The chemical industry could be in for a turbulent 2025 spurred by increased demand, cost inflation and President-elect Donald Trump‘s PFAS policies.

The Chemicals Analyst: Bank of America analyst Steve Byrne released a note covering the chemicals industry on Tuesday, upgrading and downgrading several companies:

• Archer-Daniels-Midland Co (NYSE:ADM) from Neutral to Underperform, lowering its price target from $63 to $54.
• Celanese Corporation (NYSE:CE) from Underperform to Buy, lowering its price target from $95 to $88.
• Eastman Chemical Co (NYSE:EMN) from Neutral to Buy, lowering its price target from $115 to $109.
• Element Solutions Inc (NYSE:ESI) from Buy to Neutral, lowering its price target from $32 to $28.
• FMC Corp (NYSE:FMC) from Underperform to Neutral, lowering its price target from $63 to $61.
• Olin Corp (NYSE:OLN) from Neutral to Buy, lowering its price target from $48 to $40.
• Origin Materials Inc (NASDAQ:ORGN) from Buy to Underperform, lowering its price target from $2.50 to $1.50.

Main Takeaways: Agriculture stocks faced a decline in the waning months of 2024, amid market concerns over potential trade policies under President-elect Trump and the impact of rising interest rates linked to the federal deficit. Byrne believes the market has already re-priced higher risk.

The analyst believes chemicals will see increased demand with a caveat.

“We expect end-market demand to grow this year, although we’ve pared back expectations, given incremental headwinds from tariff concerns, a strong USD, and higher interest rate expectations, among others,” Byrne said. “Still, the U.S. Manufacturing PMI has been surprisingly weak and the risk-reward is skewed positively in our view.”

Meanwhile, the analyst foresees a return of inflationary pressures on input costs, squeezing margins.

Byrne says Trump’s election win and a possible “trade war” could slow GDP growth and hurt chemical companies’ bottom lines. He notes deregulation and lower corporate taxes as a positive. The analyst suggests that Trump’s weakening of the EPA could pause certain regulatory initiatives, potentially increasing litigation risks for PFAS manufacturers.

Company Takeaways: Byrne cited declining profitability and increased macroeconomic risk for his Archer-Daniels-Midland downgrade.

The analyst upgraded Celanese’s stock based on an expected demand recovery, an attractive valuation and potential benefits from shareholder activism.

Eastman Chemical took a severe hit in 2024’s fourth quarter. Byrne says the market’s sell-off was “overdone” and is optimistic for future revenue and earnings growth.

Byrne downgraded Element Solutions and said there is better opportunity elsewhere. He noted possible currency headwinds.

FMC could face a tough recovery from its struggles in 2024, but Byrne is optimistic that the company’s EBITDA can rebound. The analyst says market multiples are “appropriately reflecting risks.”

Byrne says Olin’s valuation is “highly attractive” due to its high free cash flow yield. The analyst also said the company is insulated from Trump administration risks.

The analyst’s downgrade of Origin Materials is linked to doubts that the company will be able to license its technology and possible headwinds for sustainable products.

Price Action: Several of the companies showed sharp movement following the analyst’s note:

• Archer-Daniels-Midland traded at $51.18, down 1.8%.
• Celanese Corporation traded at $71.97, up 6.81%.
• Eastman Chemical traded at $91.77, up 2.99%.
• FMC Corp traded at $53.16, up 2.17%.
• Olin Corp traded at $33.10, up 4.38%.
• Origin Materials traded at $1, down 9.9%.

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