The European chemical industry has experienced a wave of steam cracker closures and downstream rationalization announcements over the past 18 months, reflecting persistent weak market fundamentals with little hope for near-term recovery.

High input costs, strained naphtha-cracking margins, the availability of more competitive imports, structurally oversupplied market conditions, and lackluster demand have led to the closure of six crackers so far, with more likely on the horizon.

Following these ongoing themes, the outlook for European olefins has remained bleak through the first half of 2025 and is expected to persist into the latter half of the year, as asset closure gains momentum and weak market fundamentals continue to signal no positive indication of recovery.

Despite the slate of closures already announced, market participants in the European petrochemical industry continue to anticipate the next rationalization announcement with a broad perception that further closures are needed to combat pronounced oversupply amid the open knowledge that multiple players are actively reviewing assets.

The announcement from Saudi multinational producer Sabic of the closure of its ethane-fed cracker in Wilton, UK on June 25 did not take the market by surprise, with the company previously indicating consideration of plans for a partial or full exit from European markets.(opens in a new tab)

Continuing the trend, multinational producer Dow also announced July 7 the closure of the Bohlen steam cracker in Germany,(opens in a new tab) by Q4, 2027, due to structural challenges.

“The torrent of bad news for Europe’s chemical industry — and all that work in it — sadly continues. With limited ethylene outlets and constrained export capacity, the UK was never going to be able to support three crackers,” said Andy Orszynski, director of ethylene and derivatives analytics at Commodity Insights.

Europe’s struggle for competitiveness highlighted

Companies implementing these closures have cited Europe’s lack of competitiveness against lower-cost regions, high regional energy and feedstock costs, and a disappointing demand outlook as key reasons for the axing of assets.

The global demand for cracker feedstock is projected to rise from 432 million metric tons in 2024 to 610 million mt by 2034. In 2024, ethylene production from ethane and naphtha is estimated at about 74 million mt each, while by 2034, ethylene production from ethane is expected to reach 101 million mt, and naphtha-based production is anticipated to be around 98 million mt, according to experts at S&P Global Commodity Insights.

Ethane is set to remain the most common feedstock in the US and the Middle East, cementing a more competitive position against naphtha-based production in Europe, while the increase in naphtha demand will be driven by new refinery/petrochemical integrated project startups in China, according to Commodity Insights’ latest Annual Chemicals Performance Review, published in May 2025 and compiled by the Company Strategies and Performance (CSP) Chemical program. Northeast Asia will remain the largest naphtha feedstock consumer over the forecast period, the review added.

The worldwide ethylene market “will remain in a protracted downcycle unless capacity rationalizations take place soon to overcome years of capacity overbuilding,” according to the review.

Global ethylene prices are expected to start a broad recovery around 2028 as ethylene demand growth “finally starts outpacing capacity additions,” the review stated.

As of the end of 2024, to restore European cracker operating rates from their current trough level of about 75% toward the 90% mark and bring the regional olefins market into better balance, further rationalization of assets, around 2 million mt/year of ethylene was required, according to Commodity Insights. The closures announced so far, representing total capacity of 3.950 million mt/year, have brought Europe closer to achieving this.

However, some of these capacity rationalization plans are due to be offset by INEOS’s new 1.4 million mt/year Project One ethane cracker at Antwerp, Belgium — due to start operations in late 2026 — which brings back into the market around 37% of the ethylene capacity taken offline.

Weak market fundamentals persist today

Production margins and prices for European ethylene — the key product of steam crackers — are expected to remain under pressure for the remainder of the year.

Average European ethylene spot prices have hovered around Eur790/mt FD NWE since late 2022, according to Platts price assessments, experiencing significant volatility. In July 2023, prices fell to Eur563/mt, marking the lowest levels of the decade, excluding the COVID-19 period.

Since Q2 2022, spot prices have consistently been at a discount to industry-settled contract prices, following a market peak post-pandemic, according to Commodity Insights data.

Domestic producers have faced challenges due to volatile structural fundamentals, losing their competitive advantage globally. Structural shifts in demand, characterized by weak end-user activity, have led producers to lower cracker operating rates to avoid oversupply in the region.

Given the structural weaknesses compared to historical levels and ongoing uncertainties from geopolitical and macroeconomic conditions, market participants anticipate continued short-term weakness in the European ethylene market.

In today’s market, European ethylene continues to be weighed down by low derivative demand and ample supply dynamics, despite efforts to mitigate an oversupply situation. “Affordability remains an issue,” a trader said, “I would be extremely surprised if people take action before clarity on tariffs.”

Lack of clarity on tariffs has also further weighed on the sentiment of European ethylene players, with sources citing stalled business as most of the market awaits a decision or development on the status of tariffs.
Source: Platts