Unlock Editor’s Digest Lock for Free
FT editor Roula Khalaf will select your favorite stories in this weekly newsletter.
Chemical companies are on sale as they review their operations in the region to address competition between new plants in Asia and the Middle East.
Saudi chemical group Sabic is working with bankers to explore options such as selling European petrochemical businesses, according to those familiar with the issue. Dow, Lyondellbasell, Shell, and BP show that they are metering options for assets in the region.
The deliberations will bring as Europe’s energy costs remain high following the 2022 Russian invasion of Ukraine, and as the industry builds new plants in other regions. This has strengthened pressure on the chemical sector, which accounts for around 5-7% of Europe’s manufacturing revenue and employs over 12 million people.
“There are many additional supplies planned in regions like China and the Middle East. Some management teams are looking at old European assets and think, “I don’t know if we can compete or not.”
“What was the key factor that made companies consider withdrawing from assets? It was a higher energy cost,” Bray added.
The European Council of Chemical Industry warned in January that more than 11 million tonnes of capacity will be closed in the region over the past two years, affecting 21 major sites.
Furthermore, gasoline prices are four to five times higher than the US, and the sector’s competitiveness is “under pressure,” calling for urgent action from EU policymakers.
Founded by the Saudi Arabian government and majority owned by the state’s oil group Saudi Aramco, Savik works with Lazard and Goldman Sachs bankers in the process.
Petrochemical assets in Europe generate approximately $3 billion in revenue and approximately $250 million in profit before interest, taxes, depreciation and amortization. They warned that no final decision was made.
Sabic did not respond to requests for comment. Lazard and Goldman declined to comment.
The Dow said in October it would conduct a strategic review of some of the assets in the region. He said this was a move that came after Houston-based Lyon del Bassel announced last May that it launched its own strategic review of European assets.
“The European regulatory environment has led to an increase in challenges across many sectors and value chains,” Dow CEO and Chair Jim Fitterling said in its third quarter results. “We are publishing a strategic review of some of the assets in Europe, primarily the assets of the polyurethane business.”
Jim Ratcliffe sir, owner of the billionaire at Petrochemicals Group Ineos, has consistently warned that the UK chemical industry is heading for extinction due to high energy prices and carbon taxes.
“We are witnessing the extinction of one of the major industries as the production of chemicals has been squeezed out of it,” he said in January. Last week he called on the UK to “rethink” taxes.
In March, INEOS sold KPS Capital Partners for 1.7 billion euros to a composite business offering resins and coatings to manufacture plastics. The business had 17 sites in Europe, North America, South America, Asia and the Middle East.
Last week, Ineos said it had signed an eight-year supply agreement with fellow chemical company Covestro for US gas amid signing an eight-year supply agreement, in signs of a European chemical company trying to ensure a cheaper, less volatile gas supply.
“A lot of people see where things are and say there are inefficient plants in Europe and isolated plants, and they are trying to find a home for them,” said Alasdair Nisbet, chief executive of chemical advisory firm Natrium Capital. “You’re looking at a rethinking of what’s competitive.”
