Eu to establish critical chemicals alliance to ensure supply chain security

The Critical Chemicals Alliance aims to address supply chain dependencies and market distortions.

The EU chemical production faces challenges from cheaper competitors in the United States and China.

The European Commission will expand national subsidies and simplify regulations for the chemical industry.

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The EU's executive body stated that the European Commission will collaborate with member states and the chemical industry to support the production of chemicals deemed essential for the European industrial supply chain.

The European Commission has announced that it will establish a Critical Chemical Alliance later this year, which will bring together the Commission, member states, and various stakeholders as part of a broader plan to revive the European chemical industry.

The committee stated in a statement that the chemical alliance will "identify key production bases that require policy support and address trade issues such as supply chain dependencies and market distortions."

This initiative draws on a previously established alliance that is responsible for identifying metals and minerals crucial to the energy transition. Subsequently, the EU set mining, processing, and recycling targets for 17 strategic materials.

Chemicals are fundamental input materials for almost all industries (from textiles and defense to technology) and directly create 1.2 million jobs within the EU. However, during the COVID-19 pandemic, chemical production significantly declined, and it has still not fully recovered in the face of competitors from the US and China that have significantly lower energy and production costs.

Committee officials stated that over the past two years, more than 20 chemical production bases have closed, and petrochemical and ammonia products are "under tremendous pressure."

"First, there is the issue of sovereignty: we must protect the steam cracking units," said European Commission Executive Vice President and Industry Commissioner Stephane Sejourne to reporters.

The steam cracking unit is a unit in petrochemical plants used to produce basic chemicals such as ethylene and propylene, which are widely used in products like food plastic packaging, rubber, automotive headlights, and fleece hoodies. The European Union currently has about 40 steam cracking units.

Chemical giant Dow (DOW.N) announced plans to close two factories in Germany and one in the UK over the next two years.

Sai Ruone told reporters that the alliance will assess the EU's dependence on imports in key molecules.

"For example, in the case of methanol, we rely 80% on foreign imports. If we look back at the key production bases, we must protect and maintain Europe's sovereignty... Relevant work will identify these critical molecules, and the plan also suggests promoting a mechanism similar to the 'Critical Molecules Act'."

In addition, the committee will include chemicals in future trade agreements and strengthen monitoring of chemical imports. Since 2024, the committee has launched 18 trade remedy investigations targeting different molecules.

To alleviate the impact of high energy prices, the committee will expand national subsidies, accelerate approval processes, and provide energy security through EU funds. Serone stated that the committee will also establish "EU content" standards for chemicals to be included in public procurement requirements, a measure that is being promoted across the entire EU industry.

Finally, the committee will propose the sixth simplification plan for the chemical industry, known as the "omnibus amendment." This amendment is expected to be presented within the year and will simplify the labeling rules for hazardous chemicals and revise regulations related to cosmetics and fertilizers, anticipated to save the industry €363 million (approximately $425.47 million) annually.