Ineos' CEO sounds the alarm -
Europe’s Chemical Industry is Faltering
Ineos’ Sir James Ratcliffe is sounding the alarm bell for Europe’s Chemical industry. In fact, activities that lead to general collapse have already been occurring for some time now. Following a general supply glut driven by Chinese overcapacity in the sector, Europe’s chemical industry is finding it more difficult to compete globally.
- Twenty-one major European chemical sites are already shutting, representing over 11 million tonnes of capacity.
- Chemical output is plunging. UK chemical production is down 30%, German production is down 18% and French production is down 12%.
- Eight of the world’s ten largest chemical companies are scaling back or withdrawing from Europe, while – in contrast - all of the USA’s top ten producers are investing and expanding.
A Self-Inflicted Wound
Most of the damage is self-inflicted. Taxation on fossil fuels to artificially boost costs, carbon and energy taxes, and a lop-sided US tarriff arrangement all work together to sabotage Europe’s competitiveness.
As a result the Oxford study predicts that half the ethylene capacity in Europe will close down by 2030. Ethylene formed one of the bases raw materials of the petrochemicals integration pyramid. Without domestic ethylene the rest of the pyramid has more difficulty surviving and cascade effects follow.
Ratcliffe is calling on Europe’s politicians to roll back the structural impediments to competitiveness already in place. This includes:
- Remove green taxes and levies from energy costs.
- Scrap carbon taxes.
- Provide tariff protection (challenge one‑sided tariffs).
Europe has recently proposed some action to help the chemical industry but it doesn’t not include structural reform, only assistance and focus on regulatory burden. In fact, it actually doubles down by selectively incentivizing decarbonation efforts by the industry.
Actioning the Insight
I had a conversation last week at the Chemical Summit in Houston where I hosted a panel on growth. A common theme I heard in table discussions was that the Chemical Industry must do “better marketing” of itself to help people understand the criticality of the industry.
I think and we advocate that the fight is more than public relations, but rather philosophical. Decarbonization pushed through by government fiat, ahead of it’s economic viability will engender de-industrialization. The hidden fact is that deindustrialization will further lead to reversal of standard of living improvements generally.
This is a policy issue, and one that has to be met head on. The environment and stopping global warming has the moral high-ground today, and that can’t be reversed with good marketing; only by articulating the moral good of the industry.
I’m interested in your thoughts and comments on this situation. Both from those in and outside of Europe. Please feel free to click through to the comments section and weigh into the discussion.
Until next week,
Kendall -
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