Europe's Chemical Industry at Crossroads: Commission Steps In to Boost Domestic Production
Europe's chemical industry is facing a critical juncture. The continent has been reliant on foreign chemical supplies for years, with ethylene and propylene imports consistently outnumbering exports since 2019. Now, the European Commission is stepping in to bolster domestic production, while companies grapple with closures and a looming threat from global competitors.
The European Commission is set to beef up state aid and adjust public procurement rules to boost domestic chemical production. This move comes as Europe remains a net importer of key chemicals like ethylene and propylene, despite the continent's significant demand for these products.
The petrochemical sector is witnessing a shake-up, with only robust companies expected to weather the storm. INEOS is leading the charge with a €4 billion ethane cracker in Antwerp, the first of its kind in Europe in three decades. This facility will churn out 1.45 million tonnes of ethylene annually, a significant boost for European production.
However, the picture is not entirely bleak. Key players like BASF continue stable operations, maintaining concentrated production with certified facilities. Belgian company Vioneo is also making strides, developing a large-scale polyolefin project using renewable electricity and biogenic CO2. Meanwhile, Japanese groups Asahi Kasei, Mitsui Chemicals, and Mitsubishi Chemical have formed Setouchi Ethylene LLP to pursue CO2-neutral ethylene production.
Yet, the risk of surrendering the petrochemical industry to global competitors looms large. North America and China are expanding their production capacity, with China projected to reach nearly 87 million tonnes per year by 2030. In Europe, up to 40% of ethylene production capacity is at risk of closure, with many plants operating below 80% utilisation since 2023. Major firms like Versalis have posted cumulative losses of over €3 billion in the past five years, contributing to the accelerating decline of the sector.
The European Commission's intervention is timely, aiming to reverse the trend of reliance on foreign chemical supplies. However, the road to recovery is fraught with challenges, including high production costs due to reliance on naphtha as the main feedstock. The continent's petrochemical industry must innovate and adapt to compete with global rivals and secure its future.
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