Ineos says it will idle three acetyls plants in Hull, England, because of high energy prices. The closures, which will spell the end of industrial-scale acetyls manufacturing in Europe and affect 300 employees, are the latest for a European chemical industry struggling to remain competitive.
The three plants make 480,000 metric tons (t) of acetic acid, 150,000 t of acetic anhydride, and 250,000 t of ethyl acetate per year. Ineos bought two of them in 2020 from BP as part of a $5 billion deal for the oil major’s aromatics and acetyl chemical business, becoming the only industrial-scale maker of any of the three chemicals in Europe.
Ineos says the plants are “among the most efficient in the world,” producing material with half the carbon footprint of that made in the US. The group pressed ahead only last year with a $40 million investment in the Hull site, converting it to run on hydrogen and reducing natural gas consumption by 33%.
But “ridiculously high” gas prices mean the plants are still too expensive to run, according to Ineos CEO Jim Ratcliffe. “I’m sure people will find it hard to believe that we are being forced to mothball some of the most efficient plants in Europe but with gas prices now 12 times the level in the US and 8 times that of China, we just cannot compete,” he says in a press release.
The price of natural gas in Europe is almost triple what it was at the beginning of the year, according to the data provider Trading Economics.
The announcement comes after five other closure decisions that Ineos says were a consequence of high energy prices. The firm closed its ethanol plant in Grangemouth, Scotland; idled a chloromethane facility in Tavaux, France, and production assets in Martorell, Spain; and announced the closure of chlor-alkali and allylic compounds facilities in Rheinberg, Germany, as well as polystyrene production facility in Wingles, France.
Ineos says these decisions do not reflect a lack of commitment to manufacturing in Europe. “We want to manufacture in Europe and the UK, and we are actively pursuing solutions such as importing [liquefied natural gas] from the United States to improve competitiveness,” a spokesperson says in an email.
“But unless the gaps on energy costs, carbon costs and unfairly traded imports are addressed, more industrial production, investment and jobs will inevitably be attracted to regions with lower operating costs. This is not just an Ineos issue. It is a broader question about the future of manufacturing in Europe.”
Chemical plant closures have sent ripples through Europe. In the UK, where energy prices have spiked more than elsewhere because of the country’s reliance on imported gas, ExxonMobil shuttered a large ethylene cracker last year.
The UK Chemical Industries Association says Ineos’s challenges are symptomatic of those faced by all UK chemical businesses “for many years now.” In an email, the association’s chief executive, Steve Elliott, describes them as “totally uncompetitive” energy costs, a government push for carbon reduction that is not reflected in competitor countries, and chemicals imported—“some might say dumped—from third countries including China.”
Germany has also been hard hit by closures, with BASF, Dow, Evonik Industries, and Solvay among those shuttering facilities. Evonik recently said that two-thirds of the 3,200 job cuts it previously announced will occur in Germany and that it sees growth opportunities in the US and Asia rather than Germany.
The German Chemical Industry Association (VCI) says further plant closures cannot be ruled out. “As long as demand remains weak and Europe maintains a substantial cost disadvantage compared with other regions, companies will continue to review their asset portfolios,” VCI chief economist Henrik Meincke says in an email.
Meincke says it would be wrong to attribute the wave of closures to energy costs alone. Rather, energy costs are the last nail in the coffin for firms struggling with weak demand and strong competition.
Beyond these problems, Europe should be concerned about new investments increasingly being directed to regions offering lower energy costs, faster planning permission and regulatory procedures, and stronger growth prospects, Meincke says. A July VCI survey found that 43% of chemical firms in Germany are already shifting investment to foreign assets.
“If this trend continues, Europe risks a gradual erosion of industrial value chains and future production capacity,” Meincke says.
