Tariffs hamper chemical industry recovery/ European producers face falling profits and fierce competition
European chemical producers are in a difficult situation due to US tariffs of at least 15% on imports from the European Union. The measures are causing order delays and reduced demand in a sector that is still dealing with the consequences of the 2022 energy crisis.
The chemicals sector, the EU's fourth-largest export after machinery, automobiles and pharmaceuticals, has been hit hard by high production costs due to rising gas and energy prices following Russia's invasion of Ukraine. This has led to job losses and capacity reductions in the €655 billion sector.
The new US tariffs directly hit key customers of the chemical sector, such as the automotive, machinery and consumer goods industries. Global carmakers have recorded losses of billions of dollars from this trade war. Data from LSEG for the European chemicals sector predicts a 5% drop in profits in the third quarter, after a significant contraction of 22% in the second quarter.
Metzler Research analysts say tariffs, pricing pressure and fierce competition from Asia are creating a “toxic combination.” Orders that used to be scheduled 3-4 months in advance are now being placed just weeks before delivery. Some companies have lowered their expectations for next year, due to customer savings and exchange rate fluctuations.
The concern about stiff competition from Asia is real. Experts warn that cheaper chemicals from China could flood the European market if Chinese exports from the US are diverted to Europe due to potential tariffs.
The European Union exported chemicals worth around 40 billion euros to the United States last year, a slight increase from 38 billion euros in 2023. The European chemical industry generates around a third of total sales abroad, or approximately 224 billion euros.
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