Numerous chemical plants are rapidly disappearing

Can you believe it? The birthplace of the Industrial Revolution—Britain—is on the verge of losing its ability to produce ethylene? Ethylene is a vital chemical feedstock: it polymerizes into polyethylene, which serves as the raw material for plastics. Yet ethylene production facilities in Britain are shutting down one after another. Last year, Saudi Basic Industries Corporation (SABIC) closed its plant in Teesside, UK. This February, ExxonMobil is set to shut down its ethylene plant in Mossmorran, Scotland. Once these ethylene plants close, only the Grangemouth facility in Scotland will remain—the sole surviving ethylene production base in the entire UK. To protect this last remaining facility, the UK government rushed to provide £125 million in subsidies and loans at the end of last year. The shutdown of chemical plants in Britain is not an isolated European phenomenon. According to incomplete statistics, between 2023 and 2024, over 11 million tonnes of chemical production capacity have been announced for closure across Europe. The petrochemical industry is rapidly vanishing from Europe’s industrial map. Petrochemical production is highly carbon-intensive. Due to rising production costs and stringent carbon-emission reduction requirements, the industry had already been gradually withdrawing from Europe. The outbreak of the Russia-Ukraine conflict in 2022 further accelerated this decline in European petrochemical capacity. Oil and natural gas serve both as raw materials and critical energy sources for Europe’s petrochemical industry. However, following the Russia-Ukraine conflict, Europe severed its oil and gas ties with Russia—causing soaring costs for both raw materials and energy. Many companies became financially unsustainable and were forced to shutter their plants. Similar developments are unfolding in Japan: this year, Toray has ceased producing terephthalic acid in Japan, and Maruzen Petrochemical has closed its ethylene plant in Chiba Prefecture. Over the past two decades, Japan’s refining capacity has declined by roughly 40%. While refining capacity is shrinking across Europe and Japan, China’s refining capacity has surged to approximately 980 million tonnes—ranking first globally. China’s petrochemical industry has grown substantially in scale—but high-end capacity remains insufficient. Domestic self-sufficiency for premium polyolefins stands at only 65%, leaving ample room for industrial upgrading and domestic substitution. Last year, in response to the ‘anti-involution’ initiative, authorities conducted comprehensive assessments of aging facilities, mandating the phase-out of inefficient units—especially those over 20 years old—in refining, fertilizer, and related sectors. This policy aims to eliminate outdated capacity, increase industry concentration, and promote high-end development. Small, local refineries with low technological content and high environmental risks will be phased out under the anti-involution drive—benefiting industry leaders. These large enterprises can be found within the Petrochemical Industry Index. The Petrochemical ETF (159731) tracks the Petrochemical Industry Index. Its top holdings clearly reflect performance shifts among leading petrochemical enterprises—making it a highly flexible investment tool for the sector. Of course, beyond industrial upgrading, it remains essential to retain sufficient capacity for basic, indispensable chemical products—and avoid repeating Europe’s and Japan’s over-deindustrialization missteps in petrochemicals. This requires learning from past mistakes and ensuring stable supplies of raw materials and energy. Last year, China imported a record 578 million tonnes of crude oil, while gasoline and diesel consumption fell by about 4%—and output of these refined products declined accordingly. Some of this additional imported crude oil is being directed toward petrochemical enterprises—not for fuel production, but for manufacturing chemical products. This 'reducing fuel output while increasing chemical output' strategy effectively converts excess fuel-production capacity into higher-value ethylene and aromatic compounds. Another portion reflects China’s strategic move to replenish national petroleum reserves while global oil prices remain relatively low.

China’s chemical industry opportunities amid the global energy crisis

1. Massive investment required for upgrades: Aging equipment demands approximately USD 1 billion in modernization investment per facility—yet economic returns are no longer viable. 2. Soaring energy and supply costs: European natural gas prices have remained persistently high; steam-cracking units consume enormous amounts of energy, eroding cost competitiveness. (Core reason) 3. UK’s economic and policy environment: Increasingly stringent regulation, heavy carbon-tax burdens, and growing market uncertainty. 4. Global competitive disadvantage: Compared with low-cost feedstocks enabled by the U.S. shale gas revolution—and Chinese mega-refining & petrochemical projects powered by nearly free electricity—Europe’s aging facilities continue to lose competitiveness. 5. Strategic retrenchment: ExxonMobil is reallocating resources toward North America, the Middle East, and other regions offering superior cost advantages. This shutdown will slash UK ethylene capacity from approximately 1.85 million tonnes/year to 1.02 million tonnes/year (only the INEOS Grangemouth plant remains), a reduction of roughly 45%. This marks the second major European ethylene plant closure since April 2024—following the shutdown of SABIC’s 425,000-tonne/year facility in Gravenchon, France. Since April 2024, ExxonMobil, Shell, and SABIC have already closed—or announced plans to close—seven steam-cracking units across Europe, collectively representing over 4 million tonnes/year of capacity. The ethylene supply-demand balance has been disrupted. What is ethylene? Ethylene is a colorless, flammable light olefin, with the chemical formula C₂H₄. It is the foundational raw material of the global petrochemical industry—often dubbed the 'mother of petrochemicals.' Its production capacity and pricing directly determine the supply and cost of thousands of downstream chemical products. It occurs naturally in plants as a ripening hormone (e.g., bananas and apples release ethylene during maturation). Industrially, however, ethylene is entirely synthetically produced—with steam cracking being the dominant method. Using petroleum fractions (e.g., naphtha) or natural gas condensates as feedstock, high-temperature cracking yields ethylene alongside co-products such as propylene and butadiene. Ethylene’s importance lies in its role as the ultimate source for virtually all downstream chemical products—its value chain permeating every facet of human production and daily life. Its strategic significance rivals that of steel in heavy industry. Daily life: food packaging, textile fibers, appliance casings, plastic goods, personal care products; Industrial manufacturing: automotive components, construction materials, electronics & electrical appliances, medical devices; Agriculture: plastic mulch films, irrigation pipes, pesticide adjuvants—directly impacting grain production efficiency. Put simply, every plastic item you see in daily life originates from ethylene processing—including PCB boards used in semiconductors. One consequential ripple effect: Against this backdrop of energy crisis, in December 2025, four global chemical giants—Wanhua Chemical, BASF, Huntsman, and Dow—simultaneously raised prices for MDI and TDI across markets covering 75% of global consumption. Price hikes ranged from USD 200 to USD 350 per tonne (up to EUR 350 per tonne).

CIA Survey Warning: UK Chemical Industry Competitiveness Crisis Deepens

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The UK Chemical Industry Association warns of a deepening competitiveness crisis driven by high energy costs and weak demand, forecasting a 2.4% production drop by 2026 and a 7.1% decline in Q4.

ccin

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CIA Survey Warning: UK Chemical Industry Competitiveness Crisis Deepens

CIA Survey Warning: UK Chemical Industry Competitiveness Crisis Deepens

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