EU Chemical Industry Faces Weak Q1 2025 as Energy Costs Undermine Competitiveness

Gas Prices and Output Pressure the Entire Value Chain

The sector’s competitiveness remains well below its 2014–2019 average. Energy-intensive processes underpin the production of key chemicals like ammonia, ethylene, and propylene—making the industry highly sensitive to energy fluctuations. As of Q1 2025, natural gas prices in Europe were 3.3 times higher than those in the United States, significantly raising input costs and reducing margin flexibility.

Production output declined by 0.3% during the first two months of 2025, with most downstream users also reporting reduced activity. While Belgium showed a 9.1% uptick, France and the Netherlands suffered declines of over 5%. Overall EU27 chemical production remains 9.1% below pre-crisis levels.

Falling Trade Surplus and Long-Term Capacity Concerns

Although 2024 saw a temporary boost in trade surplus—largely driven by falling imports due to weak internal demand—this trend reversed early in 2025. Cefic reported a 25% drop in trade surplus in January and February compared to the same period last year. Imports rose by 10.2%, outpacing the modest 1.8% increase in exports.

Meanwhile, capacity utilisation fell from 74.4% in Q4 2024 to 74.0% in Q1 2025. This is well below the long-term average of 81.4% and suggests a structural weakening that could lead to more site closures. Cefic notes that over 11 million metric tonnes of announced capacities were closed between 2023 and 2024—assets unlikely to reopen due to capital costs and community resistance.

Implications Beyond the Chemicals Sector

These trends carry serious implications for sectors reliant on chemicals, such as automotive, consumer goods, construction, and energy. Uncertainty in Germany and the US further dampens the outlook, limiting opportunities for rebound. Stakeholders across supply chains should anticipate continued volatility and consider alternative sourcing or energy strategies.