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Europe could lose its ability to manufacture aspirin, wind turbines, fertilizers, and electric vehicles. Indeed, while demand remains, the production capacity for the molecules needed to make these products continues to shrink.
In March 2025, the Brindisi steam cracker was shut down. This marks the ninth closure of its kind in Europe since 2020, collectively removing nearly 6 million tonnes of ethylene production capacity. This fits into a troubling trend: according to the European Chemical Industry Council and the consultancy Roland Berger, Europe has witnessed or announced the closure of 37 million tonnes of total chemical production capacity since 2022, representing roughly 9% of the Union’s total, with a closure rate six times higher than the historical average. This figure covers the entire sector—petrochemicals, inorganic products, polymers, speciality chemicals, and commodity chemicals—concentrated upstream in the supply chain.
One might argue that base chemicals constitute a declining industry, akin to textiles or steel, and that Europe should retreat from this sector to focus on high-value-added products. The available data, however, tell a different story. The new industries Europe is betting on are, in some cases, more dependent on chemicals than the old ones, and this dependence is concentrated in a way that makes the rare-earth sector appear more diversified by comparison.
If this decline persists, it will create strategic vulnerability akin to Europe’s existing fragility around critical minerals. Is it possible to lose the ability to produce its own molecules and still hope to manufacture everything else?
The foundation of the material economy
The three pillars of the chemical industry, which form the backbone of the material economy, are steam crackers, ammonia plants, and the chlor-alkali units. Everything downstream—cars, medicines, solar panels, microchips, wind turbine blades, synthetic textile fibers, and plastic water bottles—operates thanks to, or relies on, molecules produced by one of these facilities.
A steam cracker converts a feedstock—almost always naphtha derived from crude oil in Europe—at about 850 °C into smaller molecules: ethylene, propylene, butadiene, benzene, and toluene. These are the fundamental building blocks of industrial chemistry. Ethylene becomes polyethylene, used for packaging, pipelines, insulation, and automotive components. Propylene becomes polypropylene, paints, solvents, and plastics used in medical applications. Butadiene becomes synthetic rubber. Benzene enables the production of nylon, polycarbonate, epoxy resins, and pharmaceutical intermediates. A steam cracker produces all of these compounds simultaneously, in fixed proportions. It is impossible to produce ethylene without producing propylene, and likewise, you cannot produce propylene without producing butadiene. These molecules are transported over short distances (by pipeline and, less commonly, by road) to roughly twenty derivative units clustered around the steam cracker, within what the industry calls a “chemical park” or a “chemical hub”: polyethylene plants, polypropylene units, styrene facilities, ethylene oxide reactors, PVC production lines, and more.
An outage at one of these facilities would wipe out an entire chemical complex, which indeed functions as a single organism. If you shut down the steam cracker, the whole organism dies. Proximity is essential to keep downstream activities competitive. The effective distribution radius of a steam cracker is a few hundred kilometers. This is where chemicals set out toward steel, aluminum, and anything that can ride a cargo ship. A tonne of steel can cross an ocean, a feat far more challenging for ethylene or chlorine. This is why global maritime trade in ethylene sits at about 8 million tonnes per year, while world production exceeds 200 million tonnes.
The same logic applies to two other keystones of the chemical industry: ammonia and chlorine. Ammonia is produced from natural gas and atmospheric nitrogen via the Haber-Bosch process. It forms the basis for all nitrogen-based fertilizers and a wide range of industrial chemicals such as amines, nitriles, isocyanates for polyurethanes, and intermediates for pharmaceutical synthesis. In 2024, European agriculture used 8.9 million tonnes of nitrogenous fertilizers. When European ammonia production capacity was shut during the 2022 energy crisis, fertilizer prices surged by about 150%, and the shortfall was bridged by imports from Egypt, the United States, and Russia.
Electrolyzing salt marks the start of the chlorine and caustic soda value chain, with caustic soda used in aluminum refining, textiles, window frames, and medical devices, as well as a family of chlorinated intermediates used in pharmaceuticals, agrochemicals, and water treatment. This process is highly electricity-intensive, making the production of chlorine and its derivatives extremely sensitive to energy price swings.
Why have these basic chemical plants been shutting down in Europe?
The usual explanation points to energy prices, which on average are markedly higher in Europe than those paid by U.S. chemical plants.
