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Plant closures in Europe’s chemical industry are accelerating, with two of Netherlands’ chemical plants shutting down in the past year, forming part of a wider trend of European plant closures. These closures have resulted in the loss of 20,000 jobs, and have also included a fall of over 80% in industry investment.

The European chemical industry faces numerous pressures: energy costs that are at least double those of the US/China, a weak demand, and a competing Chinese oversupply. The UK is particularly hit hard by this downfall in chemical production, with chemical output down 60% since 2021 and very few nationwide facilities.

Chemicals underpin nearly every production process. Pharmaceuticals, electronics, agriculture, etc. They all rely on chemical inputs. Losing domestic production means supply vulnerabilities for those adjacent industries that then have to import chemicals at a higher cost or relocate their operations to regions where chemicals are still available.

What makes the issue of plant closure even worse is that chemical plants are often built through interconnected networks. This means one facility’s waste can be used as another facility’s input/raw material. What that means is if any of the plants which formed part of the network were shut down then that eliminated critical inputs for neighbouring plants, compelling those plants to shut down too.

What does this mean for the European chemical industry?

• Chemical plant closures threaten entire manufacturing supply chains as companies lose affordable inputs, pushing them to consider industrial relocation to the US or Asia

• Interconnected chemical plants face prospects of a domino-like collapse as individual shutdowns threaten entire networks of chemical plants

• The EU’s stricter climate policy like carbon pricing makes it even harder for chemical plants to stay afloat, further rendering European chemical production uncompetitive