Europe’s chemical sector is entering a period of accelerating decline, as plant closures mount and reliance on imported raw materials increases.
Ageing infrastructure, elevated production costs, and aggressive global expansion—particularly in China and the Middle East—have rendered many European facilities uncompetitive, prompting calls for urgent political intervention.
Steam crackers, which convert hydrocarbons into base chemicals such as ethylene and propylene, are at the heart of the crisis. These chemicals are essential to a broad range of sectors, including plastics, pharmaceuticals, and industrial manufacturing.
Widespread Closures, Deepening Losses
Major chemical firms are closing European assets following consecutive years of financial losses. Versalis, the petrochemical division of Italy’s Eni, has posted cumulative losses of over €3 billion in the past five years. The company is now closing Italy’s final two steam crackers and shifting investment—totalling €2 billion—into bio-refineries and chemical recycling projects.
Other international operators, including Dow, ExxonMobil, Shell, and TotalEnergies, are similarly scaling back their presence or reassessing their operations across the continent.
Consultancy Wood Mackenzie estimates that up to 40% of the European Union’s 24.5 million-tonne ethylene production capacity is now at medium or high risk of closure. Many of the EU’s petrochemical plants, which are small to mid-sized, have operated at below 80% utilisation—widely regarded as uneconomical—since 2023.
In March, eight EU member states issued a joint statement warning that up to 50,000 jobs could be lost if further steam cracker closures proceed between now and 2035.
Disadvantage in Feedstock and Infrastructure
Most European facilities rely on naphtha—a by-product of oil refining—as their main feedstock. By contrast, producers in the United States and Middle East use ethane, which is significantly cheaper and largely derived from shale gas and natural gas liquids.
According to Eni, producing a tonne of ethylene in Europe costs approximately €740 when using naphtha. In comparison, U.S. producers can achieve costs of under €370 per tonne using ethane, while Middle Eastern operators benefit from even lower rates—around €185 per tonne. These input cost disparities are compounded by ageing infrastructure: the average steam cracker in Europe is over 40 years old, while in China the figure is closer to 11 years, according to Citi analyst Sebastian Satz.
As a result, Europe has become structurally dependent on foreign chemical supplies. EU data shows that the bloc has remained a net importer of ethylene and propylene every year between 2019 and 2023.
Global Expansion Intensifies
While Europe’s capacity contracts, competitors are expanding. North America’s ethylene production is set to rise from 54 million to 58 million tonnes per year by 2030. China is expanding even more rapidly: its output is projected to increase by 6.5% annually between 2025 and 2030, reaching nearly 87 million tonnes per year—more than three times the current EU total.
To circumvent European and U.S. tariffs, Chinese producers are establishing plants in Southeast Asia aimed at exporting directly to Western markets. Similar pressures have left Japanese and South Korean petrochemical producers operating at reduced capacity since 2023.
In the Middle East, a €55 billion merger between Abu Dhabi National Oil Company and Austria’s OMV will create the Borouge Group, which is set to become the world’s fourth-largest polyolefins producer. Borouge plans to target the European market directly, adding further downward pressure on EU-based manufacturers.
EU Response and Industrial Strategy
The European Commission has announced plans to support domestic production of strategic chemicals, including ethylene and propylene, through expanded state aid and changes to public procurement rules. These reforms aim to prioritise EU-manufactured products, following a model similar to the 2023 Critical Raw Materials Act.
Industry Commissioner Stéphane Séjourné has stated that Brussels will identify key production sites and critical supplies. “This is about sovereignty—keeping our steam crackers,” he said.
However, the measures may prove insufficient. Eni executive Giuseppe Ricci, describing the situation, warned: “It’s like being on the Titanic — you can’t stay in denial. You must go and find a lifeboat.”
Some member states—including France, Italy and Spain—are advocating for a broader “Critical Chemicals Act” to safeguard the sector’s strategic importance. Still, industry leaders argue that decisive action has been delayed too long.
Industry Consolidation Underway
A limited number of large players are positioning themselves to remain. INEOS, which operates one of Europe’s most technologically advanced petrochemical sites in Cologne, is constructing a €4 billion ethane cracker in Antwerp. This facility, the first of its kind in Europe in three decades, will have a production capacity of 1.45 million tonnes of ethylene per year and is due to begin operations in 2026.
According to Professor Enzo Baglieri of SDA Bocconi School of Management, only companies with sufficient market share and financial resilience will survive the reshaping of the sector. “Only major European companies with the market share to set competitive prices will continue to produce ethylene,” he said.
While a complete collapse is unlikely, the European petrochemical industry is poised to become smaller, more concentrated, and more reliant on external suppliers. Unless policy and investment efforts succeed in reversing the current trend, the EU risks surrendering yet another strategic industrial sector to global competitors.