Yet the deciding factor is feedstock, and Europe is structurally locked into an expensive option. European steam crackers run on naptha, priced between roughly 500 and 600 euros per tonne. U.S. crackers use locally sourced ethane, a natural gas derivative, costing about 150 to 200 euros per tonne. The Middle East enjoys a comparable cost advantage. This gap of 250–300 euros per tonne of ethylene cannot be offset by greater efficiency or by cheaper electricity alone.
Another factor is age. A European steam cracker on average is over forty years old, compared with roughly seven years for a Chinese cracker. A new state-of-the-art steam cracker integrated into a mega-complex consumes around 30% less energy per tonne produced, requires fewer maintenance outages, and can yield up to 20% more co-products from the same feedstock.
Finally, emissions matter, because the Union’s plants are subject to a CO2 price. While exposure remains limited due to free allocation of quotas, this could change. The border-adjustment mechanism for carbon should restore level playing field with non-European industries, but currently it does not cover most chemicals, with the exception of fertilizers.
The role of the new Chinese shock
The aggravating factor that compounds Europe’s disadvantages is global overcapacity in producing petrochemicals, which depresses prices and makes European producers less competitive. The leading driver of this overcapacity is China, which has developed an ethylene capacity of 62 million tonnes—more than double Europe’s total capacity. Annual additions in 2025 alone approached 10 million tonnes. By 2030, Chinese capacity is expected to reach 87 million tonnes, over a third of the world total. This figure far exceeds China’s own domestic needs.
Meanwhile, even if China does not export significant quantities of ethylene to Europe because of challenges with cryogenic transport, it exports downstream products and finished goods that include ethylene. Thus, China accounts for barely 2% of Europe’s imports of polyethylene. The real competition for base polymers comes from ethane-based supplies in the United States and the Middle East. In contrast, in higher-value chemical sectors (technical plastics, polyurethanes, and feedstocks for polyester), China’s share of European imports has surged from a single-digit percentage a decade ago to the mid-twenties, even higher in some cases. These are precisely the molecules where European producers used to hold a technical edge that has vanished today.
Overcapacity in basic chemicals thus translates into a dumping concern for intermediate and final chemicals in Europe. Take vinyl flooring as an example: it’s a finished construction product manufactured in China, shipped to Europe, and sold directly to European contractors. It contains PVC, plasticizers, and additives. The European PVC producer, plasticizer maker, and compounding firms are bypassed.
A downstream European manufacturer who imports cheaper polyethylene from China or the United States to stay afloat makes a rational business choice. The same goes for an automotive supplier sourcing molded polypropylene components or a construction firm laying Chinese vinyl flooring. Individually these decisions seem commercially justified, but collectively they erode Europe’s chemical value chain at every step.
Moreover, Europe’s trade defenses are slow and limited. A dumping investigation can take six months or more to yield countermeasures. It is often European companies that must initiate such investigations and provide most of the evidence. And the system works poorly for products with hundreds or thousands of derivatives, semi-finished, and finished goods.
Why this matters
At this point, one might reasonably ask, “So what?” If basic chemicals are structurally uncompetitive—outpaced in terms of feedstock and scale, and undervalued—the most prudent move might be to abandon them. Europe no longer manufactures basic textiles, and the economy has adapted. Perhaps the future lies in pharmaceuticals, clean technologies, and advanced semiconductor sectors where Europe excels and which require molecules rather than steam crackers.
The case of pharmaceuticals
In 2025, the European Union exported €366 billion in medical and pharmaceutical products, yielding one of the region’s largest trade surpluses, at €221 billion. Yet the active pharmaceutical ingredients (APIs) that go into these products tell a different tale. Between 60% and 80% of them are imported, predominantly from China and India. For antibiotics, dependence is even higher—over 90% for certain APIs. For paracetamol (the world’s most widely used analgesic), the essential starting material is currently not produced in any European factory. The Critical Medicines Alliance has highlighted the problem: “Many essential medicines are supplied by only one or two manufacturers, making supply chains highly vulnerable to disruptions, price volatility, and geopolitical pressures.” Merely acknowledging the problem does not solve it. A French API producer that aimed to spearhead Europe’s relocalization announced in July 2024 that it would exit production of 13 low- or negative-margin APIs, including, according to industry reports, paracetamol. Building a new API plant in Europe costs between €50 and €150 million and takes four to seven years, and there is currently no European framework to bridge the cost gap with Chinese production.
