European chemistry is losing its breath. In just a few years, nearly 10 percent disappeared. production capacity on the Old Continent. Industry representatives warn that they are being replaced by cheaper products from Asia and the Middle East, as European companies suffocate under the weight of energy prices, CO2 costs and a thicket of regulations. And both representatives say so state-owned (Azoty), private (Qemetica), and a foreign business operating in Poland (BASF).
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The chemical sector is responsible for approx. 7 percent entire EU industry and generates over one million direct jobswith 3-5 times more indirectly dependent positions, mainly in small and medium-sized companies. Meanwhile, as Katarzyna Byczkowska, president of BASF Polska, estimates, approximately 9% of companies have been liquidated in Europe in the last three years. chemical production capacity, and in 2023–2024 the European chemical industry itself shrank by 14%. At the same time, chemical production was growing, among others. in China, Russia and the United States.
— We in Europe play a different game to the rest of the world, but on the same pitch. We are starting to lose – warns Kamil Majczak, president of Qemetika (former Ciech) during a debate with other representatives of the chemical sector organized by Siemens. In his opinion, Europe still believes that will impose rules on others, while China, the USA and India look at the world as a field for expanding their spheres of influence and taking over markets. — We cannot expect developing countries to suddenly make everything green, three times more expensive, because we think it is right, he adds.
The European chemicals sector is in serious trouble.
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Skyrocketing energy costs
Majczak emphasizes that the consequences of rising costs are already tangible. More installations are being closed in Europe, and some companies have survived the last two or three yearsusing previous profits. — This buffer is running out, and when the plant closes, it won't move anymore. People will leave, production capacity will disappear and will not come back after a year or two – warns the head of Qemetica.
In the case of fertilizers, the price of gas accounts for 75–80 percent. the cost of producing the product, and Europe has been an importer in this respect for years, now forced to use much more expensive sources than before. This is a big problem for fertilizer companies such as Azoty.
— Chemistry is an energy-intensive industry, and gas is often not only an energy carrier, but also a key raw material – emphasizes Paweł Bielski, vice-president of Grupa Azoty.
— At certain times gas in the USA was 4-6 times cheaper than in Europe – reminds Katarzyna Byczkowska, president of BASF Polska. Differences in energy costs are immediately visible in the profit and loss account of European and American plants – admits Kamil Majczak, president of Qemetica, who compares the results of factories in Europe and the USA. The bill must also include fees for CO2 emissions, which – as Majczak says – Outside Europe there is virtually none, except for a specific system in California.
The EU is taking away the oxygen of European chemistry
Industry representatives emphasize that they do not question the direction of decarbonization, but the pace, scale and structure of regulatory burdens in a situation when Europe is already starting from a worse position because it is more expensive in terms of energy.
Katarzyna Byczkowska draws attention to two levels of regulatory costs. Firstly, these are direct expenses resulting from compliance with regulations – as in the case of the EU CLP regulation. In connection with the regulations ofchanging the font on chemical labels was to cost her company over EUR 300 millionbefore, after a year of intense negotiations, it was possible to withdraw some of the assumptions. Second, there is a growing structural burden resulting from the sheer number and variability of regulations, which generate chaos, reduce predictability and drain resources from research and development.
– In Europe, we already spend twice as much money on adapting to regulations than on research and development – notes the head of BASF Polska. On a continental scale, this means a decrease in R&D expenditure by 8%, while in China and the USA the expenditure increases year by year..
Green Deal to improve
Paweł Bielski, vice-president of Grupa Azoty, points out that the EU climate package and subsequent elements of Fit for 55 were created in completely different conditions than those in which the industry operates today. — The Green Deal was adopted when no one took the pandemic into accountneither the war in Ukraine nor the sudden change in Europe's energy balance – he argues. In his opinion, the direction of decarbonization will remain unchanged, even if some regulations are formally suspended, but the rules themselves should be improved.
A symbolic example is the ETS system, i.e. emissions trading. Free allocations of allowances are decreasing every year, and – as Byczkowska says – companies are not able to “add” another billion euros annually to purchase certificates in a situation of crisis and blocked new investments. — We need someone to stop constricting our throats even more – he says directly.
China is taking the lead
The clash between European climate ambitions and the realities of global competition is most clearly visible in the clash with production from Asia. – We used to be an exporter, today we are an importer, and this fundamentally upsets the balance – says Majczak. China has built massive modern manufacturing capacity in recent years to meet its domestic market, but slowing demand has meant much of that capacity has been freed up for export. Taking advantage of cheaper energy and less restrictive regulations, Chinese producers are aggressively entering the European market — from fertilizers to plastics.
Paweł Bielski reminds that not long ago Europe had a strong polymer industry, including the production of polyamides for the automotive, construction and packaging industries. Today, China's dominance is overwhelming in many segments – in one of them, as indicated by as many as 67 percent global production capacity is already located in the Middle Kingdom. In his opinion, a similar trend can be seen in fertilizers: huge installations are being built in Russia, the USA and the Persian Gulf countries, which will not use all the production at home, but will direct it, among others, to Europe.
Light at the end of the tunnel
However, in the discussion about costs and regulations, there is also a thread of “swallows” – positive signals. One of the main goals is to be technological development that reduces costs. – We see greater activity of companies investing in solutions that allow production faster, cheaper and more safely – says Maciej Zieliński, president of Siemens Polska.
Grzegorz Kowalczyk, journalist of Business Insider Polska
