Europe’s petrochemical industry is facing a wave of plant closures after years of losses and a rapid increase in global capacity, especially in China, according to a Reuters analysis.

High production costs and aging plants have created problems for European producers, making the region increasingly dependent on imports of primary petrochemicals such as ethylene and propylene, the raw materials used to make plastics, pharmaceuticals and many industrial goods, according to Agerpres.

“While the rest of the world is building more than 20 new cracking plants, Europe is sliding into industrial decline,” INEOS founder Jim Ratcliffe said recently, referring to a component of the petrochemicals industry.

Billionaire Jim Ratcliffe made his fortune by buying petrochemical plants from BP and other companies, and along with other business leaders he criticized the lack of political action.

The European Commission responded this month with a promise to support local production of chemicals considered strategic to its industry, such as ethylene and propylene. Brussels plans to increase state aid for the modernization of petrochemical plants and will require that products made in Europe be given priority in public tenders, as it did with the 2023 legislation for metals and minerals.

But the move may come too late to repair the damage.

“It’s like being on the Titanic. You can’t stay in denial. You have to find a lifeboat,” says Giuseppe Ricci, head of industrial transformation at Italian group Eni. He revealed that Versalis, Eni’s petrochemicals division, has accumulated losses of more than three billion euros over the past five years as the company closed its last two steam crackers in Italy and invested two billion euros in biorefining and chemical recycling.

Other major global producers, including Dow, ExxonMobil, TotalEnergies and Shell, are closing or reviewing their petrochemical assets in Europe. Most of the facilities scheduled for closure are crackers, which convert hydrocarbons into ethylene, propylene and other primary petrochemicals.

A paper drawn up in March by eight EU member states said 500,000 jobs could be at risk due to the possible closure of most European production facilities by 2035.

The problem is that EU plants are largely small and medium-sized facilities operating at less than 80% of capacity, a level considered uneconomic.

Up to 40% of the EU’s ethylene production capacity, totalling 24.5 million tonnes per year, is at high or medium risk of closure, according to consultancy Wood Mackenzie.

“The proportion of crackers in Europe that are at risk is much higher than in other regions,” says Robert Gilfillan, chief analyst for plastics and recycling markets at Wood Mackenzie.

While older petrochemical plants in Europe use crude oil as a feedstock, those in the U.S. and the Middle East use cheaper ingredients such as ethane, a byproduct of shale gas.

North America’s ethylene production capacity is expected to grow to 58 million tons by 2030, from 54 million tons today, according to consulting firm ADI Analytics.

Meanwhile, China’s ethylene production capacity will grow by 6.5 percent each year from 2025 to 2030, when it will produce nearly 87 million tons a year, Huang Yinguo, director general of the China National Chemical Information Centre, estimated in May. This is three times the capacity currently in the European Union.

Chinese producers have also begun opening facilities in Southeast Asia from which to export to Europe and North America, in an attempt to avoid carbon taxes and tariffs on products made in China.

European policymakers now face a difficult choice: to intervene decisively or to sit by and watch the continent’s petrochemical industry erode.

In a document published in March, countries including France, Italy and Spain called for a “Critical Chemicals Act” strategy after recent data showed that the EU was a net importer of ethylene and propylene every year from 2019 to 2023.

Article distributed with the support of  Schneider Electric