The wave of chemical plant closures seen over the last five years is triggering a domino effect disrupting feedstock, intermediate and co-product flows that go far beyond the original production facility. And the closures may also be pointing to a structural reset, rather than a cyclical correction, and a broader re-organisation of chemical industry supply chains.
These are among the conclusions from a Deloitte Insight report which has analysed the impact of more than 120 publicly announced chemical plant closures since the start of 2022. The report: The domino effect: Implications of chemical plant closures on supply chains, indicates that these closures are altering how chemicals are produced worldwide.
The report also paints a bleak picture for Europe: “In Europe, industrial ecosystems are disappearing. Integrated chemicals complexes rely on tightly connected material flows, where one plant’s by-product becomes another plant’s feedstock. When a unit shuts down, these links can break, triggering cascading effects across the site and the wider value chains.”
The consultants said the past five years has seen the chemical industry hit by a perfect storm with demand softening even as new capacity came online. In the Middle East, petrochemical production expanded thanks to cheap feedstocks, while integrated refinery-chemical 'mega-complexes' were being built in China and world-scale ethane crackers leveraging shale gas economics were commissioned in the US. Even now new capacity is being added, with 8 million tons of polyethylene capacity expected to come online in 2026 from projects being built in China and the US, the report calculates. All of this has lead to structural overcapacity, pushing down margins for many companies.
Deloitte says that its analysis reveals “several clear patterns,” with the closures impacting older facilities that are typically located in regions with high energy and feedstock costs, or they operate in markets with persistent oversupply.
“Between 2022 and 2025, over half of company’s announcements cited high energy or feedstock costs as the primary driver, and more than 80% of those closures were in Europe. This reflects Europe’s surge in natural gas prices in 2022 following the onset of the Russia-Ukraine war, and the resulting pressure on regional competitiveness,” the report says.
But what the report highlights is where these closures have come about. Rather than starting upstream, with steam crackers and cascading down stream, the first wave of closures hit intermediate plants in the aromatics value chain: styrene, cumene, and phenol. "Only later did closures move upstream to crackers,” it notes. “This inversion reveals where the system is vulnerable: not upstream near the feedstock level, but in intermediates exposed to global competition. In a high-cost region, these assets become uneconomic first because they can be displaced by lower-cost production elsewhere.”
Deloitte’s overview of the publicly announced closures shows that from 2022 to 2023 almost 75% of global closures were for European chemical plants in the aromatics or fertiliser value chains. During 2024, closures remained concentrated in organic chemicals, but more evenly distributed across olefins and aromatics value chains. Europe accounted for almost 50% of these closures. By 2025, Deloitte’s data indicates, total global closure announcements nearly doubled. Half of these closures were steam crackers, split almost evenly between Asia Pacific and Europe.
Closure announcements have continued into 2026, “reflecting ongoing structural pressures.” These structural pressures point to what the report calls a “hollowing out of the middle” with the chemicals industry diverging into two models. The first being mega-scale, integrated commodity complexes, that compete on cost and integration, leveraging advantaged feedstocks and world-scale assets. The second is differentiated speciality platforms that compete on performance, formulation, and customer relationship, where margins are protected by innovation and switching costs.
This is all leading to the reshaping of supply chains, which includes shortening as production moves closer to end markets, while others are getting longer as production is concentrated in a few advantage regions. Geographical concentration is also a key vulnerability, increasing exposure to logistic disruption and geopolitical shocks.
The report says there is evidence that the chemicals value chain is regionalising. After decades of shifting towards global integration there are now signs of reversal with the US and the Middle East consolidating their upstream and midstream advantage, China investing across the full value chain to compete on both cost and integration, and Europe shifting toward higher-value downstream segments.
“Volatility and uncertainty may not be temporary conditions; they may be the new baseline. Companies that thrive in this environment will likely balance resilience with cost efficiency while positioning for long-term strategic considerations,” Deloitte says.
Further reading:
- SCI welcomes £350 million support package to strengthen UK chemicals sector
- UAE chemical production gets $10 billion investment boost
- Chemical plant closures surge in Europe, investment drops
- Europe’s ethylene cracker conundrum
- China’s industrial growth adds to Europe's chemical industry woes
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