China is killing Europe’s chemicals industry. Brussels wants to intervene.

TESSENDERLO, Belgium — The European Commission is preparing new measures to prop up the EU’s chemicals industry as a wave of cheap Chinese imports pushes the sector to the brink.

EU leaders will discuss a Commission effort to curb the Chinese supply glut at a summit on June 18–19. But the Brussels machinery moves slowly, and drawing up measures could take months, or even years — time Europe’s chemical manufacturers say they don’t have.  

“The whole chemical industry is bleeding,” said Rudy Miller, vice president of Belgian chemicals business Vynova. “It’s industrial suicide.”

Vynova used to be Europe’s second-largest producer of polyvinyl chloride, or PVC, a versatile plastic used in plumbing, floor tiles, wire insulation and medical devices.

No longer. Vynova says it is being undercut by competition from China — a net importer of PVC as recently as 2019.

Vynova has shuttered production at one Dutch site, while three other factories are under legal restructuring procedures. It has filed an anti-dumping complaint against its Chinese competitors, though no investigation has yet been opened. The Commission declined to comment.

Chemicals lobby Cefic estimates that the European industry has shed nearly 10 percent of its capacity and 20,000 jobs over the past three years.

Meanwhile, Europe’s dependence on imported chemicals is growing. Non-EU suppliers delivered 31 percent of chemicals consumed in the bloc in 2023, up from 22 percent in 2013, according to Cefic. China, the largest supplier, has doubled its share of imports to 18 percent over the past decade.

The EU executive is now looking at a series of options to save companies like Vynova. These range from sectoral quotas and import restrictions — an approach it pioneered with steel — to more aggressive targeted tariffs on Chinese producers.

But with the debate on tougher trade defense measures against China just getting started, Miller worries Vynova could already be out of business by the time they are effective.

A dissolving business 

Chemicals may lack the glamor of artificial intelligence and biotech, but they are essential inputs in everything from ammunition to batteries and cars. Policymakers worry that the EU’s growing dependence on China could leave the bloc in a lurch if that supply is ever shut off.

China’s petrochemical manufacturing roughly doubled from 2010 to 2024, said Edse Dantuma, a senior economist at Dutch bank ING. Europe’s capacity, meanwhile, decreased by 14 percent. Judging by investments into plants that are yet to go online, Chinese production is only going to rise.

“The effect is, of course, a downturn for the European chemicals industry,” he said.

German Chancellor Friedrich Merz, Commission President Ursula von der Leyen and other EU leaders discussed the industry’s crisis with business leaders in February in the Belgian port city of Antwerp — a key transport and production hub in Europe’s chemical supply chain network.

During the event, Belgian Prime Minister Bart De Wever described the scenario outlined by Cefic as an “existential crisis.” 

“We cannot stand idly by while other countries such as China massively dump goods on our market,” he said.

From soap to plastic

A canal connects Antwerp to Vynova’s Flemish plant, in a wooded corner of the Tessenderlo municipality. The location was first put to use as a soap factory in 1892, and it started making chemicals in 1972.

With its conical storage towers and fluted distillation columns, the sprawling site peeks through the trees lining the road. Beyond the security gate lie heaps of what looks like unseasonal snow — the powder is regular salt, sodium chloride, the kind you can sprinkle on your food. It’s brought in by the bargeload, 2,000 tons a day.

The salt is dissolved in water, and an electric current is run through it to separate out the chlorine in a process called electrolysis. The chlorine is then combined with hydrocarbon molecules and distilled. The result is shipped to another plant for its final transformation into PVC.

It’s an energy-intensive process — Vynova’s plant uses as much electricity as the entire city of Antwerp — and EU electricity prices for industry are double those paid by its U.S. and Chinese competitors.

The European chemicals sector, like other energy-intensive industries, is also subject to one of the world’s highest carbon prices under the EU Emissions Trading System — currently around €75 per ton of CO2. The industry complains that this adds extra costs that Chinese competitors don’t face.

For Miller, who is also head of the PVC business, China remains the “most significant medium-term threat to the industry.”

Beijing made massive investments in PVC production to supply an unprecedented housing boom that began in the early 2000s. The real estate bubble burst in 2021, but factories kept producing far more than the domestic market could absorb.

The threat to European producers extends well beyond PVC. China’s market penetration is highest in the most basic part of the chemicals industry — the so-called upstream segment.

Upstream petrochemicals account for nearly half of recent European production capacity closures, according to Cefic, while basic and inorganic chemicals make up roughly a third. Polymers and other specialized chemical products account for 15 percent, while specialty chemicals represent just 5 percent.

From talk to action

The Commission currently relies on anti-dumping and anti-subsidy investigations to try and tackle what it sees as unfair Chinese competition. But these are time-consuming, target producers individually and are constrained by a lack of investigators in the Berlaymont’s trade department.

Brussels’ current trade defense policy is a “piecemeal, product-by-product” approach that is “no match for China’s macroeconomic distortions,” said Sander Tordoir, chief economist at the Centre for European Reform.

A more comprehensive solution under discussion would seek to stem the tide of Chinese imports and allow domestic producers to raise prices to sustainable levels. The EU has already set a precedent by imposing safeguards for steel.

Steelmaking in the EU had hit historic lows as a glut of cheap steel — partly from China — flooded the single market. The Commission responded with import quotas, relieving pressure on domestic manufacturers by limiting competition from rock-bottom imports.

One advantage of safeguards is that they are not country-specific, which aligns them with World Trade Organization rules. The EU can set a quota without singling out China, and then negotiate how much market access each trade partner receives.

But unlike steel, which only has around 30 product categories, chemicals are more complex, with thousands of products. Safeguards on upstream chemicals would make it more expensive to manufacture more specialized ones. Setting the quotas, meanwhile, would be politically fraught.

The Berlaymont is also looking at the possibility of an “overcapacity instrument,” which would target China’s exports more broadly.

Tordoir, together with colleague Brad Setser, has called for a broader, U.S.-style approach to Chinese trade discrimination. “Europe needs to urgently formulate a response,” he said.

However, some European chemical producers prefer to avoid a head-on confrontation with China.

German chemicals producer BASF maintains 29 sites in China and recently invested nearly €9 billion to build a new chemicals complex in Zhanjiang.

Daniela Rechenberger, a BASF representative, said that “overcapacity is a broader global issue and not limited to China.” She added in written comments that the company supported free trade and was opposed to “blanket trade barriers that would isolate Europe,” while also acknowledging that unfair trade practices needed to be tackled.

So far, no safeguard announcement has been forthcoming. And an overcapacity instrument would take years to go from legislative proposal to action.

What almost everyone agrees on is that the status quo can’t continue.

Vynova filed its PVC complaint in February, but an investigation has yet to formally begin. Six to 12 months — the typical length of an investigation once opened — “is like an eternity for today’s geopolitical speed,” said Miller.

Even provisional duties by the end of the year or early next year may come too late, he added. “We may be dead by that time.”

Graphics by Júlia Vadler.