The European Union’s chemical sector is facing a series of headwinds that the European Chemical Industry Council, Cefic, says are pushing the industry to ‘breaking point.’
A joint study by Cefic and Advancy: The Competitiveness of the European Chemical Industry, paints a bleak picture, with the report saying that between 2023 and 2024 announcements were made indicating that 11 million tonnes of production capacity would be closed across 21 major European production sites. In addition, weak demand has seen a decrease in annual average production volumes, falling 14% between 2021 and 2023, coupled with a weak recovery during 2024. These difficulties, among others, mean that “chemical activity remains at a historically low level, which has been maintained for a longer period that any time in the past 30 years,” the report says.
The report looks at how the EU’s chemical industry compares competitively with the US, China, Japan, Brazil, India and the Middle East, and the main cost and non-cost drivers for competitiveness in Europe. It concludes that the competitive position of the EU’s chemical industry has weakened on both cost and non-cost factors, including high energy, environmental and regulatory costs, through to administrative hurdles around innovation and human capital. The latter often resulting in delayed investments or decisions to invest outside of Europe.
“Lowering energy costs, ensuring access to critical raw materials, and fostering innovation are absolutely critical. If our industry falls, entire value chains fall with it: healthcare, automotive, renewable energy, and the breakthrough Green Deal technologies that are essential for the transition,” warned Cefic director general Marco Mensink.
The report highlights that while Europe’s gas and electricity prices have declined over the last two to three years the gas price currently remains four to five times higher when compared to the US. A decline is expected in the medium term, yet remaining prices will remain two to three times higher, the report says.
The competitive pressures are exacerbated by what the report says are “more complex, more costly and changing administrative and environmental regulations," which it says create uncertainty for future investments.
Alongside high energy prices, weak demand from domestic client industries and a decline in exports are impacting the EU’s chemical producers, while other factors include slowing growth in China, and increased competition in other regions. The report also notes that European chemical companies are facing increased unfair competition and anti-dumping measures have increased.
“Europe is at a crossroads. The significant slowdown of the European chemical industry has been outpacing that of the general economy due to reduced demand and eroded competitiveness. The trend of global excess in capacity results in the low utilisation rate of the industry, at only 75% for the past nine quarters. The depth and duration of the slowdown is unprecedented,” the report warns.
“For the sake of our industry and the 1.2 million of workers it directly employs, we need bold and urgent action today,” Mensink said.
The EU’s chemical sector is not alone in calling for urgent action to reverse decline. Earlier this month Sir Jim Ratcliffe, CEO of Ineos warned that “lack of energy strategy and high carbon taxes continued to de-industrialise Britain.”
The comments were made as Ineos announced plans to close the last remaining synthetic ethanol plant in the UK, with the loss of several hundred jobs. The announcement was titled: "Chemicals coming to an end in the UK."
Ineos said in a statement: “The UK, which used to be a major force in chemicals, employing a large and highly skilled workforce, has seen the closure of 10 large chemical complexes in the last 5 years alone and, in complete contrast to the USA, has not had one new chemical plant built for a generation. Energy prices have doubled in the UK in the last 5 years and now stand five times higher than those in the USA. The UK cannot compete with such a huge disadvantage,”
Warning against de-industrialisation, Ratcliffe added: “De-industrialising Britain achieves nothing for the environment. It merely shifts production and emissions elsewhere. The UK, and particularly the North, needs high quality manufacturing and the associated manufacturing jobs. We are witnessing the extinction of one of our major industries as chemical manufacture has the life squeezed out of it.”
Further reading:
• Why net zero is the 'opportunity of the century' for industry
• New Industrial Strategy will boost investment say business leaders
• Net zero: What progress has the chemicals industry made?
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