The chemical industry is a business of processing, using chemical reactions to turn raw materials, such as coal, oil, and salt, into a variety of products. During the 19th and 20th cent. technological advances in the chemical industry dramatically altered the world's economy. Chemical processes have created pesticides and fertilizers for farmers, pharmaceuticals for the health care industry, synthetic dyes and fibess for the textile industry, soaps and beauty aids for the cosmetics industry, synthetic sweeteners and flavours for the food industry, plastics for the packaging industry, chemicals and celluloid for the motion picture industry, and artificial rubber for the auto industry.

Chemical industries can be traced back to Middle Eastern artisans, who refined alkali and limestone for the production of glass as early as 7,000 B.C., to the Phoenicians who produced soap in the 6th cent. B.C., and to the Chinese who developed black powder, a primitive explosive around the 10th cent. A.D. In the Middle Ages, alchemists produced small amounts of chemicals and by 1635 the Pilgrims in Massachusetts were producing saltpetre for gunpowder and chemicals for tanning. But, large-scale chemical industries first developed in 19th cent. In 1823, British entrepreneur James Muspratt started mass producing soda ash (needed for soap and glass) using a process developed by Nicolas Leblanc in 1790. Advances in organic chemistry in the last half of the 19th cent. allowed companies to produce synthetic dyes from coal tar for the textile industry as early as the 1850s.

In the 1890s, German companies began mass producing sulphuric acid and, at about the same time, chemical companies began using the electrolytic method, which required large amounts of electricity and salt, to create caustic soda and chlorine. Man-made fibers changed the textile industry when rayon (made from wood fibres) was introduced in 1914; the introduction of synthetic fertilizers by the American Cyanamid Company in 1909 led to a green revolution in agriculture that dramatically improved crop yields. Advances in the manufacture of plastics led to the invention of celluloid in 1869 and the creation of such products as nylon by Du Pont in 1928. Research in organic chemistry in the 1910s allowed companies in the 1920s and 30s to begin producing chemicals for oil. Today, petrochemicals made from oil are the industry's largest sector. Synthetic rubber came into existence during World War II, when the war cut off supplies of rubber from Asia.

Since the 1950s growing concern about toxic waste produced by chemical industries has led to increased government regulation and the establishment of the Environmental Protection Agency (1972). The leakage of toxic chemicals at the Union Carbide plant in Bhopal, India (1984), was the worst industrial disaster in history and heightened public concern about lax environmental regulations for chemical companies in developing countries. Beginning in the 1980s, U.S. corporations faced expanding competition from foreign producers, including some Third World oil producers who have set up their own oil refining and petrochemical industries. In 1997 the U.S. chemical industry produced about $389 billion worth of products and employed 1,032,000 workers. It exported about $71 billion worth of chemicals.