Due to a combination of high energy costs, sluggish demand, and intensifying global competition, the European chemical industry is grappling with a surge in plant closures expected in 2025. Major companies such as Dow and BASF are closing plants, highlighting their structural vulnerabilities. A key factor exacerbating these challenges is China's dominance in several commodity chemicals, which has led to the influx of low-cost alternatives into the global market, eroding European profitability. Chinese overcapacity in products such as ethylene, polypropylene (PP), and polyurethane intermediates is indirectly contributing to these plant closures.
High natural gas prices (which remain elevated following the Ukrainian conflict) and weak downstream demand have severely impacted Europe's petrochemical industry. As of mid-2025, ethylene operating rates hovered between 70-75%, well below the viable threshold of 80-90%. This has prompted announcements of over 11 million tons of capacity closures between 2023 and 2024, eroding Europe's global market share by 11 percentage points. For example, Dow plans to close three of its upstream assets in Europe by 2027, including an ethylene cracker and siloxanes and vinyls production facilities in Germany, citing "structural challenges" caused by regional losses. Similarly, other companies are idling crackers, and two more European ethylene plants are scheduled for closure. These moves reflect a broader disruption in the petrochemical industry, exacerbated by the looming trade war.
Central to this is China's petrochemical overcapacity, which accounts for over 40% of global chemical sales and has expanded rapidly since 2020. China's economic slowdown has exacerbated exports, putting pressure on global prices and capacity utilization. In the ethylene and olefins sectors, China's coal-to-chemicals route offers cost advantages, leading to oversupply that has hit Europe harder than regions like the United States or India. Polypropylene faces similar challenges: even before the tariffs took effect, Chinese polypropylene plants were running at reduced capacity due to overbuilding, flooding the market and leading to plant closures. Polyurethane chemicals used in foams and coatings are another hotspot; Dow is reviewing its European assets amid competition from Asian imports. A recent webinar highlighted how overcapacity in Asia (primarily China) is directly driving European factory rationalization and reshaping supply chains.
This dynamic creates a two-way dependency: Europe absorbs China's excess capacity, but at the expense of its own viability. Despite the industry outlook projecting modest global economic growth (3.5% in 2025), Europe's "disappointing" performance persists due to these pressures. Without policy interventions such as carbon border adjustments or subsidies, further plant closures are imminent.
In summary, while energy and demand issues are most prominent, overcapacity in China for ethylene, polypropylene, and polyurethane has significantly accelerated production closures at European chemical companies. This highlights the need for companies to strategically reposition towards high-value specialty products to safeguard the industry's future.
As an integrated internet platform providing benchmark prices, on September 30, the benchmark price of PP (drawn) on SunSirs was 6,920.00 RMB/ton, down 3.98% from 7,206.67 RMB/ton at the beginning of the month.
Application of SunSirs Benchmark Pricing：
Traders can price spot and contract transactions based on the pricing principle of agreed markup and pricing formula (Transaction price=SunSirs price + Markup).
If you have any inquiries or purchasing needs, please feel free to contact SunSirs with support@sunsirs.com.
