A glimmer of hope from China?
Energy costs continue to affect Europe, with the chemical sector having faced one of the most significant declines in output among energy-intensive industries. These effects emphasise the need for accessible and affordable energy. The significant drop in energy and raw materials prices since the peak in August ‘22 was expected to provide relief at the beginning of 2023. Hopes for a recovery after the mild winter and with much lower gas and electricity prices have not materialised. Rather, the demand for chemicals is still on the decline.
Despite the 1.2% growth posted in August compared to July 2023, the EU27 chemical production still remains far behind its production rate of the same period in 2022 (-5.9% compared to August 2022). European gas prices have eased significantly but remain 60% above their average 2015-19 level.
Strong partnerships with key players like China, and the US are vital for the resilience of the EU chemical industry. China’s recent dip in demand for chemical products, influenced in part by structural factors and a flat construction cycle, is a source of concern. Reducing energy imports from Russia requires diversification and looking for alternative sources of energy and feedstock. The EU chemical industry has been an export-oriented industry with 30% of all production slated for export. Reduced trade and weak global demand from key downstream sectors, coupled with persistently high energy and regulatory costs, will continue to weigh on the sectors prospects into 2024.
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