Europe’s Petrochemical Industry: Plant Closures, Competitiveness, and the Crisis of Production

Europe’s petrochemical industry is currently undergoing a profound and challenging restructuring, characterized by widespread plant closures and a sharp decline in regional competitiveness. This strategic contraction, primarily driven by persistent operational losses and a rapid global expansion of production capacity—particularly evident in Asia—poses a significant threat to the continent’s industrial foundation and its reliance on critical chemical intermediates.

• Europe’s petrochemical industry faces widespread plant closures and declining competitiveness due to high costs and global capacity expansion.
• Producers contend with aging infrastructure and increased reliance on imports of essential chemicals like ethylene and propylene.
• The European Commission has committed to bolstering domestic production of strategic chemicals, including increased state aid and preferential public tender treatment.
• Versalis (Eni) is closing Italy’s last two steam crackers and reallocating €2 billion to bio-refineries and chemical recycling.
• An estimated 50,000 jobs could be at risk by 2035 due to potential further cracker closures across Europe.
• Approximately 40% of the EU’s 24.5 million metric tons of ethylene capacity is at high or medium risk of closure.

For years, European producers have grappled with the dual burden of high operational costs and aging manufacturing infrastructure. These factors have severely undermined their viability, leading to an increasing reliance on imports of fundamental primary chemicals such as ethylene and propylene. These chemicals serve as indispensable building blocks for a vast array of goods, ranging from plastics and pharmaceuticals to countless industrial components.

Industry Concerns and Policy Responses

Prominent industry figures have openly criticized the perceived lack of proactive policy intervention. Jim Ratcliffe, founder of INEOS, a conglomerate largely built through the acquisition of petrochemical plants, has previously underscored that Europe’s perceived inaction starkly contrasts with significant global investments in new cracking facilities. In response to these growing concerns, the European Commission recently pledged to bolster domestic production of chemicals deemed strategic. This commitment includes expanding state aid for plant modernization and mandating preferential treatment for European-made goods in public tenders, echoing previous legislative frameworks established for metals and minerals.

Despite these governmental efforts, significant skepticism persists within the industry regarding their potential to effectively reverse the current trajectory. For instance, Eni’s chemical division, Versalis, has reported accumulated losses exceeding 3 billion euros ($3.5 billion) over the past five years. Consequently, Versalis is in the process of shutting down Italy’s last two steam crackers and reallocating 2 billion euros towards strategic investments in bio-refineries and advanced chemical recycling technologies. Other global leaders, including Dow, ExxonMobil, TotalEnergies, and Shell, are similarly re-evaluating or actively divesting their European chemical assets, signaling a broader strategic shift away from the region.

Operational Impact and Economic Outlook

The majority of planned closures target steam crackers, which are critical units responsible for converting hydrocarbons into essential chemical feedstocks like ethylene and propylene. A document from eight EU countries in March highlighted the severe economic ramifications, estimating that up to 50,000 jobs could be at risk by 2035 if further cracker closures occur across Europe. Current operational data further indicates that European plants, typically characterized by their smaller and mid-sized scales, operate at an average utilization rate below 80%. This level is widely considered uneconomical for sustained profitability in the highly capital-intensive petrochemical sector.

Consultancy Wood Mackenzie estimates that as much as 40% of the EU’s total ethylene capacity, which stands at 24.5 million metric tons annually, faces a high or medium risk of closure. This alarming figure encompasses shutdowns that have already been announced since late 2024, underscoring the profound and ongoing transformation reshaping Europe’s petrochemical landscape.