Chemical companies are putting European assets for sale as they review operations in the region to cope with high energy prices and competition at new plants in Asia and the Middle East.
Saudi Arabian chemical group Sabic is working with bankers to explore options including selling European petrochemical business, according to people familiar with the matter. Dow, LyondellBasell, Shell and BP also said they are weighing the options for assets in the region.
Energy costs remain high in Europe after Russia’s invasion of Ukraine in 2022, and energy costs remain high in Europe as the industry sets up newer factories in other regions. This has exacerbated pressure on the chemical sector, which accounts for about 5-7% of European manufacturing revenue and employs more than 1.2 million people.
"In geography such as China and the Middle East, many other supplies are planned. Some management teams are studying older assets in Europe and think "we are not sure we can compete".
"What is the decisive factor that makes a company consider exiting assets? It's a higher energy cost," Bray added.
The European Chemical Industry Commission warned in January that the region had planned to close over 11 million tons of capacity over the past two years, affecting 21 major locations.
It added that since gas prices are four to five times higher than those of the United States, the industry’s competitiveness is “under pressure” and calls for urgent action by EU policymakers.
Founded by the Saudi government, SABIC is a majority owned by state oil group Aramco and is working with bankers at Lazard and Goldman Sachs.
Its annual interest, taxes, depreciation and amortization of its petrochemical assets in Europe is about $3 billion in revenue and about $250 million in revenue, and people on this matter are increasing every year. They warned that no final decision was made.
Sabic did not respond to a request for comment. Lazard and Goldman declined to comment.
Dow said in October it would conduct a strategic review of certain assets in the region, a move that followed Houston's Lyondellbasell's announcement last May of its own strategic review of European assets.
“The regulatory environment in Europe has led to challenges for many sectors and value chains,” DOW CEO and Chairman Jim Fitterling said in the company’s third-quarter results. “We announced a strategic review of selected assets in Europe, primarily the assets of our polyurethane business.”
Sir Jim Ratcliffe, a billionaire owner of petrochemical group Ineos, has been warning that the UK's chemical industry is extinction due to high energy prices and carbon taxes.
"We have witnessed the extinction of one of our major industries as chemical manufacturing has squeezed out lives," he said in January, calling on Britain to "rethink" taxes last week.
Ineos sold its composites business in March, which provides resins and coatings to make plastics, offering it to KPS Capital Partners for 1.7 billion euros. The business has 17 locations in Europe, North and South America, Asia and the Middle East.
Ineos said last week that this indicates European chemicals are trying to get cheaper and volatile natural gas supplies, which it said had signed an eight-year supply agreement with Covelans Covestro.
“A lot of people are looking at where things are and saying we have some inefficient plants in Europe or in isolated plants that are trying to find houses for those plants,” said Alasdair Nisbet, CEO of chemical consulting firm Natrium Capital. “You are seeing a competitive rethink.”