Global mergers and acquisitions (M&A) activity in the chemical industry is expected to pull back slightly from 2018 levels but will remain robust in 2019, according to a report released by global auditing and consultancy firm Deloitte on Thursday.

"In 2019, we expect a modest decline in chemical industry M&A activity, but as demonstrated in the past, activity should still be strong despite global uncertainty," said Dan Schweller, Deloitte global M&A leader for the chemicals and specialty materials sector.

"An important trend to observe in the coming year is the impact of the digital and circular economy on chemical industry M&A," said Wolfgang Falter, Deloitte global chemicals and specialty materials sector leader. "Highly diversified companies are already leveraging digital technologies across many functions. M&A will continue to be a tool for companies to stay ahead of competitors and drive transformation," he said.

Additional M&A activity could be created as companies seek to become more innovative, digital and environmental-friendly, the report noted.

Still, global M&A in chemical industry faces challenges in 2019 from weak industrial production in many economies, trade tensions and protectionism, added the report.

In 2018, world chemical industry posted 600 M&A deals, declining to the lowest level since 2014. Still, the value of M&A in global chemical industry rebounded to 72.4 billion U.S. dollars in 2018, up from 46.4 billion U.S. dollars in 2017, according to the report.

In particular, the decreases of M&A deals in the United States, China, the United Kingdom and Germany were partially offset by increases in traditionally smaller markets like India, the Netherlands, Japan and Brazil.

The drop of M&A volumes in the United States was partially driven by rising caution in the face of interest rate hikes, stock market volatility and ongoing trade tensions, said the report.