Working in the chemical industry has always been challenging. Boring times hardly ever happened, due to the overall cyclicity of the business and constantly changing market conditions with the associated imperative to adapt, especially for Europe with its structural competitive disadvantages in energy prices & raw materials, labour costs & taxes, plus consolidating markets. Additionally, chemicals always implied certain geopolitical aspects.
However, what we have been seeing in the past 12 months, in particular since early April 2025, marks a new dimension, adding more pressures on businesses than ever before. And it becomes more and more evident that these developments are way more than just short-term effects. A lot of them will most likely also last for the years to come, inevitably raising the question inmidst of all the turbulences: Quo vadis, chemical industry in Europe?
To start with the source of the latest external shock: the US tariff policy since early April 2025. Domestically, the US President sees it as fulfilling the promises he made in front of his electorate during the Presidential elections and a good thing to bring industrial production back to the USA. His strategy obviously implies to use the USA´s economic power to (en-)force a certain behaviour from other countries, regardless of whether these countries have been long-standing trade / political partners or not.
This means in practice that tariffs are now seen as a kind of sanctioning tool within the USA´s industrial policy repertoire, and not anymore – as beforehand – as a mere trade defence instrument. Since early August it is also clear that many tariff sockets are going to stay, imposing additional cost elements and administrative burden on companies. If these cost elements can be forwarded to the consumers, market prices will increase and possibly lead to a higher inflation, although recent economic data from the USA and elsewhere are not (yet) showing such an impact. Where the additional costs cannot be passed on, profit margins of companies will shrink. So, it feels like a lose-lose situation for everyone.
The most negative recent development of all is, however, that new turns almost every day as well as the back-and-forth announcements from the USA have been adding a lot of additional uncertainty to anyhow suppressed international markets. As a consequence, consumers postpone or cancel their spendings, thus further dampening the overall global demand for goods, and companies suspend their investment decisions. This all puts the globalised value chains, including chemicals, under additional stress.
Hence, it is not really a surprise, but of course also everything but helpful, that the eagerly expected increase in demand has not happened so far. At the same time overcapacities, especially in China, bring price and revenue levels under substantial pressure world-wide and in particular in Europe. With the practical closing of the US market for imports from abroad on the basis of the imposed tariffs, the pressure on European markets will grow further, while the European Union becomes more and more vigilant. Official statistics show that the EU has imposed more anti-dumping duties and other trade defence instruments in 2024 than ever before, with further increases observed in 2025 so far (1).
Most recently, the EU finally focuses its attention more towards scrutinizing the resilience of critical value chains in Europe. It is actually a “no-brainer”, although perhaps still not evident enough for people far outside the chemical industry, that the chemical value chain is the foundation of all other industries: the effectiveness of life sciences products like pharmaceuticals, the functioning of high-tech equipment like smartphones or semiconductors and the implementation of the production of sustainability solutions like windmill blades, solar panels or batteries is based on chemicals – just to name some of the applications taken for granted for a modern life. Fresh water supplies, infrastructure and defence systems are other examples.
Hence, the announced capacity closures of more than 11mt in Europe in 2024 alone and several more in the first months of 2025, mainly for basic chemicals, must be seen as a severe wake-up call for European politicians. Every plant that closes means less resilient value chains, increased import dependence, a loss of highly-qualified, well-paid jobs as well as innovation potential plus a shortfall of economic revenues for the respective regions. Strategically and geopolitically, this is exactly the wrong direction of what Brussels vowed very vocally during pandemic times, i.e. to pursue more self-autonomy.
For chemical distributors this development implies that they are now assuming a crucial role in keeping the European chemical supply chains up and running reliably, based on their traditional in-built strengths: supply chain excellence, agility and the flexibility to quickly adapt to new situations. They can easily support their partners with alternative supply sources, specific market or value-chain know-how, thanks to their substantial networks. Nevertheless, also the distributors see the overall situation with concern, because if all value chain parts surrounding the distribution sector are under stress in Europe, spill-over effects to other value chain parts are only a question of time.
After all, right now a lot will depend on how the EU repositions its industry, which by tradition has always been the backbone of the EU´s economic and international strength. Since the new Commission took office about one year ago competitiveness appears as a key priority in the EU´s agenda, contributing to the so-called Chemical Industry Action Plan to strengthen specifically the chemical industry, which the EU communicated right before the summer break 2025. The targets and measures were well formulated; just wording is not enough. In these strained times businesses are expecting quick, pragmatic, practical political actions to secure a sustainable future of critical value chains in Europe and a sound economic perspective for the people.
This shall imply a new innovative industrial policy for Europe, based on cost-efficient, enabling regulation without overlaps, redundancies and additional burden (for example bureaucracy) for businesses, clarity on and consistency in the way forward plus harmonized standards within the EU27 Member States. In parallel, (even) more European free trade agreements with other parts of the world are needed to further implement the idea of dismantling tariff and non-tariffs barriers, where the USA as long-standing EU trade partner is evidently taking another route for now.
If this could be achieved, the current situation could also lead to something positive for the future.
References and notes
- https://policy.trade.ec.europa.eu/news/commission-launches-record-number-trade-defence-investigations-2024-2025-07-28_en
