The clock is ticking for Europe’s chemical industry

On 1 August, the United States imposed a 15% tariff on most European chemical imports. It caught some off guard. However, for many in the industry, it was just another warning sign: Europe’s chemical sector is under serious pressure — and time is running out to turn things around.

The challenges go far beyond trade. For years, Europe’s chemical industry has been weighed down by sky-high energy costs, complex regulations, and growing competition from Asia. The US tariffs didn’t start the crisis — they simply added to the long list of pressures driving Europe’s steady decline.

Europe is losing its competitive edge

To understand Europe’s current vulnerability, it’s important to look beyond short-term trade tensions and examine the deeper forces driving the region’s decline. A combination of high energy costs, slow regulatory processes, and rising global competition is steadily undermining Europe’s position in the global chemical market.

High energy costs

High energy prices remain a major weakness. Since 2022, European manufacturers have paid up to seven times more for natural gas than US producers. Electricity prices in Germany and France are more than double those in places like Texas or eastern China. For an industry heavily reliant on power, that’s a critical disadvantage. 

Europe’s energy transition also adds yet another layer of pressure. As Europe accelerates its push toward net-zero, chemical manufacturers are being asked to cut emissions rapidly. Meeting these goals typically requires costly upgrades to plants, investment in new technologies, and rising compliance costs. 

These regulatory demands have the potential to push firms to shut down or relocate production abroad — accelerating industry consolidation and further eroding Europe’s manufacturing foundation.

Regulatory delays

Bureaucratic delays make things worse. Under the EU’s REACH system, it can take up to four years to get a new chemical approved — slowed by extensive testing and documentation requirements.

Compliance is expensive. REACH registration often costs millions of euros per substance — a burden large firms can absorb, but smaller ones cannot. This slows innovation, ties up capital, and pushes R&D and production elsewhere. 

The result is a fragmented, costly system that makes it harder to bring products to market — stifling innovation rather than supporting it.

Asia’s chemical surge 

While Europe slows, Asia is gaining ground — and India is emerging as a standout. Backed by strong government support, India’s Chemicals and Petrochemicals Vision 2040 aims to grow the sector into a $ 1 trillion industry. 

Major projects like Haldia Petrochemicals’ planned $ 10 billion plant in Tamil Nadu show this ambition in motion.

India is also benefiting from the global shift toward a China+1 model. With supply chain risks prompting multinationals to diversify beyond China, many are turning to India as a manufacturing alternative. Combined with ongoing regulatory reforms and export-friendly infrastructure, this shift is cementing Asia’s growing dominance in global chemical supply chains.

Brussels has a plan — but the clock is ticking

Too little, too late

In July, the European Commission launched a new Chemicals Industry Action Plan, built around four key goals:

1. Affordable, clean energy

2. Streamlined regulations to speed up approvals

3. Greater financial support for chemical businesses

4. Stronger supply chains through local partnerships and production

The plan includes measures such as a Critical Chemical Alliance to protect key production sites, an Affordable Energy Action Plan to bring down electricity and gas prices, and a regulatory package expected to save € 363 million per year by simplifying regulations, reducing paperwork, and cutting the administrative burden that slows down innovation. 

On paper, it’s a strong response to an industry in trouble. But most of these measures won’t start until 2026 — and for many companies, that’s too late. Jobs are already being cut. Plants are closing. Investment is moving elsewhere.

Industry groups welcomed the plan but warned that time is running out. Without faster action and stronger coordination across Europe, the plan could fail to stop the decline. A well-meaning strategy only works if it arrives before the damage is done.

Firms are pulling back

Some firms are already scaling back. BASF is closing several plants at its main site in Germany and cutting hundreds of jobs, citing high energy costs and weak demand. At the same time, it’s investing heavily in China — including a $ 10 billion complex in Zhanjiang, where energy is cheaper and regulatory conditions more stable.

Dow is taking similar steps. It plans to shut down three European sites and cut 800 jobs as part of a broader global restructure. Combined with earlier cuts, the company will have shed more than 2,000 jobs in Europe this year alone.

The shift has begun

These developments are early signals of a broader structural shift already in motion. If implementation lags, Brussels risks watching Europe’s chemical base erode in real time — as capital steadily migrates to regions offering faster approvals, lower costs, and greater regulatory certainty. 

The message from firms like BASF and Dow is clear: investment will leave Europe and go elsewhere if conditions don’t change. 

Strengths alone won’t be enough

Innovation without impact 

Europe remains a global leader in chemical research. In 2023, EU-based firms increased R&D spending by nearly 10%, outpacing both the US and China. Around 20% of all private-sector chemical research worldwide originates in Europe.

But research alone isn’t enough. To stay competitive, Europe must translate more of that innovation into commercial success. That means scaling up investment and clearing the regulatory hurdles that slow progress from lab to market.

The talent shortfall 

Europe’s chemical sector employs 1.2 million people and benefits from top-tier institutions like ETH Zurich and Université Paris-Saclay. However, employers are warning of widening skills shortages — especially in areas like green chemistry. 

Unless science and engineering education modernises to meet industry needs, those strengths will erode — regardless of Europe’s past performance.

A race against time

Europe’s chemical industry still holds the core ingredients for success: exceptional talent, cutting-edge research, and a legacy of innovation. However, these strengths are no longer guarantees. If high energy costs persist, regulatory burdens remain unresolved, and skilled labour continues to dwindle, Europe risks falling behind for good. 

The question is no longer whether it can compete — but whether it can adapt fast enough. 

(The author is a writer and financial services specialist who covers industry strategy, economic policy and global markets.)