Economic data are not painting a rosy picture. The EU27 manufacturing output for the first two months of 2024, is even 6% lower than the same period last year. Changes for the better remain bleak, with gas prices at least 50% above the pre-crisis level (2014-2019), high feedstock costs, and high trade dependency levels. Recent analysis shows that 31% of EU27 chemicals consumption in 2023 is attributable to imports from non-EU27 suppliers. In 2013, this number was at 22%.

While the EU27 chemicals production grew by less than 0.5% during the first two months of 2024 compared to Jan-Feb 2023, China’s share in the global chemicals market continues to grow. With 44% of the world market share, China will continue to hold the top ranking in sales, a position in bygone decades firmly held by Europe.

Europe needs to change this trend, and we need to do so fast. Our Antwerp Declaration for a European Industrial Deal provides a list of solutions.

European gas prices: There is no return to ‘old normal’

The chemical industry is highly impacted by gas prices. The current gas prices (Q1-2024) are at least 50% above the pre-crisis level (2014-2019). Compared to the USA, the gas price in Europe remains 3.9 times higher. This leaves Europe at a competitive disadvantage with the USA (among others). 2022 gas prices were more than spectacular. Consequently, EU27 chemical production was immediately impacted by the high energy costs. The figures speak for themselves: 2022 and 2023 reported a severe output decline of more than 6%, and 2024 is still showing a weak start, and has not yet shown strong signs of a recovery. In 2024 the European chemicals production grew by less than 0.5% during the first two months compared to Jan-Feb 2023. Europe must act urgently and find solutions to its structural energy problem. Policies adding costs on top intended to boost transformation could speed up EU deindustrialisation and boost import dependencies.

Assessment of EU27 chemical overall order books showed gradual improvement

The latest EU economic survey shows a significant increase in confidence in the EU27 chemical industry. In March 2024, chemicals production expectations went up for the second time in row. It is certainly weak compared to the pre-crisis level but it remains in the positive digits. The assessments of the stocks of finished products decreased for the sixth consecutive month in row.

The managers’ opinion on the current level of overall order books continued to move into the right direction, and showed a gradual improvement. The indicator on export-order of books is still showing some encouraging signs. It is too early to say that demand is gradually back to the normal level. The chemicals confidence indicator improved further in March 2024, yet is still at a low level.

2024 shows a weak start for most EU27 sectors

Output of the entire EU27 manufacturing sector was significantly lower during the first two months of 2024 compared to the same period in 2023 (-6.0%). The year 2024 started with a strong output decline of January 2024 compared to December 2023 (-5.9%), followed by a slight upturn of 1.1% in February versus January of the same year. Focusing on Jan-Feb 2024, and with (+0.4%), the EU27 chemical industry reported the third-highest output increase among the EU27 manufacturing sectors, behind the paper (+1.3%) and food and beverage (1.6%).

Production volumes are still not recovering due to lack of demand growth, coupled with high regional energy and feedstock costs. The slight increase in chemical volumes throughout the first two months of 2024 (+0.4%, y-o-y) must be analysed with a lot of caution, it could be probably linked to a short-term restocking. It must not be perceived as good start of stabilised demand and ongoing recovery. Time will tell if production increases in Jan-Feb 2024 will continue over the coming months.

The chemical industry in Europe is under cost and demand pressures, and certainly more than in the other competing countries in the world. Chemicals production in Europe faces more structural challenges rather than business cycle issues. The latest announcements on closure of crackers units in Europe underpin this.

China became the largest EU27 chemical import country

The chemical industry business is based on free, fair trade and open markets, both for its raw materials and as outlets for its products. EU’s framework conditions in a global business environment provide that Europe depends more and more on imports from non-EU27 countries. Recent analysis shows that 31% of EU27 chemicals consumption in 2023 is attributable to imports from non-EU27 suppliers. In 2013, our import intensity (imports as % of EU27 consumption) was 22%, which is far lower.