The collapse of the building-block tower and the structural breakdown of Europe’s chemical industry will continue to spread.

On May 16, the UK’s Financial Times published an article titled 'The Gulf Conflict Is Pushing Europe’s Chemical Industry to the Brink of Collapse.' The article offers a detailed analysis of the structural collapse of Europe’s chemical industry—not triggered fundamentally by the Middle East conflict, but rather ignited by it as a catalyst. I. Europe’s chemical industry is a wobbling tower of building blocks. As Matthias Bening, Executive Vice President of Bayer Group, put it: 'Small blocks are gradually being removed from the tower—sooner or later, it will collapse.' This metaphor cuts deep. Europe’s chemical industry operates within a symbiotic network, with production enterprises tightly interlinked. When a block is removed upstream, downstream firms are forced to import raw materials at higher costs, sharply squeezing their profit margins. Conversely, the failure of a downstream enterprise suppresses upstream demand—creating a domino effect across the entire chain. Yvonne van der Laan, Executive Vice President of LyondellBasell, warns that shutting down critical plants amounts to removing the heart of an integrated production chain; in a downturn, the collapse of the entire ecosystem is merely a matter of time. The Port of Rotterdam concentrates such risks to an extreme degree. It hosts the world’s largest and most technologically advanced chemical cluster. Within the past year alone, two out of ten companies there have already shut down. II. Cefic’s report quantifies Europe’s chemical industry’s massive capacity retreat. The European Chemical Industry Council (Cefic) commissioned Roland Berger to publish the report 'European Chemicals: Closures and Investment Radar 2022–2025.' Between 2022 and 2025, the number of plant closures surges from 18 in 2022 to 70 in 2025—a near sixfold increase. Cumulative closed capacity over these four years reaches as high as 37 million tonnes—roughly 9% of Europe’s total chemical production capacity—directly resulting in approximately 20,000 job losses, with another ~89,000 indirect jobs at risk. New investment plummets off a cliff: new-capacity investment drops from 2.7 million tonnes in 2022 to just 300,000 tonnes in 2025—a staggering 89% decline; capital expenditure falls from €7.6 billion to €1.5 billion, a reduction exceeding 80%. Net capacity contraction totals 30.2 million tonnes. And given the asymmetry—far more closures than new additions—this trend is expected to intensify in the coming years. By sector, upstream petrochemicals suffer the hardest blow: capacity declines by 14% over four years, with 17.8 million tonnes shut down—48% of the total closures. Just nine steam-cracking units account for half of all closed capacity—severely undermining Europe’s ability to produce ethylene, propylene, and other foundational chemical feedstocks independently. Geographically, the shutdown wave sweeps across Europe: Germany shuts down 8.8 million tonnes, the Netherlands 7.2 million tonnes, and the UK 500,000 tonnes—the three most affected countries, collectively accounting for 57% of total closures. III. A structural crisis driven by the convergence of four factors. Europe’s chemical industry woes are not short-term—they stem from the intertwined impact of four structural forces. The cost trap: a double squeeze from energy prices and carbon pricing. Marco Mensink, Cefic’s Director General, states: 'The crisis is no longer the midnight chime—it is full-blown collapse under extreme pressure.' Shutdowns are accelerating; annual investment has halved—and is nearly approaching zero. If decisive action isn’t taken now, it will be too late.

Don’t be ignorant: Europe’s industrial performance is better than you think!

For example, in July 2026, the European Commission adopted the revised Corporate Sustainability Reporting Directive (CSRD), explicitly aiming to reduce administrative burdens on businesses while retaining essential disclosure requirements. The earlier simplification package had already significantly cut the number of data items companies must report. This, in fact, sends a crucial policy signal. In the past, Europe emphasized that businesses must comply with an ever-growing list of standards. Now, it is beginning to ask a different question: Can these standards be designed so they don’t erode corporate competitiveness itself? Financial regulation is undergoing similar shifts. Europe is restarting discussions on how to more effectively channel banking resources, capital markets, and household savings into business investment; how to lower cross-border financing costs; and how to further integrate capital markets. If regulation gradually pivots—from prioritizing 'risk control' toward supporting 'growth under manageable risk'—Europe’s potential growth rate could well be re-ignited. Fourth, a more proactive embrace of artificial intelligence and other advanced technologies. Finally, the area most prone to misjudgment: AI and advanced manufacturing. Many people, upon hearing 'AI,' instinctively think: 'The U.S. leads, China follows.' ChatGPT, Microsoft, Google, NVIDIA—and massive investments in data centers—make it seem as though the AI world belongs entirely to the United States. China, meanwhile, leverages its vast manufacturing base, robotics, and new-energy industries to forge an alternative technological pathway. Thus, Europe appears abandoned by AI—lagging far behind both the U.S. and China. But real-world data tells a different story. According to the European Investment Bank’s 2025 survey, EU firms’ adoption rate of advanced digital technologies stands at 77%, nearly matching the U.S. figure of 78%; EU firms’ generative AI adoption rate is 37%, slightly higher than the U.S.’s 36%. Even more striking is the manufacturing sector: 48% of EU manufacturing firms use 'big data/AI', compared to only 28% in the U.S.; and 55% of EU manufacturing firms deploy robotic automation, versus just 36% in the U.S.—a finding that completely overturns many people’s intuitions. Europe may not be the world’s best storyteller about AI—but when it comes to embedding AI directly into factories, production lines, and industrial processes, it is certainly not falling behind. The same holds true for robotics. According to the International Federation of Robotics, in 2024, Western Europe’s manufacturing robot density reached 267 units per 10,000 employees; Germany’s stood at 449. Although China possesses the world’s largest installed base of industrial robots—over 2 million units operational in 2024—its robot density remains at only 175 per 10,000 employees. This clearly shows that certain European manufacturing economies still lead globally in per-worker automation levels. So Europe’s true competitive advantage may lie in an entirely distinct approach: integrating AI, robotics, industrial software, advanced manufacturing, and traditional industries. The U.S. excels at platforms and foundational models; China dominates large-scale manufacturing and supply-chain integration; whereas Europe boasts deep-rooted strengths in machinery, automotive, chemicals, precision engineering, and industrial automation. If AI truly penetrates these sectors, Europe may unlock fresh productivity growth. Of course, Europe still lags far behind the U.S. in software, chips, cloud computing, and intellectual property investment.

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