Since the second quarter of 2023, output of the EU27 chemicals industry has started to show a slight upturn. This trend continues in 2024, which is showing a steady but small improvement. Production of the EU27 chemical sector increased for the fourth consecutive quarter since Q3-2023.

The EU27 chemical industry seems to have reached its ultimate low in Q2-2023. However, given the lack in demand growth, the European chemical industry production volumes are still far from the pre-Covid levels.

The overall EU27 chemicals business climate survey shows a slight downturn in July

Compared to June 2024, the managers’ opinion on the current level of overall order books decreased slightly in July 2024. The negative digitsreflect the lack of demand for the chemical industry. Yet where stock levels are concerned, the destocking trend came to the end in March 2024. July 2024 is the fourth consecutive month showing an upturn in the stock level after six months of decline. Data on managers’ production expectations shows a slight improvement in July after three months of decline.

The confidence indicator of the EU chemical industry worsened slightly in July 2024, and remains well below the pre-crisis levels. According to the latest EU27 business and consumer survey, the uncertainty indicator decreased in July. Managers' uncertainty about their future business situation in services and construction and consumers' uncertainty about their future financial situation decreased. In contrast, business uncertainty increased slightly in industry and retail trade. To sum up, the EU27 chemicals business environment shows slight downturn, and is still facing a limited demand since March 2022.

European gas prices (July 2024): 4.7 times higher than in the USA

The chemical industry is energy-intensive using about 25 to 50 % of the natural gas it purchases as raw material, while the rest is used to generate steam and power for plants and processes. Chemicals are therefore highly impacted by gas prices. The current gas pricesin the EU (Jan-July 2024) are 70% above the pre-crisis level (2014-2019). Compared to the USA, the gas price in Europe (July 2024) is 4.7 times higher, leaving Europe at a competitive disadvantage. In 2022 and 2023, EU27 chemical production fell by more than 6%, and 2024 is not yet showing strong signs of a recovery, largely due to energy prices. Europe must find solutions to its structural energy problem.

EU27 chemicals production is gradually increasing, but recovery is not there yet

Since the second quarter of 2023, output of the EU27 chemicals industry has started to show a slight upturn. This trend continues in 2024, which is showing increasingly better results. Output in Q1-2024 was 2.4% above Q1-2023 levels. Output in Q2-2024 was 1.2% higher than in Q1-2024, and 4.3% above Q2-2023 levels. Production of the EU27 chemical sector increased for the fourth consecutive quarter since Q3-2023. The EU27 chemical industry seems to have reached its ultimate low in Q2-2023. However, given the lack in demand growth, the European chemical industry production volumes are still not completely recovering.

EU27 chemicals capacity utilisation slightly down in Q2-2024

EU27 capacity utilisation has shown encouraging signs during Q4-2023 and Q1-2024. There is an increase of capacity utilisation in the EU27 chemical industry from 74.4% in Q3-2023 to 75.6% in Q1-2024. However, the second quarter of 2024 showed a small decrease of capacity utilisation which reached the value of 75.2%. The current level of capacity is still well below the long-term average of 81.4%. The European chemical industry needs to operate profitably. Some chemical companies in Europe are planning “significant staff cuts in the next few months,” according to the ifo survey

Main EU27 countries showed better chemical production results in 2024 (Jan-June)

One third of EU27 chemicals sales is attributable to Germany (33%, data 2023). For 2024, data analysis shows a patchy situation across EU27 Member States: chemicals production grew in Germany (4.9%) and Belgium (4.3%) compared to 2023 (Jan-June). The growth in Spain (6.6%) is even higher. The growth in the Netherlands (3.8%) is slightly above the EU27 growth. With 1.2%, France showed a modest growth.

Apart from Italy (zero growth) and a few other Member States, the chemical industry in the largest EU economies started the New Year better than expected. However, the increase in chemical volumes throughout the first six months of 2024 (+3.4%, y-o-y) should be interpreted with a lot of caution. A lack of orders and high costs continue to impact European chemical companies.

Global chemicals production, up by 6.1% in 2024 (Jan-June)

China accounts for 43% of global chemicals sales (data 2023). The latest monthly data shows output in China increased for the third consecutive month since March 2024. Despite weak global demand, chemical production in China grew by more than 10% for the first half of 2024 compared to the same period in 2023. It is slow and uncertainty is still significant regarding 2024 and 2025. The UK shows slight improvement in Q2-2024 but it was not yet strong enough to lead to positive growth for the first half of 2024. Overall, global chemical output grew by more than 6% during the first six months of 2024 compared to 2023.

Looking ahead, the global outlook for the second half of 2024 is really mixed: The market concerns are now the ongoing weakness of consumer consumption in China, soft trends in automotive (especially EVs) and soft landing in the USA. Some analysts believe that we should see an improvement after summer. Others think that recovery is still some way off and the demand increase will be limited as economic conditions seem to be weak in Germany and in the USA, and the situation remains unchanged in China.