Does the European chemical industry face a bleak future?

• Currently, Europe hosts numerous 'small-scale steam crackers' with ethylene capacity below 500,000 tons/year; their combined capacity totals 8.5 million tons, accounting for approximately 35% of Europe’s total ethylene capacity. Similarly, propylene units with capacity under 300,000 tons/year collectively account for 12 million tons—66% of Europe’s total propylene capacity (roughly 18 million tons). Most of these facilities were built in the 1980s–1990s, rely primarily on naphtha feedstock, suffer from high per-unit energy consumption and heavy carbon emissions, lack efficient downstream integration, and—consequently—operate unprofitably or at persistently low utilization rates. • Representative companies include Versalis (Italy), OMV (Austria), MIRO (Germany), and Repsol (Spain). Their individual ethylene units typically range between 300,000–450,000 tons/year, while most propylene units are co-produced via cracking or fluid catalytic cracking (FCC) processes. These firms have begun making strategic decisions regarding the retention or retirement of such assets: for instance, Versalis announced in 2023 the suspension of operations at its Porto Marghera facility—signaling that the combination of 'high carbon intensity + small scale + low integration' is becoming unsustainable in Europe. Shell’s exit may serve as a 'pilot case'; its strategic course will likely provide a reference model for other players, triggering broad-based asset revaluation—and potentially a wave of concentrated shutdowns. The resulting structural shortages in ethylene and propylene will extend beyond individual enterprises, precipitating a cascading collapse of regional raw material supply systems. 4. Synthetic Ammonia: Europe Is a Major Net Importer ◼ Among basic inorganic chemicals, ammonia ranks among the most critical. It serves as the key raw material for nitrogen fertilizer production—vital for plant growth and essential to sustaining Europe’s highly productive agriculture. Ammonia is also widely used across numerous other chemical manufacturing processes. ◼ The Ukraine war has significantly disrupted the global liquid ammonia market: soaring natural gas prices forced multiple European liquid ammonia plants to halt production. By 2030, Europe’s gray ammonia capacity is projected to shrink further, driven by two main factors: (i) transition toward green ammonia (estimated capacity shift: 1–2 million tons/year), and (ii) permanent shutdowns of certain plants (estimated capacity loss: ~1 million tons/year). ◼ Europe is a net importer of ammonia, with net imports reaching 2.6 million tons in 2023. Since 2021, Europe’s liquid ammonia import origins have shifted markedly: ammonia previously imported from Russia has been progressively replaced by supplies from the Middle East and Africa, Latin America, and North America. During 2022–2023, European ammonia producers faced severe challenges—primarily driven by surging natural gas prices. The global ammonia market was thus severely impacted, with soaring energy costs forcing numerous ammonia plants to shut down. In contrast, in China, export/import controls—combined with local governments’ efforts to maintain affordability of this vital agricultural commodity—prevented energy cost increases from being passed through to end-user ammonia prices. This price divergence conferred temporary competitive advantages to various Chinese chemical products. ◼ Ammonia lies at the heart of Europe’s decarbonization agenda—holding significant potential both as a novel low-carbon fuel and as a carrier for low-carbon hydrogen.

The butterfly effect of this urea crisis may hurt India most (RCEP entered into force on January 1, 2022).

Agriculture represents urea’s largest application globally: over half of all urea is used as agricultural fertilizer, meaning the urea crisis impacts agriculture most severely. Shown here is a scene from April 7, 2019, at Wanbao Mozambique Agricultural Park—the largest China-Africa agricultural cooperation project—where farmers celebrated rice harvest with singing and dancing. (Xinhua News Agency) Calculations indicate that India may need to import approximately 6 million tons of urea between October 2021 and March 2022, yet it has so far tendered only 720,000 tons. It will therefore still need to procure over 5 million tons from the global market. Indian urea production relies on natural gas, but 70% of its natural gas supply is imported; amid soaring natural gas prices, the certainty of full-capacity urea production remains highly uncertain—and India’s urea imports may increase further. In Europe, chemical giants including BASF have announced production cuts due to skyrocketing natural gas prices. Currently, a total of 4.6 million tons/year of synthetic ammonia capacity has been shut down across Europe—equivalent to roughly 7.6 million tons/year of urea capacity.

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