Looking at what an API plant needs to operate—solvents, reagents, amines, nitriles, and pyridine derivatives—these are all basic chemicals. Yet a pharmaceutical plant operating away from a chemical hub cannot function. Europe is attempting to relocate API production while at the same time losing the foundational chemical infrastructure on which those active ingredients rely.
The agrochemicals
For agrochemicals, the dependence profile mirrors that of pharmaceuticals: China dominates the supply of active ingredients, intermediates, and precursors for plant-protection products. Chinese firms control about 40% of the global pesticide market, and their share is even higher for key intermediates used in European formulations. A supply disruption of agrochemicals could affect European food production within a single growing season. Unlike semiconductors, where stockpiles can cover several months, many agrochemicals have limited shelf lives and seasonal windows for use, leaving little room for maneuver.
Clean technologies
Public debate on clean-tech supply chains has focused on critical minerals such as lithium, cobalt, and rare earths. The critical minerals legislation indeed centers on them. But these minerals must be processed by chemicals before they can be used. Take, for example, hydrofluoric acid, the chemical that enables silicon chip etching, textures solar panels, purifies graphite for batteries, and features in fluoropolymers that bind the electrodes of lithium-ion batteries. China controls more than 65% of global fluorspar production and over 60% of downstream fluorine chemistry.
A simple disruption to hydrofluoric acid supply would trigger a domino effect across semiconductors, solar, batteries, and electric vehicles. Another example is N-methyl-2-pyrrolidone (NMP), the solvent that helps bind the polyvinylidene fluoride in battery cathodes. Without NMP, lithium-ion battery cathodes crumble and fail.
None of the chemicals listed above, apart from fluorspar, appear on the list of critical raw materials. The policy framework governing cobalt and lithium has no counterpart for solvents, etching agents, and fluoropolymers that transform these minerals into functional products. This is a blind spot in the policy behind the transition.
And everything else…
Dependencies in clean-tech, semiconductor, and pharmaceutical sectors are particularly concentrated, meaning there is often a single supplier for a specific molecule. That very chemical underpins Europe’s most important sectors—construction, automotive, and packaging. Together these three sectors consume more than two-thirds of Europe’s polymers. Yet they face a different dependency structure, largely tied to volume. If European polymer production falls below a critical threshold, imports can fill the gap. But those imports come from suppliers whose trade policies can shift overnight and arrive by sea through shipping routes that may be closed, so price and supply reliability become determined more by strategic interests in Riyadh, Beijing, or Washington than by European demand.
A modern car contains roughly fifty polymer types: in bumpers and dashboards, in seats and insulation, in components under the hood or in headlight glass, and in synthetic rubber in tires and seals. Each polymer originates from a steam cracker, an ammonia plant, or a chlor-alkali unit. The European automotive supply chain was built on the premise that these molecules would be available locally, with short delivery times and consistent quality. Today, that assumption is fraying. When a European steam cracker shuts down, the auto supplier sources polymers from further-away suppliers—mostly in the Middle East and the United States. The logistics chain lengthens, buffer stocks shrink, and the risk of supply disruption, which no single company can manage alone, rises.
The construction sector is another major consumer of these products: PVC pipes, flooring, vapor barriers in polyethylene, insulating foams, polyurethane sealants and adhesives, epoxy coatings, and concrete additives. A single construction project can consume thousands of tonnes of chemicals.
Finally, packaging is the largest consumer of polymers by volume: polyethylene films, polypropylene trays, and PET bottles. The food supply chain relies on these plastic packaging materials to meet shelf life, hygiene, and logistics requirements. There remains no scalable substitute for polyethylene used to package fresh produce and for polypropylene used to seal medical devices.
Trade war and the war with Iran
Two events in 2025 and 2026 demonstrated what happens when these supply chains face stress tests.
In April 2025, the Trump administration imposed tariffs peaking at about 145% on Chinese imports. One immediate consequence was the redirection of trade flows: Chinese goods that could no longer enter the U.S. market were rerouted to Europe. The U.S.-China trade deficit widened by about 18% in 2025, with a substantial share of this rise accounted for by chemicals and chemically intensive products (plastics, synthetic fibers, formulated products). European downstream manufacturers, already under margin pressure, faced a flood of cheaper finished Chinese goods while the cost of their own feedstocks rose.
Added to this was the Iran conflict, which led to the closure of the Strait of Hormuz, one of the world’s key energy and petrochemical transit routes. About a fifth of global petrochemical trade flows through this strait, and around 45% of global polyethylene supply was disrupted.
