Energy Costs Close Chemical Plants

At Chemelot, the vast industrial complex in the Dutch province of Limburg, the damage is already visible. Fibrant has shut three of its seven factories. Sabic, owned by Saudi interests, and OCI, with links to Egypt, have sold plants on the same site.

That matters because a chemical complex is not a row of separate sheds. The factories share pipes, heat, by-products and logistics. One plant's waste stream can be another plant's raw material. Close one unit and the neighbours can lose a supplier or a customer. The whole cluster becomes weaker. The same thinning-out is now under way in Ludwigshafen, Antwerp and southern Italy, pushed by a cost gap European policymakers are trying to narrow before too much capacity is gone.

Energy as power bill and raw material

Chemical plants do not simply use energy. They turn fossil molecules into things: fertiliser pellets, plastic resins, pharmaceutical ingredients (IEA). Natural gas and oil derivatives are both fuel and feedstock. So when gas prices rise, the pressure hits twice: the power bill goes up, and so does the cost of the material going into production.

European producers pay roughly double US electricity prices, according to independent energy modelling (Energynews). In most sectors, that would be painful enough. In chemicals, it can decide whether a plant runs at all.

By mid-July 2026, Germany's spot gas price was 57.8 €/MWh, day-ahead electricity averaged 113.0 €/MWh, and carbon allowances under the ETS, the EU system that requires companies to buy permits for each tonne of CO₂ they emit, cost about €79 per tonne (BDEW). Many Asian competitors face no comparable combination of energy costs and carbon pricing. German chemical production remains more than 20% below its 2021 average, according to industrial monitoring data (NZZ).

The jobs are moving, not disappearing

The work is not vanishing from the world economy. It is moving. BASF's workforce at Ludwigshafen reportedly fell from 33,370 at the end of 2024 to about 30,000 full-time posts, while the company is investing €8.7 billion in a new site in Zhanjiang, China (finanzen.net).

BASF says the Chinese investment is partly about serving rising Asian demand, not merely escaping German costs (BASF). That can be true and still leave Europe with fewer jobs and Asia with more capacity.

In Brindisi, in southern Italy, unions warn that a protocol signed in March 2025 sets out the gradual shutdown of all basic-chemicals operations at the Versalis plant, meaning the commodity ingredients other manufacturers use as building blocks (BrindisiTime). The unions are not rejecting the green transition. They want job guarantees and a national plan before plants are closed.

Belgium is facing the same question in Antwerp, where TotalEnergies plans to shut one of its two steamcrackers by 2027. These are the plants that break oil-derived feedstock into the basic components used in plastics and chemicals (chemietechnik.de).

Brussels tries to slow the pressure

The European Commission's July 2026 package is an attempt to buy time. It proposes slowing the rate at which the ETS cap falls after 2030, extending free emissions permits that protect industry from some 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). Flanders is already moving in that direction by expanding compensation for indirect carbon costs in electricity prices to more energy-intensive sectors, including chemicals (vraagenaanbod.be).

The bargain is awkward. The ETS has done what many climate policies only promise to do: emissions from covered sectors have fallen by roughly half since 2005, making it one of the EU's few proven climate tools (Clean Energy Wire). Loosening the cap risks helping older fossil-based plants while punishing companies that have already spent money on cleaner production (Energy Market Price).

Europe is trying to shut dirty production before the clean alternative is cheap enough to run at scale. The Commission package slows the pressure. The real test is whether governments use the extra time to build cheaper clean power, stronger grids and viable hydrogen supply. Compensation can keep a plant alive. It cannot, by itself, make it competitive.