By: Richard Carter
Last updated : July 21, 2025 7:55 pm
Collapsing asset values combined with the impact of expected EU tariff measures and anti-dumping duties could offer strategic opportunities for market entry to secure technology and know-how at a reduced cost
The EU petrochemical / chemical industry is in a highly precarious situation; never in the post war period have so many chemical plants closed, or such a high percentage of capacity been closed, or announced to be closed, in such a short period of time, highlighting the massive structural challenges Europe is facing.
With hindsight it is apparent how (over)dependent the industry was on low cost Russian gas. This appears to have been the hidden lifeline, in view of the very obvious massive build of over-capacities taking place in China. Managements appear to have been blindsided to the dependency.
The collapse in European production capacity after a long period of low utilization rates has global ramifications, not least for the balance sheets of the US majors who are leading the rush to exit Europe. For example, Dow, Lyondellbasell, ExxonMobil, Huntsman, Westlake, Trinseo et al have all made capacity closure announcements or divestments.
Combined with the capacity closures of European players such as BASF, INEOS, TOTAL, ENI, and others such as Sabic, all these measures in sum are “system relevant”: they threaten the future of their raw material suppliers, utility suppliers, service companies as well as their downstream customers. This swift reduction of +10% in European capacities shifts the supply / demand balance in Europe, impacts trade flows and weakens key elements of the infrastructure system such as storage terminals and ethylene pipelines. The potential impact of the ongoing negotiations on tariffs is still an unknown for Europe. Getting behind the tariff barriers will become more important for suppliers outside Europe as global supply chains break down.
The question that I frequently get from investors and clients is the proverbial “are we there yet?” i.e. at the bottom of the cycle for Europe. My response is that this is not a cycle but an unprecedented structural pivot!
Further capacities are threatened if the EU´s recently announced Critical Chemical Alliance does not immediately propose counter-measures.
While the focus of attention is rightly on the backbone i.e. steam cracking capacity reductions and downstream polyolefin capacities, the upheaval and turmoil reaches deeper into downstream value chains such as PVC, PET, polyurethanes (MDI / TDI), polyamides (6 & 6), plastic additives, oxo, intermediates, fine chemicals etc. And also into the supposed safe haven of chemical distribution which will be challenged to buck the ongoing demand destruction.
One consequence is an imminent wave of M&A and consolidation as so many assets are up for sale. Yet few buyers have emerged to date. Asset values have collapsed and traditional valuation metrics thrown overboard. The alternative valuation is in many cases the cost of closure for the current owner, or even lower as the incumbents face opposition from other stakeholders as they look for a quick and low friction exit.
Here lies the opportunity for potential buyers. Collapsing asset values combined with the impact of expected EU tariff measures and anti-dumping duties (ADD) could offer strategic opportunities for market entry to secure technology and know-how at a reduced cost. However, while it may still be premature (“never catch a falling knife”) for concrete action it is definitely time to evaluate scenarios, alternatives and be prepared.
About the Author:
Mr. Richard Carter is an experienced advisor, consultant, and Advisor to the Board. He brings to organisations detailed understanding and exposure across all facets of the global petrochemical / chemical space.
With over 25 years of experience in fine & intermediates chemicals, global procurement, Home & Personal Care and General Management, including international assignments for BASF in Germany, USA, Portugal, Malaysia, Mr. Carter last worked as Managing Director of BASF UK and its multiple subsidiaries.
(Disclaimer: The opinions expressed within this article are the personal opinions of the author. The opinions appearing in the article do not reflect the views of ICN and ICN does not assume any responsibility or liability for the same.)