Energy prices drive chemical groups to explore Europe’s departure

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Chemical companies are putting European assets on sale as they review their operations in the region to deal with high prices for energy and newer plant competition in Asia and the Middle East.

The Sabic Saudi Arabic chemical group works with bankers to explore options, such as the sale of its European petrochemical business, according to people who know the subject. Dow, Lyondellbasell, Shell and BP also said that they are weighing options for the assets of the region.

Deliberations occur when energy costs in Europe are still high after the invasion of Russia in Ukraine in 2022, as the industry builds newer plants in other regions. This has intensified the pressure on the chemical sector, which represents about 5-7 percent of the manufacturing revenue in Europe and employs more than 1.2 million people.

“There is a lot of additional supply provided in geographies such as China and the Middle East. Some management teams seek older European assets and they think” we are not so sure that we can compete, “said Sebastian Bray, chief of chemical search for the investment of the Bank of Berenberg.

“What was the decisive factor that caused companies to take into account a way out of their 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 for closing in the region had been scheduled in the last two years, affecting 21 major places.

He added that with gas prices four to five times higher in the United States, the competitiveness of the sector is “under pressure” and called for urgent actions from EU policymakers.

Sabic, which was established by the Saudi government and is the majority property of the Saudi State Oil Aramco group, works with Lazard and Goldman Sachs bankers in his process.

Its petrochemical assets in Europe generate about $ 3 million of income and about $ 250 million of gains before interest, taxes, depreciation and amortization annually, added the people who knew the matter. They warned that no final decision had been made.

Sabic did not respond to comments applications. Lazard and Goldman refused to comment.

Dow said in October that he would carry out a strategic review of some of the region’s assets, a measure that took place after Lyondellbasell, based on Houston, announced the launch of his own strategic review for European assets last May.

“The regulatory environment of Europe has led to an increase in challenges among many sectors and chains of value,” said Dow’s CEO and President Jim Fitterling in the company’s third quarter results. “We are announcing a strategic review of select assets in Europe, mainly those of our polyurethane business.”

Sir Jim Ratcliffe, the billionaire owner of the Petrochemicals Ineos group, has constantly had warned May the British chemical industry go to extinction due to high prices of energy and carbon taxes.

“We are witnessing the extinction of one of our main industries, as chemical manufacturing has life,” he said in January. Last week, he requested that the UK “rethink” taxes.

INEOS In March he sold his composite business, which provides resins and coatings for plastics, for € 1.7 million to KPS Capital Partners. The business had 17 places throughout Europe, North and South America, Asia and Middle East.

In a sign of European chemical companies that sought to achieve cheaper and less volatile gas supplies, Ineos last week said that he had signed an eight -year -old supply agreement with the Covestro chemical company for the United States Gas.

“Many people look at where things are and say that we have inefficient plants in Europe or isolated plants and are trying to find a house for those,” said Alasdair Nisbet, CEO of the Natrium Capital Native Chemical Advisory. “You are seeing a rethinking of what is competitive.”