Europe’s Chemical Commerce Is Collapsing Below Vitality Expenses and Law

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Europe’s Chemical Commerce Is Collapsing Below Vitality Expenses and Law

By Irina Slav – Feb 04, 2026, 6:00 PM CST

Investment in Europe’s chemicals sector has collapsed whereas capacity closures and job losses stride.
High energy costs and stringent climate rules are eroding competitiveness against China and the U.S.
The decline of chemicals threatens downstream industries, alongside side automotive and protection manufacturing.

Investments within the European chemicals industry are shedding off a cliff, capacity shutdowns topped 5 million tons last yr, and buyers are leaving for greener pastures because the EU chokes the industry with rules. Vitality charges stay too excessive for anyone’s comfort. Europe is dealing with but one other big import dependence.

Investments within the chemicals industry in Europe last yr took an 80% fall, the Monetary Instances reported last month, citing details from the European Chemical Commerce Council (Cefic). The industry team warned that capacity closures across the EU had surged sixfold since 2022 and had reached an complete of 37 million tons as of 2025, which represents 9% of complete capacity. The closures resulted in 20,000 job cuts and had been accompanied by a trot in recent investments that brought the industry closer to a verge of collapse.

“It’s no longer a ask of being 5 minutes old to or after twelve,” the top of Cefic, Marco Mensink, acknowledged. “The sector is below excessive stress and breaking. The fee of closures has doubled in a yr, and even worse, annual investments are half and terminate to zero. On all aspects, the escape is accelerating, not slowing. We would maybe well presumably like decisive motion this yr, with impact at manufacturing facility ground stage.”

The chemicals industry is without doubt among the ideal in Europe and an very predominant vendor of goods and materials to a bunch of assorted very predominant industries for the continent in basic, and the EU specifically. The industry booked sales of over 600 billion euros for 2024, in step with the most up-to-date figures released by Cefic. That sounds healthy, but via market half, Europe’s chemicals companies accept as true with considered their weight on the international market shrink from over 27% assist in 2004 to simply 12.6% as of 2024.

Of route, the accelerated shrinkage of the European chemicals industry did not simply coincide with the EU sanctions on Russia and the lack of low-price pipeline gas from the East. Cheap energy inputs—and gas specifically—are very predominant for the competitiveness of an industry, which uses petroleum feedstocks for most of its output, particularly pure gas, and that’s to boot to its big energy needs.

Sky-excessive energy charges are pummeling each European industry, however the more energy-intensive amongst them are suffering proportionally excessive anguish. Then there are the total climate-related rules that the European Union leadership has been piling on businesses primarily based completely completely within the bloc as it generally signals its priority no 1 just isn’t competitiveness but emission reduction in any admire charges.

That acknowledged, the cost of that emission reduction is starting up to be recognised as presumably too excessive, with high EU officers declaring they’ll be prioritising competitiveness alongside with emissions. It used to be on competitiveness grounds that the Commission devised the carbon border adjustment mechanism, or CBAM, for quick, to tax much less expensive imports of goods produced in areas with laxer emission rules and abundant, low-price energy from gas and coal. The ideal such position, finally, is China, and China is ingesting up European chemical makers’ international market half, snappily.

The Wall Avenue Journal famend the Chinese language opponents in a most modern article about Europe’s chemical woes, stating that in some cases, Chinese language companies had been building more capacity than there is question for, akin to in monoethylene glycol, a factor of polyester. This capacity, even though not utilised at 100%, provides strain on excessive-price European producers, who now also accept as true with to deal with low-price U.S. opponents following the replace deal that President Trump and the European Commission’s head, Ursula von der Leyen, signed last yr.

The WSJ paints a list as grim because the one painted by the Monetary Instances. Saudi SABIC has divested its belongings in Europe. Dow plans to terminate several vegetation in Germany, announcing it needed to on yarn of oh excessive energy charges, excessive CO2 emission charges, and extinct question. Exxon is reportedly taking a peep to put related to SABIC did, and exit the European chemicals sector altogether. Two chemical producers, the WSJ famend in its chronicle, fair currently filed for insolvency for several of their subsidiaries.

The European chemicals industry is struggling. This is a expansive sufficient arena even though the industry used to be the self-contained form. Nonetheless there just isn’t any such thing as a such industry, and chemicals are very predominant for diverse sectors, particularly automobile manufacturing and the EU’s recent favourite industry: protection.

“Whenever it’s good to well accept as true with a defence sector… an automotive sector, it’s completely dependent on chemicals supplying the materials. This is completely a chokehold the rest of the enviornment has on Europe,” Cefic’s Marco Mensink acknowledged, as quoted by the FT. He proceeded to name chemicals “the mother of all industries” and warned that “it’s breaking down as we communicate.”

The problems peek insurmountable except there is a total reversal of priorities for the decision-makers in political circles. Nothing in want of casting off emission reduction from the number-one put would give the chemicals sector in Europe the likelihood it needs more and more desperately.

By Irina Slav for Oilprice.com

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