Three years ago at WPC, Marco Mensink — Director General of Cefic, the European Chemical Industry Council — stood up and used the word deindustrialization. It landed as provocative. Alarmist, even.
It wasn't.
He was back at WPC this April with numbers. Nine percent of European chemical capacity already gone. A projection of 20 percent for the full restructuring, heavily concentrated in petrochemicals. Four months on, that projection looks like it's going to hold. We're on the path.
That isn't a cyclical trough. It's a structural exit. And the sooner European chemical executives engage with it honestly, the better their decisions will be.
The structural problems here are neither new nor subtle. Energy costs spiked after Russia's invasion of Ukraine and never came back to competitive levels. Industrial demand is still more than 20 percent below pre-COVID in many segments. Regulatory burden increased without producing the demand signals that were supposed to follow. Every disruption since has landed on a cost base that was already uncompetitive — the Qatar LNG outage this spring is only the most recent.
A company running a naphtha cracker in Germany, the Netherlands, or Belgium is facing input costs that can't be justified at current demand. Mensink's framing at WPC was blunt: the capacity exits aren't an "if." They're a "when" and a "where."
There is a lever here, and it's the only one that actually solves the problem. Europe's cost disadvantage is not a law of nature. U.S. ethane is geology — nobody legislated it. Europe's industrial energy costs are constructed: an accumulation of energy mix decisions, carbon pricing, grid levies, and contracting choices made over two decades. Policy built this cost curve, and policy is the only thing that can rebuild it.
That's the structural change worth arguing for, and I don't think we've argued for it well. The sector has spent years asking for relief — exemptions, carve-outs, compensation mechanisms. Every one of those requests quietly concedes the premise: that expensive industrial energy is the natural order in Europe and chemicals need special handling. It isn't, and we don't. Competitive industrial energy is a choice Europe has not made, and we have argued it defensively when it should have been argued affirmatively.
Both things are true at once. Push for the energy restructuring, because nothing else repairs the underlying arithmetic. And in the meantime, work out which assets survive without it — because a decade of politics across twenty-seven member states is not an input a board can put in a 2028 model.
Europe is not a monolith. Spain is growing at 3 to 4 percent a year. And "European chemicals" covers everything from commodity polyethylene crackers to engineered specialty materials — very different businesses filed under one heading.
The commodity side — high volume, feedstock intensive, competing on delivered cost against U.S. ethane and Middle Eastern integration — is where the pressure is most acute and the exit logic clearest. Margins were thin before the energy shock. They're impossible in many cases now. Specialty tells a different story: coatings, electronic chemicals, ethyleneamines, specialty polymers, competing on formulation expertise, customer relationships, application development. Those advantages don't evaporate because gas is expensive.
But the trap is treating that split as a clean line on a portfolio chart. Often it isn't. Many European specialty positions sit downstream of the very commodity assets under review — fed by the cracker, by its byproduct streams, by shared steam and hydrogen and logistics, and cushioned by site overhead the big asset absorbs. Exit the commodity unit and the specialty business next door can find itself a merchant buyer with a worse delivered cost and a larger share of the fixed costs.
Sometimes the separation is genuinely clean. Sometimes the honest unit of analysis is the site or the chain, not the product line. Knowing which case you're in is the actual work, and a margin table won't tell you.
The practical work comes down to portfolio clarity and making the case.
Start by being honest about which assets are defending a position and which are simply consuming capital. The bottom of a long down cycle creates real psychological pressure to hold, because selling at the bottom feels like losing. But holding an asset that can't compete structurally isn't patience. It's avoidance.
Then look seriously at the specialty pivot — carefully. The path for European chemicals isn't to out-compete U.S. ethane or Middle Eastern integration on commodity products. It's to move up the value curve into formulations, applications, and materials that require the technical depth and customer proximity European companies have spent decades building. But map the integration before committing to an exit. A divestment case that doesn't price what the remaining specialty business loses — feedstock, utilities, absorbed overhead — isn't a portfolio decision. It's a transfer of the problem.
And separate the two policy levers, because they run on different clocks and we keep treating them as one conversation. Energy cost restructuring is the fundamental fix and the slow one — it won't arrive in time for the assets currently under review, which is precisely why the affirmative case has to be made now, for the generation that comes after them. The demand-side lever is faster and more winnable: Europe's 1.4 trillion euros in annual public procurement, and the Circular Economy Act and Bio-Industries Act if they're designed well. That's the lever that pays for the specialty pivot. Work it.
Europe's chemical industry will be smaller and more specialty-weighted. Planning around that beats waiting for a return to 2019.
But smaller is what survives if nothing changes. The cost curve was built by decisions, not by geology — and the executives making the hard portfolio calls this year are the ones with the standing to argue for different ones. Both jobs are ours. Only one of them has a deadline.
Until next week,
Kendall -
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