It’s going to be a very bleak winter for many parts of Europe’s chemical industry amid high-energy prices and a weak macroeconomic environment.
In slow times, companies can bring forward annual maintenance shutdowns. The largest petrochemical plants can produce output worth several hundreds of thousands to a million dollars daily, and restarting a facility can take weeks. If plants are suffering from weak demand and operating at low run-rates, getting the contractors in to scrub out the vessels and change vital parts makes sense.
But in some corners of Europe’s chemical sector, including in Germany, there’s talk of way more extreme measures under consideration; where companies have to close down a plant for months, not days. And the rumblings about such a drastic action are not just about the odd company here or there.
In comparison to a maintenance program, the repercussions of a hibernation would be seismic and very much a last resort.
There are already signs that Europe’s historic chemical industry, an engine of Europe’s industrialisation and development, is struggling.
Venator had a very narrow escape. The maker of TiO2 and additives just emerged from Chapter 11 after almost succumbing to high costs for gas and raw materials and the economic slowdown. It was able to strike a deal with lenders and buy some time by recapitalizing the company.
Adding to the region’s woes, China in recent months has increased imports into Europe as chemical companies there seek to offset lower demand in their home market while taking advantage of a lower cost-base. India has also emerged as a chemical powerhouse.
INEOS announced today that it will mothball one of its purified terephthalic acid units at its production facility in Geel, Belgium. It had already been taken off-line in May 2022 and is set to remain cold and lifeless over the winter.
“High energy and operating costs have put European PTA production at a major disadvantage relative to exporters from Asia, who benefit from access to discounted Russian hydrocarbons,” Steve Dossett, CEO of INEOS Aromatics, said in a statement. “The EU’s imposition of provisional anti-dumping duties on Chinese PET resin is a step in the right direction, but European industry urgently needs more help. At the EU level, further action is still required against other artificially low-cost PTA and PET resin importers.”
And, by the way, “action is need to control spiralling employment costs” in Belgium, he added.
This is a company that’s known for running a tight ship. It’s risen to the top of the pile in just 25 years by buying unwanted commodity chemical assets from BP and other firms and running them more efficiently.