Polymer prices surged by 50% to 80% within a matter of weeks. European plastics processors, which had turned to Saudi, Emirati, and Qatari suppliers after being edged out of the market by competition from the United States and then China, discovered that this lifeline was not a real substitute.
We are no longer dealing with scenarios or hypotheses—these events occurred within twelve months, and in neither case was the disruption driven by European policy or demand.
A catastrophe scenario
What would a catastrophe scenario for base chemicals and the Union’s supply security look like?
It would likely be a gradual collapse. The combination of higher raw material and energy costs, an aging production fleet, and new world-class capacities operating outside Europe will probably push the trend we are currently observing forward. Base chemical and steam-cracker plants would close at a rate of one to two per year, pulling down the production parks that rely on them. The European landscape could shrink from around forty active steam crackers to twenty-five, perhaps even down to eighteen. The survivors would be the largest, newest, and most integrated facilities, likely in Antwerp, Rotterdam, and a handful of German sites. The rest of Europe would become a network of import terminals for intermediate and finished chemicals. At some point, the Union would lose its autonomy in base chemicals and, indirectly, in everything manufactured from them.
Another geopolitical clash similar to the Hormuz crisis could trigger major shortages across the value chains. Food production, essential medicines, and major infrastructure projects could be brought to a halt.
How to save Europe’s chemical value chain?
Europe is not the only region under pressure on its base-chemical production. South Korea and Japan face the same challenge, perhaps more acutely due to their proximity to China. Seoul has tackled it head-on with its legal instrument, the “One-Shot Act,” which allows petrochemical firms to temporarily shut down about a quarter of the national ethylene capacity (roughly 3.7 million tonnes) in exchange for accelerated merger approvals, exemptions from antitrust rules, tax breaks, and R&D support for environmentally friendly reinvestments.
That model is partly reproducible in Europe.
Indeed, if the Union lacks the dirigistic tradition or the industrial-structure concentration that enabled the “One-Shot,” its essential tool—the conditionality principle—is already in use in certain cases. The crisis and transition framework could be amended to include dismantling and reconstruction provisions: state support for clean chemical capacities would be contingent on the verified shutdown of legacy, inefficient units. It would be about enabling a transition and acknowledging that our industrial base is aging and must be radically modernized to survive.
Europe can also leverage raw materials. The Union can be competitive in circular molecules. Chemical recycling of plastic waste (for example, pyrolysis to synthetic naptha or depolymerization back to monomers) offers a route to feedstocks with regulatory advantages. A circular molecule, certified by a mass balance, is not competing on a level playing field with a “gray” molecule derived from a mega Chinese steam cracker. Bio-based naptha from sustainable biomass and methanol derived from CO2 are other potential feedstocks. More ambitious waste and packaging regulations could create requirements for recycled content, driven by demand, to which only internal chemical recycling could reliably respond. Unlike virgin fossil molecules, circular molecules are structurally shielded from feedstock dumping, and Europe has enough plastic and other carbon-containing waste to replace a substantial portion of today’s fossil feedstocks.
Additionally, despite some progress, Europe must modernize its trade defense. The current system forces each company to file anti-dumping complaints at its own expense, with a fourteen-month wait before corrective measures can be taken. The Commission has the authority to act ex officio and start investigations without waiting for industry complaints. It has already used this power for electric vehicles and should apply it more to the chemicals sector. Furthermore, the carbon border adjustment mechanism should be extended to downstream products, such as plastics, transformed chemicals, and formulations, to close the gap that allows integrated chemistry to operate unfettered today.
Refocusing demand is another policy path. The Industrial Accelerator Act includes public procurement provisions that could anchor demand to European supply. However, chemicals are not explicitly covered by its sectoral scope. Public procurement in construction, packaging, and automotive components should include minimum European-origin requirements for integrated chemicals used in purchased goods. This same law could enable “Chemicals-as-a-Service” models, where suppliers sell performance rather than a product, making the achieved results the indicator of competitiveness.
Chemicals are indispensable to all aspects of a modern society, including strategic new sectors such as clean tech and semiconductors that Europe claims to champion. A deep erosion of chemical production would reverberate across major value chains. The Union should therefore recognise these strategic vulnerabilities and implement a robust transition plan, accompanied by policies that make the sector more efficient, more circular, and better protected against unfair trade practices.