Europe's chemicals industry: 'We're at the eleventh hour'

BY MURIEL COZIER

A new report has set out the structural pressures that are eroding the competitiveness of the European chemicals industry, as the chairman of Ineos warns that action is needed ‘or there won’t be much of a European chemical industry left to save.’

The Ineos-sponsored Oxford Economics report: Tipping Point: Threats to jobs and growth in Europe’s chemical sector, indicates that between 2019 and Q2 2025, the chemical sector in the UK contracted by 30%, with the industry in Germany, France and Belgium contracting 18%, 12% and 7% respectively.

The report highlights that, with falling output and lower profitability, Europe’s chemical producers are cutting investment relative to their global competitors. Between 2019 and 2024, the average annual growth investment in European chemical companies’ investment spending was half the rate of US counterparts, 1.5% versus 3%, the report found.

Sir Jim Ratcliffe, pictured right, chairman of chemical major Ineos, has a clear view as to what Europe’s politicians need to do. ‘We’re at the eleventh hour and there are three things that need to happen urgently. First, remove the green taxes and levies from energy costs. Second, scrap the carbon taxes. And third, give us some tariff protection. We need actions, not sympathetic words or there won’t be much of a European chemical industry left to save.’

Tom Crotty, Director of corporate affairs at Ineos, told C&I that the steep decline in the UK’s chemical sector was due to the energy and carbon policies that have made it one of the most expensive places in the world to manufacture basic materials. ‘The UK has long faced structurally higher gas prices than its competitors, and industrial energy is loaded with levies that don’t exist elsewhere. These costs have driven investment abroad and reduced domestic output,’ he said.

‘In both the UK and the EU, manufacturers are facing rising carbon and energy costs, while competitors in the US and China face none. As a result, production and emissions are simply moving abroad. This is the wrong form of decarbonisation, it’s deindustrialisation,’ Crotty said.

Combating the deindustrialisation, said Crotty, requires another look at how decarbonisation of heavy industry is managed. ‘The current approach, which relies heavily on carbon taxes and complex regulations, has made European production uncompetitive without actually cutting global emissions. The focus should be affordable clean energy, investment in infrastructure and supporting technologies that reduce emissions without driving industry out of Europe,’ Crotty said.

While the movement of bulk chemical production overseas may indeed lead to a falloff in emissions, Ineos notes that offshoring of production and investment raises concerns for European and UK supply chain resilience, which the company says is leaving the region exposed.

‘As more production moves overseas, Europe becomes dependent on imports of essential raw materials from the US and China. This weakens industrial resilience and increases vulnerability to supply shocks,’ Crotty said.

Falling domestic investment, high energy prices and concerns about regional resilience have not gone unnoticed by European and UK policy makers, with both indicating their support for the chemical sector.

Earlier in 2025, the European Commission said that it was committed to boosting the competitiveness of the bloc’s chemical sector after holding talks with representatives of the industry. Meanwhile, in June, the UK government launched its Modern Industrial Strategy. While this did not make specific mention of the chemical industry, it did make a commitment to cutting energy costs for industry.

While these moves are welcomed Crotty does not believe that the dialogues will produce the urgent changes needed. ‘It is clear that talk alone will not solve the competitiveness crises,’ said Crotty. ‘The outcomes so far from the Commission’s dialogue with industry fall short of what is needed to make a difference. The fundamental issues: uncompetitive gas prices, excessive carbon dioxide costs, and lack of tariff protection against high-carbon imports remain unaddressed.’

But there are some positive developments. Ineos’ Project ONE, a new 1.45m t/year ethane cracker located in the Port of Antwerp, Belgium, is designed to be one of the most efficient and sustainable in Europe. Converting ethane into ethylene, the hydrogen, a by-product of the cracking process, is used as a zero-carbon dioxide fuel for the furnaces. Ineos says that the success of this project provides evidence of what can be achieved in Europe, with the right conditions.

But the key to European, and UK, success and growth is a restoration of the competitive industrial pricing. ‘Affordable and reliable energy underpins every manufacturing sector,’ said Crotty. ‘If governments remove green levies from industrial bills, ensure fair access to domestic gas and reform the carbon cost burden, confidence and investment will return quickly. Until then, Europe and the UK will continue to lose production to countries with cheaper energy and weaker energy and weaker environmental standards, which helps no one, least of all the planet.’

In related news, Ineos has warned that production of BDO (1,4-Butanediol) at Marl in Germany, vital for the production of pharmaceuticals, is now at risk as it is forced to compete against ‘a flood’ of imports, and product dumping.

BDO is a chemical intermediate used in the production of medicines, such as antibiotics, antiretrovirals, statins and Vitamin B6, but Ineos said that without urgent support from government and the EU Commission to block unfair imports, this site and its 200 jobs ‘has no future’.

‘Once gone, the capacity to manufacture critical pharmaceutical products in Europe will disappear, leaving patients reliant on unreliable foreign supply chains of unknown quality,’ the company said.