European Chemical Industry Faces Crisis Amid Rising Energy Costs

A report from "Oil Price" warns of a growing crisis in the European chemical industry, a key sector for the continent, due to significant increases in energy costs and stricter environmental regulations within the European Union, threatening the sector's future and sustainability.

Sharp Decline in Investments and Production

The report cites data from the "Financial Times" regarding the European Chemical Industry Council (Cefic), indicating that investments in the sector have plummeted by as much as 80% over the past year. Additionally, production capacity closures within the EU have surged sixfold since 2022, with projections reaching approximately 37 million tons by 2025, accounting for 9% of total production capacity.

Job Losses and Decreased Competitiveness

These closures have resulted in the loss of around 20,000 jobs, alongside a notable decline in new investment projects, placing the industry in a precarious position against global competitors, particularly in the United States and China, where energy costs are lower and regulatory burdens are lighter.

Impact of Losing Russian Gas

The report suggests that the decline of the European chemical industry is closely tied to the loss of affordable energy sources, especially Russian gas, which was crucial for maintaining the sector's competitiveness. This industry is one of the most energy-dependent and is thus significantly affected by rising operational costs.

Environmental Policies Increase Economic Pressures

The report highlights that European environmental policies aimed at reducing carbon emissions have contributed to rising production costs, diminishing the ability of European companies to compete globally and prompting some to relocate investments outside the continent.

Retreats and Major Plant Closures

According to other economic reports, major global companies are beginning to reassess their presence in Europe, such as the Saudi firm "SABIC," which has sold its assets on the continent, while "Dow" plans to close several of its plants in Germany due to rising energy costs and emissions, as well as weak demand. "Exxon" is also considering a similar exit from the European chemical sector, while two companies have filed for bankruptcy for certain subsidiaries.

Wider Implications for Other Strategic Industries

The decline of the chemical industry is not limited to that sector but extends to other strategic industries that rely on it directly, such as the automotive and defense sectors, raising concerns about broader economic repercussions within the European Union.

Calls for Reevaluation of Industrial and Environmental Policies

Marco Mensink, president of the European Chemical Industry Council, warned that the sector is facing unprecedented pressures, noting that plant closure rates have doubled in a year and annual investments have fallen to near-zero levels, describing the industry as the "mother of all industries" currently undergoing a significant collapse. Estimates suggest that saving this sector may require a reorganization of industrial and environmental policy priorities in Europe to achieve a balance between environmental protection and maintaining the competitiveness of vital industries.