Sabic will not reopen UK plant and Dow will close another in Germany
Petrochemicals giant Sabic is to shut its olefins cracker in Teesside, UK. The plant has been offline since 2020 and was in within the process of being converted to run on ethane from the USA, a affordable feedstock than oil-derived naphtha. Meanwhile, Dow Chemical has confirmed it will close down its cracker in Böhlen, Germany, by the end of 2027, along with two other European primary chemical plants.
Crackers use excessive temperatures and steam to produce alkenes – mainly ethylene and propylene – from large hydrocarbons in naphtha or other feedstocks. Mostly this feeds into commodity plastics like polyethylene and polypropylene, with a smaller amount going into different chemicals.
But steam crackers in Europe are in a dangerous position, with at least 10 sites either closed or expected to be close down among 2022 and 2027. Meanwhile, LyondellBasell is negotiating with investment organization Aequita to sell 4 olefin and polyolefin plant life in Europe. ‘Getting out my calculator, we’ve got 2.3 million tons of ethylene capacity for sale and we have had 3.4 million tons of closures or declared closures [for Europe],’ stated Olivia Steele, olefins research analyst at Wood Mackenzie. That represents over a 5th of present capability within the region. The refineries that provide naphtha feedstock are also suffering, with Prax Group – operator of the UK’s Lindsey refinery – going into receivership in early July.
Petrochemicals Europe has warned that European chemical manufacturers are operating at a extensive cost drawback, with natural gas expenses 4 to 5 times higher than in the USA in 2024. Cracking is energy intensive, and makes use of lot of gas to provide heat. ‘The price differential between Europe and the rest of the nation has widened due to higher energy costs,’ says Sebastian Bray, head of chemical research at funding bank Berenberg.
European steam crackers also tend to be older and run on naphtha from oil, while newer, more aggressive crackers may also provide the flexibility to run on inexpensive US ethane. Newer facilities in China and somewhere else are always larger, permitting them to obtain greater economies of scale and more favorable cost profiles. ‘Age is often a proxy for scale and aggressive position, because the newer crackers have become bigger and bigger,’ stated Alan Gelder, market analyst at Wood Mackenzie. The most up-to-date ethylene installation in Europe is 25 years old.
Capacity buildup
There has been a international buildup of ethylene manufacturing in the Middle East, North America and Asia. China, as soon as a main importer of commodity chemicals, has been trying to end up become more self-sufficient. Korea, Japan, southeast Asia, US and the Middle East have been all massive ethylene derivative exporters to China, but are seeing lower exports now, stated Dhanish Kalayarasu at market intelligence organization Argus Media. ‘We have approximately 50 million tons of new ethylene capacity coming online among 2020 and 2028, with lots of new capacity in China, and that’s putting pressure on older European and Asian assets,’ says Steele.
Further chemical capacity underneath construction in China and the Middle East might also put even extra pressure on older plants in Europe and somewhere else. ‘China is dedicated to involve its chemical industry and the government has made capital available to companies, assisting them as they grow and obtain dominance,’ says Bray.
The situation has converted enormously quickly. ‘[Olefin] ability capacity was quite solid, and then on the start of 2020 it commenced to rise pretty significantly,’ stated Valeria Sterpos, partner at management consultancy Bain & Company. ‘Capacity build-up was higher and quicker than the required growth.’ Just as ethylene manufacturing surged, the world economy has decelerated, so requirement for products that use a lot of plastics in either manufacturing or packaging – like cars, electronics and appliances – has not grown at anticipated rates. Trade disputes and tariffs between China and the US are predicted to further suppress demand growth. Sterpos estimates that 10% of ethylene and propylene capacity will n to need to shut down to restore good economic returns for the remaining plants.
Against the grain
Ineos is the only corporation constructing a brand new ethylene cracker in Europe. Its Project One plant in Antwerp will procedure imported US ethane and have a carbon footprint half that of an typical European naphtha cracker, in step with the organization. ‘It is a test as to whether building a new chemical plant in Europe, the usage of the first-class and most modern day technology, may be made economic,’ stated Bray. It is anticipated to come online in 2027, producing 1.5 million tons of ethylene per year, and putting more pressure on costlier local competitors.
In Italy, Eni subsidiary Versalis operates all three of the nation’s crackers. While one already closed in 2022 and another in Brindisi is expected for closure in 2025. At Priolo in eastern Sicily, Versalis plans to transform a cracker into a biorefinery at a cost of around €800–900 million.
In March, Versalis noted that the EU chemical industry is constantly dropping market share. Versalis stated it might refocus on high price products and speciality polymers, with the Priolo biorefinery planned to begin in 2028. ‘This kind of conversion is something [Versalis] has been quite successful at,’ stated Gelder. ‘Typically, biorefinery sites provide smaller throughputs, however higher margins and so are more valuable.’
If closures continue, Europe may end up importing more commodity chemicals and plastics from the Middle East, which has persisted to diversify from oil manufacturing into petrochemicals. The European Commission recognizes that chemicals is an allowing industry, playing a pivotal function in helping Europe’s industrial competitiveness. ‘The plight of the chemical area has not gone unseen in Europe, but politicians – for my view – usually see it as semi-strategic,’ stated Bray: It is a great source of jobs and there may be a political case for supported associated with industrial autonomy, however concrete assist for the sector only periodically makes it to the top of the political agenda.
Trade turbulence
Yet trade tensions around US tariffs are ramping up concerns round industrial supply chains. Politicians within the UK and EU are beginning to recognize that domestic manufacturing needs some help, says Steele. Gelder warns that ‘the money involved may be very, very massive,’ and inflexible petrochemical plants can lose huge sums of cash very quickly if situations change, so direct financial guide is not likely from coins-strapped governments.
The trade situation with the US also places the EU at the backfoot. ‘If you can’t be sure who your buddies are, you need to keep the functionality to shield yourself, in which case you want a production base,’ says Gelder. ‘And without petrochemicals it’s far tough to produce anything.’ Bray notes that the chemical industry has been sad with the degree of regulation it confronts in Europe, but aside from alleviating that, ‘there’s not much Europe can do’.
China’s ethylene manufacturing isn’t proof against trade uncertainty. Its more recent plants depend upon ethane imported from US and the Trump government has constrained exports of the gas to China – presently the destination of around half of US ethane exports. The capacity buildup for ethylene is expected to stop soon. ‘The chemicals sector is not any stranger to over-funding. Whenever margins are good, people invest,’ stated Kalayarasu. ‘We’ve been seeing some Chinese ventures [coming online ahead of schedule], but this is the primary year I’ve no longer been listening to much about new ventures,’ stated Kalayarasu.
‘This is a turbulent time in Europe. There’s going to be similarly rationalization,’ stated Steele. ‘But we assume we can see a restoration in the 2030s, with demand selecting back up.’ In the interim, operators may also need to decide if their European steam crackers can ride out the cost pressures or reorient closer to inexpensive feedstocks or better value chemicals.
