INSIGHT: Implementation of EU’s Clean Industrial Deal critical in challenged environment

ANTWERP (ICIS)–The lack of momentum in the fourth quarter and weak prospects for 2025 only serve to build pressure for further restructuring in European petrochemicals.

Three plant closures have been announced already in 2025 and it is highly likely that there are more to come.

Europe suffers competitively from high energy costs, a regulatory burden that global producers do not encounter elsewhere, and a lack of tangible incentives for change.

Overcapacity in the major building block petrochemicals and polymers clearly does not bode well for local producers but the sector’s challenges run deeper than that.

Following the industry-led and ground-breaking Antwerp Declaration from Europe’s energy intensive industries last year, and the Draghi report on European Competitiveness in September, more might have been expected from the European Commission’s Clean Industrial Deal proposals.

The industry consensus is that there is likely to be welcome change to some aspects of EU policy but that implementation is achingly slow.

The sector is frustrated with lack of access to new sources of hydrocarbons and Europe’s push to cut carbon seemingly at all costs, while deindustrialisation is looking like less of an empty threat and more of a reality

A large group of business leaders discussed the just published Clean Industrial Deal with Commission President Ursula von der Leyen in Antwerp on Wednesday. Industry looks now to EU heads of state to take action on key aspects of the Antwerp Declaration that are largely addressed in the Clean Industrial Deal at an EU Council meeting in March.

The Commission’s focus in its Clean Industrial Deal is on innovation – including pumping €100bn into a decarbonisation investments, paid for from the EU’s Emissions Trading Scheme (ETS), for example, and simplifying complex emissions reporting rules and the Carbon Border Adjustment Mechanism (CBAM) proposals.

It seeks to tackle high energy prices by focusing still further on renewables, on nuclear power and on better grid connections and more efficient gas and electricity markets.

Europe has to adapt to harsher competition, von der Leyen said at the event, a point that industry leaders have been pressing home for many years.

On the side lines of the meeting, industry leaders were focused on energy, regulation and competitiveness. “We need lower and competitive energy prices,” Yves Bonte, CEO of polyamides and engineering materials producer DOMO told ICIS.

He added that the Deal was promising more predictable regulation and going a long way to addressing key elements of last year’s Antwerp Declaration. He called it “a good step in the right direction” but noted that more clarity was needed on implementation.

Peter Huntsman, CEO of polyurethanes and systems producer Huntsman, was forthright. With this new clean industrial deal Huntsman does not have the ability to compete, he said.

He spoke of de-industrialisation in Europe and the impact on sectors such as aerospace and automobiles.

“As our customers leave Europe, we’ll have to move with them,” he added. Huntsman used to have 60% of its business in Europe but that has dwindled. The company had employed 10,000 there but now the headcount is under 2,500, production has dropped 90%.

Huntsman does not believe that the Commission’s proposals will lead to anything that is going to make energy in Europe more competitive. He pointed to US energy competitiveness, its fracking and exploitation of hydrocarbon resources. “Europe needs to develop its own hydrocarbons,” he said.

Europe needs more competitive hydrocarbons, Tom Crotty, Group Director of INEOS told ICIS, on Wednesday, adding that this is where the US is getting it right. “The US will be even more competitive over the next few years,” he suggested and warned of a “vicious cycle of decline” for petrochemicals in Europe.

A more virtuous cycle would be one in which Europe had more competitive energy and its industries were given greater opportunities to invest through mechanisms comparable to the Inflation Reduction Act in the US, he suggested.

Europe’s petrochemicals operating and regulatory environment is seen as being disincentivising.

“It [the Clean Industrial Deal] is a step forward, but it is too little, too late,” Crotty said.

No INEOS executives were among the 400 business leaders in Antwerp on Wednesday, a sign of the frustration with slow progress at the European level since the Antwerp Declaration, but the frustration goes deeper than that.

In an open letter to European politicians, INEOS chairman and CEO, Sir Jim Ratcliffe, said that chemicals in Europe is facing extinction. “Government policies have resulted in enormously high energy prices and crippling carbon tax bills,” he said. The company’s gas bill is €100 million higher than its US equivalent and its electricity bill €40 million higher. “The carbon tax bill is rising towards a shocking €100 million,” he added.

“The industry is in crisis with such huge disadvantages. Instead of investing in growth for the future, it is fighting for survival.

“Government policies will shut all petrochemicals in Europe. All our major competitors are planning for withdrawal from Europe as government has failed to act time after time,” Ratcliffe added.

Decarbonisation is the focus of the Commission while deindustrialisation is seen as a death knell for larges swathes of the chemicals sector.

“Decarbonising Europe by deindustrialisation is idiotic,” Ratcliffe said.

This is a by no means a static situation, of course, and industry executives have doubled down in asking what needs to happen to lift and sustain Europe’s chemical and industrial competitiveness. The commitment to Europe is strong. The Clean Industrial Deal shows that the European Commission is listening to industry.

Also speaking to ICIS and on the side lines of the event, Kim Hedegaard, CEO of Power-to-X at technology and catalysts provider TOPSOE, pointed out that the EU’s policies are not just about the next four to five years but about providing the framework that can promote greater industrial sustainability.

There is not enough stimulus in Europe, he suggested, that might underpin that sustainability and positively influence the risk picture.

Hedegaard is “cautiously optimistic,” however.

“Nothing is static when you talk about climate, energy or politics,” he said.

Insight by Nigel Davis