Eni Group Closes Versalis Cracker Amid Major Losses

Recently, during the release of Eni Group's Q4 2024 financial report, CEO Claudio Descalzi announced the closure of two steam cracker units operated by its chemical subsidiary, Versalis. This decision comes as Versalis faces significant losses in both the fourth quarter and the entire year of 2024. In light of the ongoing downturn in the European petrochemical industry, this move has sparked speculation about potential restructuring in the sector.

Eni has set a target to restore Versalis to financial balance by 2027, and the closure of the steam cracker units is part of this recovery strategy. The latest financial report highlights that Versalis incurred severe losses due to unfavorable market conditions, with an estimated adjusted quarterly loss of 231 million euros in Q4 2024, slightly narrowing compared to the previous year but widening from 193 million euros in Q3. For the entire year, the adjusted loss is expected to reach 814 million euros, an increase from 614 million euros in 2023.

Descalzi emphasized that to achieve profitability, Versalis must reach EBITDA balance by 2027, aiming for an adjusted EBITDA of 900 million euros by the end of 2028. To meet these goals, Eni plans to reduce Versalis's capital intensity by approximately 350 million euros. The restructuring aims to enhance competitiveness in the European petrochemical industry, which has struggled recently. Eni intends to shift Versalis’s focus towards composite materials, specialty polymers, and biochemical products while targeting a 65% specialty product share in its portfolio.

The closure of the two steam cracker units in Brindisi and Priolo, which have a combined annual capacity of 1 million tons, is likely to impact the naphtha market significantly. With the closure, around 1 million tons of naphtha is expected to enter the export market, potentially disrupting European supply chains. The current market dynamics have already led to a sharp rise in spot prices for naphtha.

As Eni's decision unfolds, it may signal the beginning of a new wave of consolidation in the European petrochemical sector. With ongoing discussions among major producers about potential closures, the industry is bracing for further changes as companies strive to restore profitability amidst ongoing economic pressures.