Should supply chain professionals be worried about the competitiveness and long-term viability of Europe’s chemical sector?
According to a recent report commissioned by Cefic, Europe’s chemical industry association, the answer is a resounding yes: chemical plant closures in Europe surged sixfold since 2022, reaching a cumulative 37 Mt of capacity over the three year period, or around 9% of European production capacity; meanwhile, new investment has collapsed, with announced investment capacity falling from 2.7 Mt in 2022 to just 0.3 Mt in 2025.
Amid imminent closures and declining investment, the industry warns of “a growing asymmetry, potentially leading to a net capacity reduction of -30.2Mt.”
“It’s no longer a question of being five minutes before or after twelve,” said Marco Mensink, Cefic’s Director General. “The sector is under severe stress and breaking.”
The report, conducted by Roland Berger on behalf of Cefic, counted 70 closure announcements in 2025 alone; of these, 56 were for units with known capacity.
Energy cost competitiveness was cited as the primary rationale in 49% of all closures between 2022-2025, followed by low demand (19%), overcapacity (9%), and regulatory factors (8%).
What capacity is being lost
Capacity closures announced between 2022 and 2025 were first and foremost found within the upstream petrochemicals segment (losing 17.8 Mt between 2022 and 2025, or around 14% of the segment’s total production capacity), followed by basic inorganics (losing 11.7 Mt, or 8% of production capacity), polymers (5.4 Mt, 6%), and specialty chemicals (2.0 Mt, 4%).
The 16% decline in European steam cracker capacity over the period concerned is all the more dramatic when compared to the situation between 2017 and 2022, when the segment saw a mere 1% reduction in capacity. This impacts Europe’s ability to make its own ethylene, propylene, and butadiene.
Anemic investment
On the investment side, the report notes 21 “confirmed” chemical investments in 2025, of which 14 had known capacity, amounting to some 7 Mt in total. Beyond those, it noted an additional 5 Mt of investments which had been announced but not yet confirmed by a final investment decision, construction start date, or completion; however, it cautioned that not all of those announcements would necessarily materialize.
Between 2022 and 2025, confirmed investments were found in the battery value chain (€1.9 billion), emissions reduction (also €1.9 billion), and recycling (€1.5 billion, mainly focused on chemical recycling of plastics to pyrolysis oil).
Impacts upstream
The European chemicals sector provides inputs worth €26.2 billion to the packaging industry each year, mostly in the form of plastics; €59 billion to agriculture and food, including fertilizers and additives; and €39.3 billion to the consumer products industry to make personal care items and household cleaning agents.
“As the backbone of manufacturing, healthcare, defence, water treatment, food production and clean‑energy technologies, the industry underpins countless regional value chains,” Ellen Mulder, Cefic’s communications manager, told Expana. “Its continued decline means higher costs for downstream industries, growing supply insecurity, and increased strategic vulnerability.”
Indeed, as the organization has previously explained, “the pandemic has highlighted the interdependencies within the chemical value chain, showing that disruptions can cause significant bottlenecks… [and reinforcing] the importance of maintaining a minimum level of local supply and demand to avoid cascading failures across the entire value chain.” It argues that relocation of production to cost-competitive regions introduces significant challenges, including extended supply delays, regulatory or compliance risks, and supply chain disruptions from policy changes or environmental regulations.
Image source: Adobe
Written by Shannon Behary
