Europe's "deindustrialization": Plant Closures and Frozen Investments
Over the past few years, the European chemical industry has undergone an unprecedented deep reshuffling. According to data from the European Chemical Industry Council (CEFIC), between 2022 and 2025, the closure of production capacity in the European chemical sector surged sixfold, with cumulative capacity losses reaching 37 million tons over four years, accounting for approximately 9% of the industry's total capacity. More alarmingly, annual investment volume plummeted from 2.7 million tons in 2022 to 300,000 tons in 2025, with capital expenditures declining by 81% over the same period.
The root cause of this shutdown wave is the "out-of-control" surge in Europe's energy costs. Before the Russia-Ukraine war, the EU sourced about 40% of its natural gas and 30% of its crude oil from Russia. As Russian gas pipelines were shut down one after another, Europe was forced to import liquefied natural gas (LNG) from countries like the U.S. and Qatar, with costs 3-4 times higher than Russian gas. The soaring energy prices directly breached the economic threshold of chemical production lines—Germany's industrial natural gas prices once exceeded pre-war levels by more than 10 times, while electricity prices in southern Norway surged 20-fold. Cefic Director General Marco Mensink bluntly stated: "The industry is on the verge of collapse, with shutdowns doubling within a year while annual investments have dropped to nearly zero. Both these trends are accelerating, not slowing."
China's Chemical Industry "Expands Against the Trend": Capacity, Exports, and Cost Advantages
Amid the global chemical industry's overall challenges of declining capacity utilization and corporate profitability pressures, China's market has demonstrated unique growth resilience. According to BloombergNEF data, global net ethylene capacity will reach 14.6 million tons in 2026, approximately twice the average annual new capacity added over the past five years. China accounts for a staggering 56% of this new ethylene capacity, making it the primary driver of this expansion. By the end of 2025, China's ethylene production capacity will surpass 60 million tons, maintaining its position as the world's largest ethylene producer.
From a more macro perspective, China's chemical exports account for 38% of the global market share, up 12 percentage points from 2020. China's ethylene production capacity represents 25% of the global total, while its benzene production capacity exceeds 30%, and xylene production capacity accounts for 50% of the global share. Both polyethylene and polypropylene production capacities rank first in the world. In the fields of basic raw materials and synthetic resins, most of China's products have secured the top global position.
The Global Landscape of "Rising East, Declining West": Globalization Opportunities for Chinese Chemical Industry
First, capitalize on the dividends of global production capacity transfer.
Second, the premium logic driven by supply chain security.
Third, the upgrading opportunity of high-end transformation.
From a longer-term perspective, the strategic value of China's chemical industry is being redefined. The 2026 government work report introduced carbon emission intensity targets for the first time, and the dual carbon emission control system will be fully implemented during the 14th Five-Year Plan period. This means carbon emissions will become a rigid constraint indicator in local government evaluations. The raising of carbon emission thresholds will further accelerate the exit of small and medium-sized enterprises, while supply-side concentration is expected to continue rising. The profitability and industry influence of leading enterprises will further strengthen.
Key Highlights at a Glance
Europe's Recession: From 2022 to 2025, the European chemical industry cumulatively shut down 37 million tons of production capacity, accounting for 9% of Europe's total capacity. Annual investments dropped from 2.7 million tons to 300,000 tons, with capital expenditures declining by 81%
China's Advance: China's ethylene production capacity exceeds 62.88 million tons (accounting for over 30% of the global share), with chemical exports reaching $331.13 billion, representing 46% of global chemical sales
Cost advantage: The unit cost of integrated refining and petrochemical units in China is 30% to 40% lower than that in Europe, and the cost advantage of coal-to-olefins further expands under high oil price conditions
Geopolitical Impact: The explosion at the Jubail Industrial Zone affected 6% to 8% of global petrochemical production capacity, while the disruption of the Strait of Hormuz drove Asian naphtha cracking profits to record highs
Policy Reshaping: The EU CBAM is officially implemented, China's dual carbon emission controls fully transition, and supply-side concentration is expected to continue rising
Europe's "deindustrialization": Plant Closures and Frozen Investments
Over the past few years, the European chemical industry has undergone an unprecedented deep reshuffling. According to data from the European Chemical Industry Council (CEFIC), between 2022 and 2025, the closure of production capacity in the European chemical sector surged sixfold, with cumulative capacity losses reaching 37 million tons over four years, accounting for approximately 9% of the industry's total capacity. More alarmingly, annual investment volume plummeted from 2.7 million tons in 2022 to 300,000 tons in 2025, with capital expenditures declining by 81% over the same period.
