European Chemical Industry Seeks Self-Rescue

Despite the unprecedented attention given to the chemical industry in Europe, the market remains in a difficult situation with no short-term relief in sight. From September 22 to 25, at the 59th annual meeting of the European Petrochemical Association (EPCA) held in Berlin, Germany, the sentiment in Europe's chemical industry remained pessimistic. Marco Mensink, Director General of the European Chemical Industry Council (Cefic), candidly stated that the current European chemical industry is in a "highly challenging period," and only through capacity consolidation and the rapid implementation of the "Chemical Action Plan" can the European chemical industry be saved.

Capacity integration is the key to recovery.

The widespread shutdown of production capacity in the European chemical industry can no longer be ignored. INEOS Group's "Project One" in Antwerp is expected to start production in early 2027, and this new capacity will inevitably impact the existing surplus capacity in Europe.

Mencink stated, "When you see some relatively new production facilities being shut down, it means we must be highly vigilant. There have already been multiple cases like this. It is clear that the European chemical industry must complete capacity restructuring and integration before any real improvement can occur. Recovery will ultimately come, but it is highly unlikely to happen by 2026 or 2027; the earliest we might have to wait is until 2028."

Menzink compared the European economic recovery curve to a "bathtub shape," rather than a "V shape" or "U shape." He pointed out: "We are currently in a long and flat phase at the bottom of the market, but things will eventually improve and will not continue to deteriorate."

Implementing policies is an urgent task.

The European Commission's "Chemicals Industry Action Plan" provides support for the industry, which, along with automotive, pharmaceuticals, defense, and steel, is classified as one of Europe's "key strategic industries."

Mensink pointed out, "The action plan contains all the right elements, but the core challenge now is whether the policy system can be quickly implemented. In the face of ongoing capacity shutdowns, accelerating the implementation of the action plan has become the most urgent task at present."

Despite the introduction of new legislative plans, they have not been able to prevent the continued withdrawal of chemical production capacity in Europe. Some industry insiders remain pessimistic about the future of the European chemical industry. Mensink admitted, "Workers on the front lines of the chemical industry are struggling to hold on. We are witnessing plant closures and people losing their jobs."

The implementation efficiency of industry policies is drawing significant attention. At a side meeting held by the German Chemical Industry Association (VCI), Markus Steilemann, CEO of Covestro and president of the German Chemical Industry Association, stated: "The direction that the German Chancellor and his cabinet are focusing on is correct, but actions need to be quicker and more forceful. We need real reforms, and we need them fast, addressing short-term issues and finding solutions for long-term needs."

The downstream market is a potential ray of hope.

Amidst the heavy clouds overshadowing the industry, the demand from downstream markets and the vast market consisting of 515 million European consumers may be among the few potential rays of hope.

Mencink stated, "I believe we are still experiencing the aftereffects of the impacts caused by the COVID-19 pandemic, and this influence may continue for some time. The chemical industry is closely linked to the automotive industry; when the automotive industry thrives, the chemical industry will also grow accordingly; similarly, when the construction industry begins to recover, the chemical industry will also warm up."

Despite Europe traditionally defining its advantage by "innovation capability" and not yet losing this competitive edge, Mensink still warns, "The chemical industry must never be complacent." Although the overall demand outlook is bleak, there are still structural "inelastic demands" in the chemical industry, and which region can meet these demands has become the core topic of discussion at this year's EPCA annual meeting.

Amid escalating geopolitical tensions and ongoing major conflicts worldwide, political divisions within Europe are becoming increasingly prominent. However, Mencinger believes that some solutions might lie "locally," and the only way forward for Europe is to first address its domestic issues.