Goldman Sachs has re-oriented its stance on European chemicals toward a more pro-cyclical outlook, issuing seven rating adjustments across the sector in a note dated Tuesday. The broker upgraded Arkema, Evonik and Symrise to Buy, raised Lanxess to Neutral, and downgraded Givaudan and Clariant to Sell. Umicore was moved down to Neutral.
The firm framed the changes as reflecting a potential turning point after an extended downturn. Goldman Sachs pointed to a combination of factors it expects will help clear expectations - trough margins anticipated in fiscal 2025, management actions including restructuring and capacity consolidation, and early signs of demand improvement.
Macroeconomic data cited by the brokerage include an uptick in U.S. manufacturing activity and related metrics. Specifically, the U.S. manufacturing PMI increased to 52.6 in January, with Goldman Sachs noting support from higher new orders and production. In addition, U.S. chemical railcar shipments - measured by railroad carload volumes - were running above seasonal norms, according to the note.
The bank also highlighted a range of policy and structural developments that it views as relevant for the sector. German fiscal infrastructure spending is expected to rise from 14 billion in 2025 to 31 billion in 2026. In China, a rollback of export tax rebates on selected chemicals and policy easing in real estate were cited as factors that could change trade and demand dynamics. Separately, industry data referenced in the report show European chemical production capacity closures reached roughly 17 million tonnes per annum in 2025, bringing total closures since 2022 to about 9% of capacity.
Market reaction to the note was immediate for several companies included in Goldman Sachs coverage changes. Shares of Arkema, Evonik, Symrise and Lanxess were reported to have risen between 5.3% and 9.4% as of 04:58 ET (09:58 GMT).
Goldman Sachs argued that diversified chemical companies now offer a more attractive risk-reward profile. The brokerage said its adjusted EBITDA estimates for 2026 are broadly aligned with consensus and sit 2.8% above consensus for 2027. On timing, the firm expects fiscal 2025 results to act as a clearing event for market expectations and noted that historically diversified chemical multiples have led earnings revisions by four to eight months.
Looking at forecast dynamics, Goldman Sachs estimates consensus next-twelve-month adjusted EBITDA numbers are likely to trough with first-quarter 2026 results. Across the sector, the bank now sees average upside of 13% to its 12-month price targets: diversified chemicals are shown with 18% potential upside, consumer ingredients at 8%, and paints, gases and specialties at 11%.
Despite the more positive stance on diversified names, Goldman Sachs retained a cautious posture on consumer ingredients. The brokerage said it expects negative volume and pricing pressures to continue for that segment, with the earliest meaningful inflection projected from the third quarter of 2026. Its adjusted EBITDA forecasts for ingredients are 2.5% below consensus for 2026 and 3.6% below consensus for 2027.
Specific downgrade rationales were explained in the note. Givaudan was downgraded to Sell amid what Goldman Sachs described as downside risk to mid-term margins tied to higher capital intensity and mix dilution. Clariants downgrade was linked to exposure to late-cycle segments and a lack of near-term catalysts. Umicore was cut to Neutral on the view that much of the re-rating already seen in battery materials has occurred, while execution risks persist.
The brokerage also observed that European chemical equities have underperformed broader markets: the SX4P index lagged the SXXP by 14% in 2024 and 23% in 2025. Goldman Sachs noted several companies are trading close to multi-decade lows on EV-to-EBITDA multiples. Nonetheless, the firm said that, while structural challenges such as overcapacity, Chinese exports and competitiveness pressures remain, accelerating capacity rationalization and easing energy costs from 2027 onward could support medium-term earnings power.
Key implications for market participants - the note signals a shift in conviction toward cyclical recovery potential in diversified chemicals, while caution remains where volume and pricing trends are still under pressure. Investors and corporate managements will likely watch FY25 results, capacity rationalization progress and energy cost trends as pivotal inputs for the sectors earnings trajectory.