BY NEIL EISBERG | Editor
The chemical industry has weathered a long series of serious challenges over recent decades – and is facing a new set right now.
The impacts vary around the world, but certainly the new emphasis on tariffs emerging from the US has added a new level of complexity to decisions around international trade – and a cascade of consequences that are still to become clear for businesses in any region.
For Europe’s industry in particular, this is yet another thing to cope with – alongside high energy costs and changes in demand from its core customer industries like automotive and construction. One result of this has been overcapacity in the European market and the declining utilisation of expensive assets, and margins under increasing pressure.
It’s unsurprising then that Europe is already getting worried about the levels of chemicals imports into the region – something which could well grow as tariffs reshape the world economy and companies look for new export options.
In the past, in the absence of governmental intervention, restructuring would have been the only option available to the European chemical industry. But in response to recent challenges, the EU has developed a plan – its Action Plan for the Chemicals Industry – to help the industry turn its fortunes around.
Among other things it plans to tackle energy costs, accelerate the development of more sustainable chemicals and cut bureaucracy, all of which are laudable aims (in contrast, the UK’s chemical industry, which faces many of the same problems, is still waiting for the Government’s long-promised industry-specific proposals).
While this may be positive, the tariffs deal agreed between the US and the EU in late July, however, is still likely to have an added adverse impact.
Another way of looking at the challenge: the very beginning of the chemicals industry’s manufacturing journey – the production of basic chemicals feedstocks from the cracking of raw materials like oil and gas – is under severe pressure in Europe. The impact has already been seen in announcements concerning cracker closures. According to a survey by global intelligence and analysis provider S&P in July 2025, the multiple factors already outlined have led to the closure of seven European crackers so far ‘with more expected’.
It may be some time before the market turns around: according to S&P, the global demand for cracker feedstock is projected to rise from 432m t in 2024 to 610m t by 2034, and S&P forecasts the global ethylene market will see a recovery in 2028 when growth finally starts outpacing capacity additions.
But the problem extends far beyond just basic feedstock chemicals production and now the operations of downstream chemical production are coming under the microscope of chemical managements across Europe. Already in 2025, we have seen the closure announced of a range of downstream facilities across Europe. And while not part of the ethylene market, the UK’s largest bioethanol plant looks set to close because of the US-UK tariff deal, which opened the doors to low-cost US product.
So, are there any positive signs ahead for the industry? As the industry-of-industries, in part the chemicals industry will have to wait for international economic uncertainty to subside and for businesses and consumers to regain their confidence so that demand can catch up with the existing oversupply. Europe’s promised increase in defence spending may have some impact on demand, too.
Indeed, one potential solution for the European chemicals industry has been mooted – the European industry should return to its past and become a strictly regional chemical producer, not seeking to compete with the US and China, for example.
Certainly, in a world where tariffs can be imposed with little notice, it might be tempting to avoid becoming involved in markets too far from home. And, in an increasingly fractured world, governments may start to see the benefit of having a local chemicals industry that can supply the basics of industrial production and increase support for companies accordingly. It could be that the international chemicals industry becomes more regionally focused for the next few years.
There is a more forward-looking option: the shift towards sustainable chemicals built on new non-fossil feedstocks will be complicated and expensive but for the companies that seize the opportunity there could be an early-mover bonus down the line.
Another suggestion, one that was already raised during earlier periods of capacity rationalisation, is that the commodity chemical business needs to look at adopting some of the business practices of the speciality chemical sector.
The speciality chemicals business can be described as adopting a more service rather than product approach. Building closer relationships with consumers and trying to meet their specific requirements through a renewed focus on innovation may be the most successful approach.
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