Barron's Streetwise Why Chemical Stocks Have Tanked—and 3 to Consider
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Oct 24, 2025 In this discussion, Matthew DeYoe, a chemicals analyst at BofA Securities, delves into the current challenges facing the chemical industry. He explains why chemical stocks have lagged behind despite a strong market, citing factors like the industrial recession and shifts in housing demand. Matthew highlights the risks of upstream investments while advocating for downstream specialty chemicals as potential bargains. He also offers insight into specific companies like Element Solutions, RPM, and Exalta, emphasizing the unique opportunities they present.
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Cyclical Weakness Meets Structural Oversupply
- The chemical sector faces both cyclical weakness from housing and structural oversupply from China's capacity build-out.
- That combination compresses margins and delays a broad recovery for upstream commodity chemicals.
China Is Reshaping Global Demand
- China is reorienting demand toward data and energy infrastructure, reducing traditional chemical demand like housing-related plastics.
- Continued Chinese capacity additions act as a global backstop, pressuring prices in Europe and the U.S.
Stay Downstream For Now
- Avoid most upstream commodity chemical stocks until dividend cuts and oversupply clear.
- Prefer downstream, higher-value-add names with durable pricing and lower fixed-cost intensity.