There has been a perceptible rise in concern in the executive suites of many chemical companies over the past year. The concern was not just over falling share prices, though that was certainly on executives’ minds as 2018 wore on. Something more fundamental happened. Demand weakened.

Chemical production in the European Union slipped 1% in the third quarter of 2018 and another 4% in the fourth quarter, the region’s biggest quarterly decline in a decade. Chemical production in China fell almost as much in last year’s fourth quarter—3%.1 For many executives, the production declines in two of the world’s biggest markets overshadowed the continuing rise in chemical output elsewhere.

The production declines for chemical companies in Europe and China coincided with the biggest selloff in global stock markets since 2008. As a result, chemical companies had their first decline in total shareholder returns (TSRs) since 2015 and their worst TSR performance since 2012, according to Boston Consulting Group. Although stock markets have since rebounded, giving shareholders some relief, it’s still useful to look at what happened to chemical company returns in 2018 and see what can be learned.

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