The European chemical industry is facing a critical crisis, with investments plummeting, capacity closures soaring, and investors seeking greener pastures. The EU's stringent regulations and soaring energy costs are choking the industry, pushing it towards a breaking point. The sector, a vital supplier of goods and materials to essential industries, is witnessing a dramatic decline in market share, from over 27% in 2004 to just 12.6% in 2024. This accelerated shrinkage is not solely due to the EU's sanctions on Russia and the loss of cheap pipeline gas. The industry's competitiveness is further threatened by sky-high energy costs and climate-related regulations, which prioritize emission reduction over competitiveness.
The Financial Times reports an 80% plunge in investments last year, with capacity closures reaching 37 million tons, representing 9% of total capacity. This has led to 20,000 job cuts and a slump in new investments, pushing the industry to the brink. The head of Cefic, Marco Mensink, warns of a severe stress and breaking point, with the rate of closures doubling in a year and annual investments close to zero. The industry's struggle is exacerbated by Chinese competition, which is building more capacity than demand in certain sectors, and low-cost U.S. competition following recent trade deals.
The Wall Street Journal highlights the grim situation, noting that companies like Saudi SABIC and Exxon are divesting from Europe due to high energy costs, CO2 emission costs, and weak demand. Two chemical producers have even filed for insolvency for several subsidiaries. The industry's importance cannot be overstated, as it is essential for sectors like car manufacturing and defense, which are vital to the EU's economy.
The crisis demands a complete reversal of priorities for decision-makers in political circles. Removing emission reduction from the top priority list is crucial to giving the European chemical sector the chance it desperately needs. The future of the industry hangs in the balance, with the potential for a significant impact on the EU's economy and global competitiveness.
