Europe’s chemical sector is undergoing a profound contraction, marked by mounting plant closures, structural cost disadvantages, and a growing reliance on imported primary feedstocks.
High input costs, ageing infrastructure, and aggressive global expansion—particularly from China and the Middle East—have rendered many European facilities economically unviable.
Steam crackers, the industrial units that convert hydrocarbons into ethylene and propylene, lie at the centre of this shift. These two chemicals form the basis of numerous industrial applications, including plastics, pharmaceuticals, and composite materials, and their production has historically underpinned Europe’s industrial capacity.
Industrial Retrenchment Accelerates
Several major operators are now shutting down or downsizing their European chemical assets. Versalis, a subsidiary of Italy’s Eni, has recorded over €3 billion in losses over five years. The company is permanently closing Italy’s last two steam crackers and reallocating €2 billion towards investment in bio-refineries and chemical recycling.
Similar reviews and closures are underway at Dow, ExxonMobil, Shell, and TotalEnergies. Most of the rationalisation focuses on steam crackers, which are now operating at unsustainably low utilisation rates across much of the European Union.
Data from consultancy Wood Mackenzie indicate that up to 40% of the EU’s ethylene capacity—equating to roughly 10 million tonnes—is now at medium or high risk of closure. Average utilisation across European crackers has fallen below 80%, a threshold widely regarded in the industry as uneconomic.
A joint paper issued in March by eight EU member states, including France, Italy, and Spain, warned that up to 50,000 jobs could be at risk if closures continue through to 2035.
Feedstock Costs and Asset Obsolescence
The cost structure of European production places the region at a marked disadvantage. Most EU crackers rely on naphtha, a relatively expensive feedstock derived from oil refining. By contrast, U.S. and Middle Eastern producers use ethane, sourced from shale gas or natural gas liquids, which is significantly cheaper.
According to figures published by Eni, the production cost of ethylene in Europe stands at approximately €740 per tonne. In the United States, that cost drops to below €370 when using ethane. Middle Eastern producers benefit from even lower costs, estimated at around €185 per tonne. Compounding these cost differentials is the age of European infrastructure: most EU crackers are more than 40 years old, compared to an average age of 11 years in China.
This combination of factors has led to a sustained net import position. Eurostat data show that the EU has imported more ethylene and propylene than it has exported each year between 2019 and 2023.
Global Capacity Growth
While Europe’s capacity contracts, competitors are scaling up production. North America’s ethylene capacity is forecast to increase from 54 million to 58 million tonnes by 2030. China is expanding more aggressively, targeting an annual growth rate of 6.5% from 2025 to 2030. By the end of that period, Chinese capacity is projected to reach nearly 87 million tonnes—more than three times the EU’s total.
To bypass carbon tariffs and trade restrictions, Chinese producers are also establishing facilities in Southeast Asia for re-export to European and North American markets. Meanwhile, petrochemical producers in Japan and South Korea have reduced utilisation in response to similar cost pressures.
In the Middle East, a €55 billion merger between Abu Dhabi National Oil Company and Austria’s OMV is set to create the Borouge Group, expected to become the world’s fourth-largest polyolefins producer. The company plans to supply the European market directly, intensifying competitive pressure on EU-based manufacturers.
Political and Industrial Response
In response to the unfolding crisis, the European Commission has announced new measures to support the domestic production of strategic base chemicals. These include expanded access to state aid, and revisions to procurement regulations intended to give preference to EU-manufactured products. The approach follows the model used in the 2023 Critical Raw Materials Act.
EU Industry Commissioner Stéphane Séjourné has confirmed that Brussels will identify priority production sites and critical feedstock supply chains. “This is about sovereignty—keeping our steam crackers,” he said.
Several member states are now advocating for the creation of a broader “Critical Chemicals Act” to safeguard what remains of the continent’s petrochemical industry. Whether this policy agenda can be implemented in time remains uncertain. Giuseppe Ricci, Head of Industrial Transformation at Eni, remarked: “It’s like being on the Titanic — you can’t stay in denial. You must go and find a lifeboat.”
Consolidation and Strategic Investment
While broad retrenchment continues, some firms are pursuing long-term investment. INEOS is constructing a €4 billion ethane cracker in Antwerp—the first new plant of its kind built in Europe in over 30 years. With an annual capacity of 1.45 million tonnes of ethylene, the facility is expected to come online in 2026 and is intended to serve regional demand at improved cost-efficiency and lower carbon intensity.
According to Professor Enzo Baglieri of the SDA Bocconi School of Management, only a limited number of dominant producers will remain in the European ethylene sector. “Only major European companies with the market share to set competitive prices will continue to produce ethylene,” he said.
While full-scale deindustrialisation is not anticipated, Europe’s petrochemical base is set to become smaller, more consolidated, and increasingly dependent on external supply chains. Without a significant and timely policy response, the EU risks further erosion of its strategic industrial capabilities.
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