The root cause of this shutdown wave is the "out-of-control" surge in Europe's energy costs. Before the Russia-Ukraine war, the EU sourced about 40% of its natural gas and 30% of its crude oil from Russia. As Russian gas pipelines were shut down one after another, Europe was forced to import liquefied natural gas (LNG) from countries like the U.S. and Qatar, with costs 3-4 times higher than Russian gas. The soaring energy prices directly breached the economic threshold of chemical production lines—Germany's industrial natural gas prices once exceeded pre-war levels by more than 10 times, while electricity prices in southern Norway surged 20-fold. Cefic Director General Marco Mensink bluntly stated: "The industry is on the verge of collapse, with shutdowns doubling within a year while annual investments have dropped to nearly zero. Both these trends are accelerating, not slowing."
China's Chemical Industry "Expands Against the Trend": Capacity, Exports, and Cost Advantages
Amid the global chemical industry's overall challenges of declining capacity utilization and corporate profitability pressures, China's market has demonstrated unique growth resilience. According to BloombergNEF data, global net ethylene capacity will reach 14.6 million tons in 2026, approximately twice the average annual new capacity added over the past five years. China accounts for a staggering 56% of this new ethylene capacity, making it the primary driver of this expansion. By the end of 2025, China's ethylene production capacity will surpass 60 million tons, maintaining its position as the world's largest ethylene producer.
From a more macro perspective, China's chemical exports account for 38% of the global market share, up 12 percentage points from 2020. China's ethylene production capacity represents 25% of the global total, while its benzene production capacity exceeds 30%, and xylene production capacity accounts for 50% of the global share. Both polyethylene and polypropylene production capacities rank first in the world. In the fields of basic raw materials and synthetic resins, most of China's products have secured the top global position.
The Global Landscape of "Rising East, Declining West": Globalization Opportunities for Chinese Chemical Industry
First, capitalize on the dividends of global production capacity transfer.
Second, the premium logic driven by supply chain security.
Third, the upgrading opportunity of high-end transformation.
From a longer-term perspective, the strategic value of China's chemical industry is being redefined. The 2026 government work report introduced carbon emission intensity targets for the first time, and the dual carbon emission control system will be fully implemented during the 14th Five-Year Plan period. This means carbon emissions will become a rigid constraint indicator in local government evaluations. The raising of carbon emission thresholds will further accelerate the exit of small and medium-sized enterprises, while supply-side concentration is expected to continue rising. The profitability and industry influence of leading enterprises will further strengthen.
Key Highlights at a Glance
Europe's Recession: From 2022 to 2025, the European chemical industry cumulatively shut down 37 million tons of production capacity, accounting for 9% of Europe's total capacity. Annual investments dropped from 2.7 million tons to 300,000 tons, with capital expenditures declining by 81%
China's Advance: China's ethylene production capacity exceeds 62.88 million tons (accounting for over 30% of the global share), with chemical exports reaching $331.13 billion, representing 46% of global chemical sales
Cost advantage: The unit cost of integrated refining and petrochemical units in China is 30% to 40% lower than that in Europe, and the cost advantage of coal-to-olefins further expands under high oil price conditions
Geopolitical Impact: The explosion at the Jubail Industrial Zone affected 6% to 8% of global petrochemical production capacity, while the disruption of the Strait of Hormuz drove Asian naphtha cracking profits to record highs
Policy Reshaping: The EU CBAM is officially implemented, China's dual carbon emission controls fully transition, and supply-side concentration is expected to continue rising
