Europe’s Chemical Industry Faces Crisis Threatening Industrial Gas Demand

Europe’s chemical industry is currently at a critical juncture, facing significant challenges that threaten the demand for industrial gases. According to a new report by Oxford Economics, commissioned by Ineos, the sector is grappling with rising energy costs, strict regulatory pressures, and increased foreign competition, all of which jeopardize its future stability.

Key Challenges Impacting the Industry

• Rising Energy Costs: Energy prices have surged due to geopolitical tensions, supply chain issues, and the costly transition to greener energy sources. This puts European chemical producers at a disadvantage compared to regions with cheaper energy.
• Regulatory Pressures: Stricter environmental standards require expensive investments in new technologies, increasing operational costs and reducing competitiveness.
• Foreign Competition: Expansion of chemical manufacturers in Asia and the Americas, benefiting from lower production costs, has intensified market competition.

Potential Industry Impact

The report warns that these difficulties could lead to the disappearance of up to half of Europe’s ethylene production capacity. Ethylene is a crucial raw material in the production of plastics, solvents, and various chemical products. A reduction in ethylene output would consequently decrease demand for essential industrial gases such as oxygen, nitrogen, and hydrogen, which play a vital role in chemical manufacturing.

The downturn in chemical production would also have wider economic repercussions, affecting downstream industries including automotive, construction, and packaging. This would, in turn, influence the entire industrial gas value chain due to reduced orders.

Calls for Policy Support

Ineos and Oxford Economics recommend that policymakers consider measures to support the chemical industry, such as:

1. Energy subsidies to alleviate cost pressures.
2. Regulatory adjustments to balance environmental goals with industrial competitiveness.
3. Incentives for technological innovation to enhance productivity and sustainability.

The chemical industry remains a cornerstone of the European economy. Addressing these challenges will require coordinated efforts from companies, governments, and various stakeholders to ensure the sector’s resilience and continued growth.

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