Europe’s Petrochemical Giants Brace for Unraveling
Mass Closures Loom as Asian Giants Expand, EU Scrambles for Solutions
Europe’s vital petrochemical sector faces an existential crisis, with a wave of plant closures threatening industrial decline. Years of financial losses and aggressive global capacity expansion, spearheaded by China, have left European producers struggling to compete, increasing reliance on imported foundational chemicals.
“Sleepwalking Into Industrial Decline”
Industry leaders are sounding the alarm. Jim Ratcliffe, founder of INEOS, warned that Europe is “sleepwalking into industrial decline” while the rest of the world builds over 20 new chemical crackers, essential units for producing plastics and other key materials. He, along with other executives, has criticized a perceived lack of political action.
The European Commission recently pledged support for domestic production of strategic chemicals like ethylene and propylene, proposing expanded state aid for plant modernization and preferential treatment for European-made goods in public tenders. However, some fear this intervention may be too little, too late.
“It’s like being on the Titanic — you can’t stay in denial. You must go and find a lifeboat.”
—Giuseppe Ricci, Head of Industrial Transformation at Eni
Eni’s chemical arm, Versalis, alone accumulated over 3 billion euros ($3.5 billion) in losses over the past five years. The company is now shutting down Italy’s last two steam crackers and pivoting towards bio-refineries and chemical recycling with a 2 billion euro investment.
Economic Pressures and Global Imbalance
Major global players like Dow, ExxonMobil, TotalEnergies, and Shell are also evaluating or implementing closures of their European chemical assets. A significant portion of planned shutdowns targets the critical “crackers” that convert hydrocarbons into essential chemical building blocks.
A report from eight EU countries indicated that up to 50,000 jobs could be at risk by 2035 due to further cracker closures. European plants are predominantly smaller and mid-sized, operating at an uneconomical average utilization rate below 80%. Consultancy Wood Mackenzie estimates that up to 40% of the EU’s ethylene capacity faces high or medium risk of closure.
“The proportion of European crackers at risk is much higher than in other regions.”
—Robert Gilfillan, Head of Plastics and Recycling Markets at Wood Mackenzie
A key disadvantage for European producers is their reliance on naphtha as a raw material, which is significantly more expensive than the ethane feedstock used by competitors in the United States and the Middle East. This cost differential is stark: ethylene production in the U.S. using ethane costs less than $400 per metric ton, compared to around $200 per metric ton in the Middle East. In Europe, using naphtha can cost as much as $800 per metric ton.
New Dependencies and Strategic Choices
North America’s ethylene capacity is projected to reach 58 million metric tons by 2030. Meanwhile, China is set to increase its annual ethylene production to nearly 87 million metric tons by 2030, more than triple the EU’s current output. Chinese firms are also establishing operations in Southeast Asia to circumvent carbon taxes and Western tariffs.
Japanese and South Korean companies have already reduced operational rates due to competitive pressures. European policymakers now face a critical juncture: enact substantial interventions or witness the erosion of the continent’s chemical industry foundation. In March, countries including France, Italy, and Spain called for a “Critical Chemicals Act,” as data shows the EU has been a net importer of ethylene and propylene annually since 2019.
“First and foremost, this is about sovereignty — keeping our steam crackers.”
—Stéphane Séjourné, EU Industry Commissioner
Some European companies are investing heavily in future competitiveness. INEOS is constructing a new ethane cracker in Antwerp, Belgium, a €4 billion project expected to be operational in 2026. This facility, the first new cracker in Europe in approximately 30 years, will have an annual ethylene production capacity of 1.45 million metric tons, aiming to rival Chinese output and serve local demand with a lower environmental impact.
The Middle East is also seeing significant consolidation, with the planned merger of Abu Dhabi National Oil Company and Austria’s OMV set to create Borouge Group, a major global player in polyolefins. This entity aims to export polymers to Europe, intensifying competition.
Industry analysts predict that European petrochemical production will likely consolidate around a few major players. As Enzo Baglieri, a professor at SDA Bocconi School of Management, noted, only large European firms with substantial market share and pricing power will be able to sustain ethylene production.