sustainability. China’s 2025 “Government Work Report” emphasizes recycled materials, aiming for a $700 billion waste recycling industry by 2030 . Companies like Covestro and Dow are expanding chemical recycling capacity to reduce reliance on fossil fuels.

In Europe, the EU’s battery regulations mandate minimum recycled material content by 2031, driving demand for advanced recycling technologies. Meanwhile, green hydrogen projects, such as BASF’s $1.5 billion electrolyzer in Germany, are poised to decarbonize industrial processes .

Outlook: Navigating Uncertainty

The chemical trade sector faces a dual challenge of meeting sustainability goals and adapting to geopolitical shifts. While growth in Asia and emerging markets offers opportunities, supply chain fragility and regulatory complexity remain hurdles. Companies that prioritize innovation, regional partnerships, and circular economy practices will likely emerge as leaders in this evolving landscape.

Stay tuned for updates on trade policy developments and market trends in the coming quarters.

Key Data Points:

• Global chemical production growth: 3.1% in 2025 (APAC-driven) .

• EU chemical imports from China: $65 billion in 2024 (up 8% YoY).

• India’s specialty chemicals market: $60 billion by 2025 (12% CAGR) .

• Green hydrogen investments: $30 billion globally in 2025 .

Source: Financial Times, ICIS, and industry reports.