European Chemicals Weekend Chemical Reactions

Research evidence excerpt

European Chemicals Weekend Chemical Reactions

of issues for Europe’s protectionist stance, which

the region has pledged to adopt to shield its domestic industrial sectors, including

chemicals, from the pressure from significant Chinese imports. Bloomberg reports

(see here and here) suggest that the EU and China are now working toward an

October deadline to show progress on the trade agreement. From the EU’s

perspective, the trade relationship with China is clearly out of balance, given that

significant volumes of Chinese goods continue to be exported to the region at lower

prices – which adds pressure on Europe’s domestic producers. We have been

consistently highlighting this dynamic in our recent reports on the EU Chemicals

sector (see here and here), with material chemical capacity oversupply, driven

mainly by recent significant capacity additions in China, seen as one of the key

structural issues facing the industry. The takeaways from recent EU-China trade

talks suggest that China appears unwilling to discuss limiting exports,

preferring to focus on increasing EU exports to China. While the EU has some

options at its disposal to limit imports from China – for example, stronger trade-

defense measures (anti-subsidy and anti-dumping actions) and tighter restrictions on

certain Chinese investments – the risk of retaliation from China appears significant.

A clear example of China’s leverage is that earlier this year, European carmakers

reportedly pushed the Commission to temporarily suspend sanctions on a major

Chinese semiconductor supplier. They warned that, without an exemption,

production could face shortages within weeks. This highlights how supply

dependence can limit Europe’s room to escalate trade measures.