Post by Daniel Senger

EXCERPTS: Germany’s chemical companies have been struggling for years as high energy prices and competition from Asia undermine their business. But now the shrinkage is entering a new phase, where consolidation risks becoming a disorderly unraveling that takes even those parts of the industry with it that stand a chance of a profitable future. A protracted period of weak demand, rising expenses and global overcapacity have drained cash flows across the region’s €635 billion ($737 billion) chemicals sector. That’s leaving companies struggling to fund upgrades and innovation even as rivals in China and the Middle East expand with newer plants operating at lower cost. Executives, investors and labor leaders are fearing that the wave of closures, carve-outs and restructuring that’s already started will leave the industry too weak to finance its future. Chemical making is highly inter-dependent, often organized in large parks like BASF SE’s Ludwigshafen site. There, one locally made ingredient forms the base for additional steps within a network that employs more than 30,000 people. “We should not fight against the consolidation that’s already taking place, but rather strive for it to be orderly and coordinated,” Michael Vassiliadis, head of German chemicals union IGBCE, said in an interview at an industry conference in Berlin this week. He warned that closures of individual plants can ripple through the supply chain, leading to unnecessarily high production loss down the line. Executives warn that the pressure is spreading down the value chain — from commodity chemicals dependent on steam crackers to specialty chemicals and advanced materials. These segments used to be more resilient because they rely on technical expertise and customized products rather than scale alone. That’s beginning to erode as China expands into more sophisticated parts of the industry, intensifying competition even for European producers that had so far been insulated. To differentiate themselves from the low-cost competition, European companies should stick to — rather than reduce — spending on innovation and sustainability. COMMENTS: While it's clear bloodshed in European chemicals will continue, some upstream consolidation is needed, now, either in European hands or through a Chinese JV or acquisition. Just look at what the Chinese are doing with "involution" by first consolidating internally to become stronger externally - per attached. https://lnkd.in/g_fjACSE