The Decline of Europe’s Chemical Industry: A Troubling Trend
The lights at the LyondellBasell plant in the port of Rotterdam went out for the last time on a September afternoon, marking the end of an era. This factory, which produced propylene oxide —an essential raw material for foams, mattresses, and auto parts—had just been dismantled. Serving as a silent symbol of a weakening industry, it casts a long shadow over Europe’s once-thriving chemical landscape.
The factory, barely 22 years old , fell victim to a perfect storm affecting the European industrial heart. Factors such as rising energy costs , fierce Asian competition , and declining investments have conspired to push Europe’s chemical sector into decline. Once a global leader in chemicals, Europe is now struggling to maintain its industrial foothold amidst challenges posed by China .
The Perfect Storm: Energy Crisis and Competitive Disadvantages
The sequence of Europe’s industrial challenges began with the war in Ukraine . The cutoff of Russian gas supplies sent energy prices skyrocketing across the continent, revealing a dangerous dependency. According to economist Edse Dantuma , gas prices in the Netherlands were reported to be 15% to 66% higher than in other European countries. This disparity added significant operational costs for local manufacturers.
Yet, the most damaging blow came from the East . An influx of cheap Chinese chemicals flooded the European market post-pandemic. Manon Bloemer , director of the Dutch association VNCI , pointed out that during the pandemic, China managed to complete its entire chemical value chain unnoticed by the West. As domestic demand stagnated, Chinese manufacturers began exporting surplus products to Europe, which was already grappling with the highest energy costs in the world, all while facing historically low prices for chemicals.
In the UK , petrochemical giant Ineos , owned by Sir Jim Ratcliffe , was compelled to cut jobs due to the influx of “very cheap” imports from China. The situation isn’t any better in Germany , where chemical production (excluding pharmaceuticals) is projected to decline by at least 2% this year according to ICIS . Economist Christiane Kellermann from the VCI warned that “capacity utilization remains low,” and many production shutdowns are looming.
Signs of an Industry in Peril
Historically, Europe was the world’s laboratory for chemical innovation. Petrochemical complexes in locations like Rotterdam, Ludwigshafen , and Antwerp showcased the industrial prowess of the continent. However, a joint study by Cefic and Advancy warns that the European chemical sector is at a “historic turning point,” facing structurally higher costs, regulatory burdens, and a significant capital flight. Alarmingly, Europe has lost 30% of its chemical production over the past decade, with new investments dwindling to record lows.
In Germany , a report from Strategy& PwC noted that chemical investments have dropped by an astonishing 90% over the past seven years, resulting in reduced profits by 12% . Incoming orders are now at their lowest levels in a decade, leading the report to conclude, “ Deindustrialization is no longer a risk; it is a reality.” The report also emphasizes that European countries no longer benefit from global economic growth, as investment decisions are increasingly being made in other regions of the world.
China: A New Epicenter of Production
Conversely, China is experiencing an unprecedented investment boom in its chemical sector. According to Global Data , China is expected to account for over 60% of the world’s new petrochemical projects by 2030 , with more than 500 plants currently underway. This surge in production is largely driven by a strategic policy aimed at self-sufficiency , supported by cheap financing and robust domestic demand.
Recent reports from Roland Berger indicate that not only is China producing more, but it has also become a global price setter across multiple value chains, capitalizing on unprecedented levels of surplus production. China’s strategic dominance in petrochemicals is reshaping its influence over various critical industries, including batteries and fertilizers, leaving Europe at a disadvantage.
Recognizing the crisis, the Chinese government aims to reduce overcapacity by converting or closing obsolete plants over 20 years old and promoting advanced chemical production for higher-value applications. Yet, the continuing excess in Chinese production puts downward pressure on global prices, making it increasingly challenging for European manufacturers to compete.
The Consequences of Inaction
As described by Ronald van Klaveren in an interview with NRC, the current industrial ecosystem resembles a Jenga tower : “Remove one piece and it might hold; take away three, and it collapses.” Each closure across Europe jeopardizes intricate networks of factories interconnected through pipelines of steam, heat, and raw materials. The fallout from factory shutdowns leads not just to lost jobs but also declines in entire communities, reminiscent of the industrial reconversion crises of the 1980s .
Despite the urgency, the political response has been sluggish. The European Commission recently introduced its Chemical Industry Action Plan , which, according to Dutch industrialists, has good intentions but lacks concrete measures. The industry is urgently calling for affordable energy , fair rules for imports, and a competitive tax framework.
Shifts in the chemical landscape are inevitable. In Germany , Helaba Bank warns of a “ Chinese shock 2.0 .” After China joined the WTO in 2001 , it began in textiles and toys; now it competes fiercely in high-tech manufacturing. This has resulted in intense price pressure , as highlighted by economist Adrian Keppler .
The Future Landscape: A Call for Transformation
Looking ahead, Europe finds itself at a crossroads. The Cefic and Advancy report suggests that up to 40% of European chemical plants could close by 2040 if the transition to low-carbon materials and high-value products isn’t accelerated. To comply with the Green Deal , Europe requires over €2 trillion in investments by 2050 . However, uncertainty surrounding energy costs, regulatory changes, and lengthy permitting processes deter potential investors.
Experts recommend embracing innovation, digitalization, and specialized applications to pivot away from mass production and focus on added value. This is essential for Europe to carve out a niche in a competitive global environment.
The story closes where it began: in the port of Rotterdam , standing before an empty factory. Just a decade ago, Europe led the global chemicals market; now it finds itself reliant on Chinese imports even for basic materials. Failure to redefine the industrial strategy may result in Europe losing its chemical prowess entirely. The echo of the turned-off machines in once-thriving laboratories serves as a stark warning: without competitive energy solutions, coherent industrial policy, and a unified vision, Europe risks slipping into an era of deindustrialization .
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