Chemical Industry Faces Plant Closures Amid Challenging Second Quarter

The chemical industry has weathered a grueling second quarter marked by inflation, soaring energy costs, and sluggish economic growth, particularly in Europe and China. As the demand for chemicals waned and financial pressures intensified, several companies have been left with no choice but to shutter their plants, grappling with dwindling sales and declining earnings.

Among the casualties is the German chemical giant Lanxess, which experienced a loss for the quarter. In response, the company has formulated a strategy to trim expenses by approximately $110 million in the short term. These cost-cutting measures encompass a hiring freeze across Europe, with a more ambitious target of slashing annual structural costs by around $165 million by the year 2025.

One of Lanxess's decisive actions involves ceasing hexane oxidation operations at its facility in Krefeld-Uerdingen, Germany, by 2026. CEO Matthias Zachert clarified the decision, stating that the plant's lack of competitiveness stems from its high energy consumption and lagging demand, making the move a pragmatic choice in the face of adversity. Additionally, Lanxess is actively exploring the possibility of selling its chromium oxide plant at the same location; however, if no buyer is found, the plant will be closed. This facility produces a product integral to the construction and ceramic sectors, namely chromium oxide pigment.

Zachert candidly expressed his concern, noting that the current state of the construction industry is the most dire he has witnessed in his professional career. This somber observation underscores the broader challenges faced by the chemical industry.

Trinseo, a US-based chemical company, similarly encountered losses during the quarter, experiencing a sales decline of over 32% compared to the same period the previous year. To mitigate the impact of the downturn, Trinseo is pursuing the closure of its styrene plant located in Terneuzen, the Netherlands. Negotiations with the local works council have commenced as part of this initiative. Last year, the company began the process of closing its styrene plant in Böhlen, Germany. CEO Frank Bozich attributed the decision to Europe's elevated energy costs, which render styrene production in the region among the world's most expensive. Bozich acknowledged that purchasing styrene externally is a more cost-effective solution compared to internal production.

Meanwhile, Chemours, another major player in the chemical industry, is poised to shut down its titanium dioxide plant situated in Kuan Yin, Taiwan. While this move incurs charges of approximately $150 million for plant decommissioning, it is projected to yield annual savings of $50 million.

Chemours's financial performance in the quarter reflects the broader industry struggles, with a 14% dip in sales and a staggering 45% drop in profits. These outcomes underscore the pervasive challenges that the chemical industry contends with in the face of a turbulent economic landscape.