Global Market Analysis

European Chemical Industry Restructuring Far From Complete; Strategic M&A Activity To Stay Selective

October 1, 2024

Companies Mentioned: ADNOC, Covestro, ExxonMobil, LyondellBasell, BASF, Trinseo, Kemira, Issaquena Green Power, Honeywell, Air Products, Technip Energies, AP Moller, Hy Stor, Microsoft, Nel, QuestOne, Woodside, OCI, Maersk
Commodities Mentioned: Ethylene, Polyethylene, Caustic Soda, Ethylene Dichloride, Vinyl Chloride, Polyvinyl Chloride, Power, Natural Gas, Chlorine, Hydrogen, Ammonia, eFuels, Nuclear Power, Renewable Power, LNG, Green Methanol, Polymers, Fuel, Materials, Polyolefins

Daily Chemical Reaction

European Chemical Industry Restructuring Far From Complete; Strategic M&A Activity To Stay Selective

Key Findings

General Thoughts: We discuss ADNOC’s announced acquisition of Covestro amid an ongoing European chemical sector restructuring that is far from complete, with some portions needing much more restructuring than others.
Supply Chain/Commodities: We highlight the US and Middle East petrochemical production cost advantage relative to Europe and flag domestic PE and PVC markets among polymer markets most at risk from US port strikes.
Energy/Upstream: We discuss the 45v tax incentive and the power additionality requirements for green hydrogen production – we see it as fair to have the same additionality logic applied to data centers amid surging demand.
Sustainability/Energy Transition: We discuss European efforts to limit Chinese electrolyzer capacity in its second EU hydrogen bank auction, among other factors that differ from its first auction and are likely to drive up costs.
Downstream/Other Chemicals: We discuss weak European manufacturing data and price expectations, highlight global freight rate trends ahead of the US port strike, and comment on EU market risks from international trade.

Exhibit 1: European ethylene production costs reflect some of the highest levels globally, making many of its ethylene (and other petrochemical production assets) a restructuring, closure, or backward integration target.