The competitiveness of the European chemical industry

The chemical sector is a cornerstone of our European economy. It generates €655 billion in annual turnover and powers other industries, ranging from pharmaceuticals to automotive manufacturing. Despite its foundational role, the chemical industry faces significant challenges that threaten its competitiveness, like many other industries in this green transition. This month, the European Chemical Industry Council, or CEFIC, published a paper outlining the key issues and actions needed to increase European competitiveness in the chemical sector and reclaim the prime position Europe once had.

 

Europe’s reduced competitiveness

As with many other industries, the European chemical sector is grappling with challenges in four key areas:

• Energy cost: Europe’s energy prices are among the highest globally, creating a disadvantage for local production compared to regions like the U.S. and Asia. This is mainly caused by the heavy import dependency.
• Regulations: Stringent environmental policies create added financial and administrative burdens for European companies.
• Market share decline: Europe’s global market share of chemical sales has fallen from 23% in 2008 to 13% in 2023.
• Investment shortfalls: Capital scarcity and policy uncertainty deter investment in critical areas, such as upstream production.

 

Figure: Overall competitiveness between Europe, US, and China. (Source: CEFIC, figure: Ortelius)

 

The dangers of decline

 

The consequences of this weak position in the industry are far-reaching. Although Europe leads globally in chemical R&D and patent filings, scaling innovations has yet to materialize, creating the risk of losing this competitive edge. Additionally, by 2024, there were announced closures of over 11 million tons of production capacity, threatening up to 20,000 direct jobs. This is a 2-4% reduction in Europe’s chemical production, affecting economic stability and overall value chains. The highest impact, however, is on our sustainability goals: The chemical industry plays a central role in advancing green initiatives in the journey towards climate neutrality. This includes:

• Developing bio-based and recycled materials
• Carbon capture technologies
• Circular economy frameworks

If the chemical industry weakens, so does our hope for a reliable green transition.

 

Revitalizing the chemical sector

 

Luckily, not all is lost just yet. The Draghi report and the Antwerp Declaration outline urgent actions to safeguard the sector:

• Develop streamlined and cost-effective regulations
• Ensure affordable and sustainable energy access
• Invest in infrastructure for recycling and clean technologies
• Secure domestic raw materials through mining and recycling
• Foster demand for sustainable and circular products

 

Proactive policy measures and industry collaboration can revitalize the European chemical sector, ensuring its resilience and alignment with sustainability goals. By embracing green technologies and addressing cost barriers, the industry can secure its position as a global leader again.