European Chemicals Sector: Navigating Prolonged Overcapacity And Demand Weakness

The European chemicals industry faces a challenging landscape through to 2029–2030, according to the latest industry forecasts. Despite hopes for a cyclical rebound, sentiment is now leaning toward a structural shift rather than merely part of the typical cycle.

There are four key issues currently facing the European chemicals market:

1. No let-up in global overcapacity

Recent capacity additions, especially in Asia, have pushed operating rates down towards 70%¹in many European countries, far below historical averages. The signs, however, are that limited recovery is expected this decade.

Four new ethane-fed crackers (4.15 MMt/y combined) coming online in Asia and Europe by 2027 will lower feedstock costs while further expanding overall supply. Further global cracker capacity expansion like this will drive the need for plant closures, especially assets in high-cost regions such as Western Europe and Northeast Asia. Japan will retire three naphtha