Overcapacity and Government Regulations Concerning the European Chemical Market

The European chemical market is expected to see a CAGR of 1.8% during the forecast period (2024-2031). According to the European Chemical Industry Council, the European chemical sector is the 4th largest manufacturing producer, in terms of turnover. Thus, Europe is the second largest producer of chemicals globally, followed by China. The European chemical market is segmented by type (petrochemicals, basic inorganic, polymers, specialty chemicals, consumer chemicals, and others). The world chemical sales, in 2022, were €5,434 billion of which €760 came from Europe. The major constituents were petrochemicals (27%), specialty chemicals (25%), polymers (19%), basic inorganics (16%), and consumer chemicals (13%).

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However, the market is currently facing overcapacity pressures, attributed to the emergence of new players in the US, China, and the Middle East. Additionally, the high energy and feedstock costs concern European producers. The industry calls for strategic planning and corporate restructuring to maintain competitiveness. The planned closure announced by the petrochemical giants ExxonMobil and Sabic in April 2024 points to the emerging concern.

China has been at the forefront of the expansion, marking tremendous growth in 2022 and 2023. The European chemical industry relies heavily on the sales of specialty chemicals. However, the segment growth in the region is facing challenges due to China's rising dominance, which contributes to about 40% of global sales. The market share in Europe is declining due to factors such as an aging population, market maturity, high energy and labor costs, regulatory burden, and an increasingly competitive global market.

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The government regulations have a significant impact on the market during the forecast period. In December 2024, the government revised the Regulation on Classification, Labelling, and Packaging of Chemicals (CLP) to protect human health and the environment. Additionally, the EU Commission proposed to ban pesticides due to TFA (Trifluoroacetic Acid) pollution, of rivers, tap water, and mineral water across Europe.

Additionally, in December 2023, the European Commission adopted the 'one substance, one assessment' package, comprising of three legislative proposals to, streamline assessments of chemicals across EU legislation, strengthen the knowledge base on chemicals, and ensure early detection and action. This is an attempt to counter the emerging chemical risks. The package will ensure coherent and transparent safety assessments of chemicals used in products such as medical devices, toys, food, pesticides, and biocides. It will shorten the gap between the identification of a possible risk and the necessary regulatory action.

The major players operating in the European chemical market include BASF SE, Croda International PLC, INEOS Group, Johnson Matthey (JM), and LyondellBasell Industries N.V. The market players are focusing on capitalizing on growth by adopting strategies such as collaboration, partnerships, and market expansion, significantly bolstering the market growth during the forecast period.

Recent Development

In June 2024, BASF showcased power solutions at The Battery Show Europe 2024 in Stuttgart, Germany. The products presented during the event include battery materials and recycling solutions, high voltage connectors, busbar technology for high voltage power electronics, Elastollan®(TPU)- Electric Vehicles (EV) charging infrastructure, Ultramid® Expand for electric vehicle batteries, and more.

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