High costs shutter European chemical plants

At Chemelot, a sprawling industrial complex in the Dutch province of Limburg, producer Fibrant has shut three of its seven factories. Saudi-owned Sabic and Egypt-linked OCI have sold plants at the same site. Chemical complexes are not collections of independent buildings. Chemelot's factories share pipes, by-products, heat and logistics. Lose one unit and its neighbours lose feedstock or customers, weakening the whole cluster. The same hollowing out is visible in Ludwigshafen, Antwerp and southern Italy, driven by a cost gap that European policymakers are now scrambling to narrow.

Energy as power bill and raw material

Chemical plants do not just consume energy. They turn fossil molecules into products. Natural gas and oil derivatives are not only fuel: they become the fertiliser pellet, the plastic resin, the pharmaceutical ingredient (IEA). When gas prices rise, the squeeze hits both the electricity bill and the input cost at the same time. European producers pay roughly double US electricity prices, according to independent energy modelling (Energynews). That alone would hurt. In chemicals, it hurts twice.

In mid-July 2026, Germany's spot gas price sat at 57.8 €/MWh, day-ahead electricity averaged 113.0 €/MWh, and carbon-emission allowances under the ETS (the EU's Emissions Trading System, where companies must buy permits for each tonne of CO₂ they release) cost about €79 per tonne (BDEW). Most Asian competitors face neither comparable energy bills nor carbon costs. German chemical production remains more than 20% below its 2021 average, according to industrial monitoring data (NZZ).

The jobs are moving, not disappearing

BASF's Ludwigshafen workforce reportedly fell from 33,370 at end-2024 to about 30,000 full-time posts. The company is pouring €8.7 billion into a new site in Zhanjiang, China (finanzen.net). BASF says the Chinese investment is partly about selling into Asia's growing demand, not only escaping German costs (BASF). Both things can be true. The net effect is still fewer European jobs and more Asian capacity.

In Brindisi, southern Italy, unions warn that a protocol signed in March 2025 maps out the gradual shutdown of all basic-chemicals operations (the commodity ingredients other manufacturers build on) at the Versalis plant (BrindisiTime). The unions are not rejecting the green transition. They are demanding employment guarantees and a national plan before plants close. In Belgium, TotalEnergies plans to shut one of its two Antwerp steamcrackers (plants that break oil-derived feedstock into building blocks for plastics and chemicals) by 2027 (chemietechnik.de).

Brussels tries to slow the pressure

The European Commission's July 2026 package proposes reducing the pace at which the ETS cap falls after 2030, extending the free emission permits that shield industry from carbon costs, and creating a €100 billion Industrial Decarbonisation Bank. The Commission argues that large-scale electrification could cut Europe's fossil-fuel import bill by €260 billion a year by 2040 (European Commission). The Flemish government is already expanding compensation for indirect carbon costs in electricity prices to more energy-intensive sectors, including chemicals (vraagenaanbod.be).

The tradeoff is real. The ETS has worked: covered-sector emissions have fallen by roughly half since 2005, making it one of the few EU climate tools with a proven track record (Clean Energy Wire). Weakening the cap risks rewarding older fossil-based plants while penalising companies that already invested in cleaner processes (Energy Market Price).

Europe is trying to close dirty production before the clean replacement is cheap enough to run. The Commission's package buys time. The economic test is whether governments use that time to build cheaper clean power, grids and hydrogen. Compensation alone keeps capacity alive without making it competitive.