Home > Information > News

Dawn Breaks: Can the European Union (EU)'s Plan Save Europe's "Twilight" Polyolefins?

Polyolefin Professional 2025-07-23 15:30:51

The new EU policy is an acknowledgment of the crisis.

A roadmap for non-recovery

As Asia reshapes the cost curve through technological sovereignty (such as China’s domestic production of alpha-olefins), and the Middle East maintains its low-cost advantage through resource endowment, the twilight of Europe’s polyolefin industry has become inevitable.

Policies can only buy it time for transformation.

Either become a "niche player" in high value-added specialty materials.

Either continue to be marginalized in the global industrial landscape

On July 8, 2025, the European Commission released the "Chemical Industry Action Plan," which was described by the German Chemical Industry Association (VCI) as a "political turning point." The plan attempts to save the European chemical industry—on the brink of collapse due to soaring energy costs, shrinking demand, and competitive disadvantages—through four key levers: energy subsidies, trade defense, green transformation, and regulatory simplification. However, when polyethylene, a bellwether of the European chemical sector, is placed under the microscope, the disconnect between policy and reality becomes clearly apparent.

Energy Subsidies: The Token "Affordable Energy Plan"

The production of polyolefins in Europe is highly dependent on naphtha cracking, while the cost of the ethane route in the Middle East is only 1/3 to 1/2 of that in Europe. The cost of coal-to-olefins in China is 20% lower than the naphtha route. Taking ethylene as an example, the cost of the naphtha route in Europe is 40% higher than the ethane route in the U.S. and 50% higher than the ethane route in the Middle East. However, natural gas prices are highly volatile, and whether "joint procurement" can solve the problem of high natural gas prices remains unknown.
Even if the EU lowers electricity prices for chemical companies through the Affordable Energy Action Plan, industrial electricity prices in Europe are still more than twice those in the United States, and the carbon tax (about €80-100 per ton) further increases costs.
The EU Carbon Border Adjustment Mechanism (CBAM) increases the cost of polyolefins by €80-100 per ton, while Asian products can circumvent this through low-tariff regions. However, the plan does not propose any carbon tax exemptions or compensation mechanisms, merely making general references to "supporting decarbonization." In addition, PFAS (per- and polyfluoroalkyl substances) restriction policies require companies to adjust formulations or seek alternatives, leading to higher compliance costs (for example, Clariant has launched PFAS-free processing aids), yet the EU has not provided sufficient technical or financial support.

Trade Defense: Potential Backlash of "Import Monitoring"

The EU is enhancing scrutiny of Chinese/Middle Eastern polyolefins through an import monitoring task force. However, Chinese HDPE exports to Europe have already increased by 15% in 2024, filling the domestic gap. If anti-dumping duties are implemented, they will directly raise raw material costs for European downstream companies (such as Covestro and Borealis), further accelerating the relocation of the industrial chain. BASF's Zhanjiang integrated project (1 million tons of ethylene) is coming online, and Covestro is expanding its Shanghai base. Shell is focusing on its Huizhou base in China and has repeatedly reduced its European assets.

Green Transition: Distant Solutions Cannot Address Immediate Needs of the "Circular Economy"

Chemical recycling: The EU plans to build 500,000 tons/year of plastic recycling capacity by 2026, but the current polyolefin recycling rate is less than 10%, and the cost of recycled materials is 20-30% higher than that of virgin materials.
Bio-based polyolefins: TotalEnergies' Bio-PE project will have a capacity of only 80,000 tons in 2025 due to a shortage of feedstock (bio-ethanol), which is insufficient to replace the ten-million-ton-scale fossil-based market.

Regulatory Simplification: €360 Million Saved as a "Placebo"

Most of the polyolefin plants in Europe were built before the 1980s, resulting in low energy efficiency and a lack of downstream expansion. For example, Shell's 310,000 tons/year ethylene plant in Wesseling, Germany, has suffered losses due to insufficient operating rates, while China's Wanhua Chemical has achieved mass production of high-end polyolefins through independent research and development of metallocene catalysts, with technological breakthroughs far outpacing Europe. Meanwhile, the manufacturing PMI in Europe has been below the boom-bust line for 18 consecutive months, and the consumption of chemical products has decreased by 12% year-on-year, trapping the traditional polyolefin market in a vicious cycle of "high costs - weak demand."
Simplifying the REACH registration process is expected to save 363 million euros annually, accounting for only 0.07% of Europe's annual chemical revenue (approximately 500 billion euros). However, Shell's European chemical operations are losing 100 million dollars annually, and BASF's expected annual profit for 2025 has been downgraded by 700 million euros. Regulatory relief cannot fill the profit gap caused by shrinking demand.

In 2023-2024, Europe shut down approximately 11 million tons per year of chemical production capacity, with olefin capacity accounting for 26% (around 2.86 million tons). The contraction in ethylene and propylene capacity directly impacts the polyolefin industry chain. For example, SABIC's 865,000 tons per year ethylene cracker in Teesside, UK, has been permanently closed, while the 530,000 tons per year ethylene plant in Geleen, Netherlands, will also exit the market in 2024. The share of Europe's polyolefin production capacity has dropped from a peak of 35% to 18%.

In the European polyolefin industry, which is deeply trapped in capacity contraction and high costs, the introduction of the EU's Chemical Industry Action Plan has sparked divisions within the industry.

The European Chemical Industry Council (Cefic) and the German Chemical Industry Association (VCI) consider the action plan a key step in enhancing competitiveness, particularly praising the simplification of the regulatory framework and financial incentives—which are expected to save €363 million annually in compliance costs. While alleviating the burden on small and medium-sized enterprises, the “Key Chemicals Alliance” has also secured an adjustment window for core production capacity.

Ineos, however, criticized the plan as "too little, too late," failing to address the issues of high natural gas costs and carbon emission costs. Natural gas costs are still more than twice those in the United States, and the carbon tax (80-100 euros/ton) continues to widen the gap with the Middle East ethane route (30%-40% lower costs) and China's coal-based route (20% lower costs).

The EU's "Chemical Industry Action Plan," through measures such as protecting production capacity, reducing energy costs, and cushioning trade impacts, could provide the industry with a 1-3 year transition buffer period. However, it cannot resolve the rigid cost disadvantage of the naphtha route and the technological path lock-in (80% of the facilities are outdated capacities from the last century). Without breakthroughs in energy costs, technological innovation, and global layout, Europe's polyolefin industry may irreversibly retreat from being a "scale player" to a "niche market participant" reliant on technological premiums.

【Copyright and Disclaimer】The above information is collected and organized by PlastMatch. The copyright belongs to the original author. This article is reprinted for the purpose of providing more information, and it does not imply that PlastMatch endorses the views expressed in the article or guarantees its accuracy. If there are any errors in the source attribution or if your legitimate rights have been infringed, please contact us, and we will promptly correct or remove the content. If other media, websites, or individuals use the aforementioned content, they must clearly indicate the original source and origin of the work and assume legal responsibility on their own.

Dawn Breaks: Can the European Union (EU)'s Plan Save Europe's "Twilight" Polyolefins?

Most Popular