Europe’s Chemical Industry Collapse
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.
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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
How to use this in applications
The restructuring teams at law firms will have to help chemical plants that are on the brink of shutting down. This will uniquely require law firms to consider environmental liability as chemical facilities will have significant contamination on site. Strict EU regulations on environmental liability might mean cleanup orders that cost tens of millions to act on.
Trade teams at law firms may have to advise on complaints made to the European Commission about potential Chinese dumping. Dumping refers to when a competitor country sells their output in another country at a very low price by taking advantage of their own country’s more relaxed tariffs or government subsidies.
Supply contract disputes will uniquely emerge from the interconnected networks of European chemical plants that are affected by certain plant closures. Law firms will have to advise on terminations of these contracts, and potential litigation where suppliers of certain inputs have failed to deliver.
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