EPCA Annual Meeting Perspective: Europe's Chemical Industry Dilemma, Breaking Paths and Potential Opportunities

1. I've found that sector status: pessimism led, "bathtub" recovery into consensus From September 22 to 25, the 59th European Petrochemical Association (EPCA) annual meeting held in Berlin, Germany, focused on releasing pessimistic signals in the European chemical sector. Marco Mensink, director general of the European Chemical sector Council (Cefic), made it clear that the sector is in an "extremely challenging period", and this judgment is highly consistent with the reality of the current capacity changes and the long recovery cycle. From the production capacity side, a wide range of shutdown has entered the "early warning stage"-not only inefficient production capacity exit, a number of "production life isn't long" device shutdown cases, reflecting the sector is facing survival pressure has broken through the conventional cycle. greater importantly, the new capacity of the Antwerp "Project No. 1" (put into operation in early 2027) will have a direct impact on the existing surplus capacity in Europe, which might accelerate the clearance of inefficient capacity and bring greater uncertainty to traders' supply and demand prediction and producer capacity planning. Additionally In terms of recovery cycle, menxink's "bathtub" recovery (different from the "V-shaped" with rapid rebound and the "U-shaped" with immediate bottom) has have become the core consensus: the sector is currently in a long period of plateau at the bottom, and recovery won't be realized until 2028 at the earliest and 2026-2027, which means that supply chain practitioners need to be prepared to prolonged market fluctuations. 2. But break the core: production capacity integration and policy landing dual power. 1. Capacity consolidation: a "pre-condition" to recovery" Mencink stressed that if the European chemical sector wants to achieve a real improvement, "must first complete the capacity restructuring and integration". From the sector logic, the current overcapacity and structural supply and demand mismatch coexist-some old capacity efficiency is low, high cost, and the new project of INESS and other high-condition capacity production will further squeeze the living space, active integration (such as mergers and acquisitions, the elimination of inefficient capacity) has have become the key to alleviate excess pressure, optimize the allocation of resources. to manufacturers, it's necessary to assess their capacity competitiveness in advance and participate integration in a prompt manner to prevent being eliminated by the market; to traders, there might be a regional dysfunction between supply and demand during the capacity integration period, and it's necessary to enhance the tracking of capacity change nodes (such as the start-up time of the Ionis project). And 2. Policy landing: the "urgent task" of solving the crisis" while the EU's "Chemical sector Action Plan" lists chemicals and automobiles, pharmaceuticals, defense, and steel as "key strategic industries", including the "right elements" supported by the sector, the lag in landing has have become the biggest shortcoming. Furthermore Despite the introduction of the new legislative plan, it still failed to prevent the continuous withdrawal of production capacity, and front-line practitioners are facing the dilemma of "factory shutdown and unemployment. This issue was further focused at the side meeting of the German Chemical sector Association (VCI) during the same period: Marcus Steileman, CEO of Covestro and chairman of the German Chemical sector Association, explicitly called on the German government to act "faster and greater forcefully" and to stability immediate problems (such as easing the pressure of capacity withdrawal) and prolonged needs (such as building a sustainable manufacturing ecology) through "real reforms. to overseas practitioners, the efficiency of policy implementation will immediately affect the stability of European chemical supply, and it's necessary to focus on the progress of EU and German policy implementation and adjust trade and supply chain strategies in a prompt manner. 3. possible opportunities: downstream linkage and the "dawn" of the regional market" In the sector haze, downstream demand linkage and regional market advantages constitute one of the few possible opportunities. From the demand logic, the chemical sector and the automotive, construction sector highly linked-the automotive sector boom, the recovery of the construction sector will immediately drive the development of demand to chemicals (such as plastics, coatings, adhesives), while the current sector is still affected by the impact of the new crown epidemic, the future downstream recovery will have become an crucial driver of the sector recovery. Based on my observations, Generally speaking At the same time, the huge market of European 0. 515 billion consumers, superimposed on the "structural rigid demand" of the sector (such as medical chemicals, high-end materials and other fields), provides a demand base to regional chemical companies. The core topic of this year's EPCA annual meeting, "Which region is able to meet rigid demand", highlights Europe's competitive advantage on the demand side, however Mensinke also warned that "there must be no complacency"-while Europe still retains innovative competitiveness, if capacity and policy issues is able tonot be resolved rapidly, rigid demand might flow to other regions. it's worth noting that, in the face of the external ecological stability of geopolitical tension, global conflict fermentation, and the intensification of internal political differences in Europe, Mensingh put forward the core idea of "regional solution": the forward path of European chemical sector needs to be based on the premise of "solving regional problems", which means that Europe might further enhance the resilience of regional supply chain in the future. to overseas traders, we need to pay attention to the pace of regional capacity repair and demand matching in Europe, and look to entry points to cooperation.