European energy crisis hits the chemical industry, and where is the future growth of the coating industry likely to be?

The European chemical industry is beginning to suffer due to the impending energy crisis, which will affect all industries supplying all European value chains, which of course includes the chemical industry, the fourth largest manufacturing chain in the EU.

The crisis has been exacerbated by the war in Ukraine, characterized by soaring gas and electricity prices, which in turnhave led to gas supply shortages and demands for lower electricity consumption,thus putting hundreds of chemical plants at risk across Europe. Europe isalready experiencing a deficit in chemical imports and exports, with the valueof chemical imports exceeding the value of exports, resulting in a €5.6 billiontrade deficit in the first half of 2022. This runs counter to the EU's ambitionto become self-sufficient in chemicals, which is seen as creating an importdependency.

According to Marco Mensink, directorgeneral of the European Chemical Industry Association CEFIC, the chemicalindustry is almost at a "breaking point". In a statement released inlate October, he said, "We are approaching the point of no return; we arenot far from the tipping point if urgent solutions to energy prices are notprovided to our sector. Hundreds of companies in the chemical industry arealready in survival mode, and we are already starting to see the first closures. We need action now.

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CEFIC is therefore calling on the EuropeanCommission and its member states to act on two fronts. Measures are needed inthe short term to stabilize energy supplies over the winter and in the longterm to protect the European chemical industry.

BASF said gas supply restrictions couldpose a risk of shutting down major production sites in Europe. CF Fertilizerhas already shut down its ammonia and fertilizer plants in Ince, UK.

Citing the Wall Street Journal, Germanchemical company BASF's energy costs jumped 800 million euros ($785 million) inthe second quarter from a year earlier to 1.1 billion euros. The figure alsohints that more and more European chemical companies are having troubleforecasting their energy consumption and setting budgets.

Hans-Ulrich Engel, BASF's chief financialand chief digital officer, said, "Natural gas prices in Europe arecurrently rising and falling by up to 50 euros per megawatt-hour, with dramaticprice fluctuations in a relatively short period of time." BASF iscurrently drafting spending plans for next year, but the unpredictability ofEuropean energy supplies, including the possibility of supply rationing, islimiting the plans. engel said BASF is slowing down hiring and cuttingmarketing budgets, but said the company has not yet started laying offemployees.

Information from the German newspaperHandelsblatt indicates that many German industrial sectors are now cuttingproduction to save gas and electricity. This mainly affects energy-intensiveindustries: the steel industry has cut production by about 5%, the chemicalindustry by 8% and the fertilizer industry has even closed 70% of itsproduction capacity in Germany.

More and more European chemical companiesare having difficulty forecasting their energy consumption and setting budgets.Energy supply, geopolitical conflicts and the current state of the Europeaneconomy are also affecting the investment plans of multinational chemicalcompanies, with many chemical giants increasing their investments in Chinese projects.