Challenges Facing the Dutch Chemical Industry in the Wake of Rising Energy Prices

The Dutch chemical industry has been heavily impacted by continuously rising energy prices since Q2 2022. Although supply-side issues are easing and output is stabilizing, weak international economies are dampening demand. Furthermore, input prices remain structurally higher than before, causing pressure on the competitiveness of chemical companies.

However, in 2023, the industry has calmed down thanks to government measures and alternative supply, reducing the potential risk of natural gas shortages. European natural gas prices have fallen from historic highs to around 2-3 times the levels before 2021, making larger-scale chemical production profitable once again. Despite this, European natural gas prices are expected to remain structurally higher than before, which negatively impacts intercontinental competitiveness and growth prospects for the chemical industry.

Despite the high energy prices, chemical manufacturers have managed to maintain output at a decent level by implementing cost-saving measures, using alternative energy sources, and importing energy-intensive semi-finished products from non-EU countries. However, the industry still faces pressure on profit margins due to structurally high energy prices, energy price volatility in Europe, and weak demand in major international markets.

Although chemical manufacturers have observed an increase in orders, they remain pessimistic about the future due to the ongoing uncertainty caused by the COVID-19 pandemic and geopolitical events, such as the situation in Russia and the Middle East. Therefore, the industry is likely to continue facing challenges in the coming years, and structural improvements may take longer than expected.