Without action, EU factories would close and prices could soar

China is deliberately flooding Europe with cut-price chemicals, causing factory closures and putting national security at risk, Sir Jim Ratcliffe has warned.

In a letter to Ursula von der Leyen, president of the European Commission, the billionaire boss of Ineos warns that urgent action is needed to protect the sector, with 200 chemicals plants in Europe closing in the last five years alone.

Were domestic capacity to vanish, prices would soar, he warns. Sir Jim points the finger at China, which he says is intentionally “overbuilding its entire chemical industry”.

The excess, he says, “is being ‘dumped’ into our European marketplace at unsustainable prices”.

While high energy costs and carbon taxes have caused problems for the “highly stressed” sector, this flood of Chinese chemicals poses “a further and even more difficult threat”, Sir Jim warns.

They have accelerated closures, he says, and this has put Europe’s ability to feed and protect itself at risk.

“Approaching 200 chemical plants have closed down during the last five years”, he writes.

“It is clearly a ‘critical industry’ for national security purposes.

“Europe cannot run hospitals, feed people or build weapons without our key products.”

Sir Jim tells the EU President that action was needed now and couldn’t move at “a snail’s pace”.

He says: “Since Covid we have seen a huge increase in both energy costs and carbon taxes but more recently we have been experiencing a further and even more difficult threat.

“China is overbuilding its entire chemical industry, which it fully recognises is a critical ingredient for its national security.

“This intentional excess capacity (which is considerable) is being ‘dumped’ into our European marketplace at unsustainable prices.

“The result is an accelerating rate of closure of our chemical industry.”

He says that China did not have “superior economics” for manufacturing chemicals and warned that, without action, EU factories would close and prices would soar.

Further, products made in China were less environmentally sound, he claimed.

He writes: “It is very clear that when our industry has shut down, prices will rise rapidly and consumers will suffer.

“In addition, chemicals made in China have double the carbon footprint. “Europe must be protected from unfair competition, preferably quicker than at ‘snail’s pace’.”

Interventions could include the implementation of the EU’s Industrial Accelerator Act, currently under draft legislation.

It aims to boost demand for EU-made low carbon industrial products. This must include the chemicals sector, he says, which employs a million people in Europe.

Sir Jim also called for more EU support for the European domestic industry, pointing to Ineos’s £4billion investment in “Project ONE” - a giant chemicals plant in Antwerp, Belgium.

It will produce ethylene, the primary building block for plastics and many other bulk chemicals.

It promises to be the most efficient plant in Europe, reducing carbon emissions by two thirds. But Sir Jim says that, “shockingly”, the project has received no EU funding.

“Europe needs to start giving the type of support to industry that our global competitors receive from their governments,” he writes.

Project ONE is “the first major chemical investment in Europe for a generation”.

“This is exactly the type of investment project that Europe should welcome and be supporting,” he tells von der Leyen. “Sadly, this has not been the case.

“Project ONE has not received any EU funding, despite its strategic, economic, and environmental benefits.”

He cites the announcement of the ETS Investment Booster, a scheme that would see some of the money paid in the Emissions Trading Scheme, a de facto carbon tax, be used to help industry de-carbonise.

“For Europe to maintain a viable chemical industry, this new scheme must be defined so that it can support projects such as ours, both in the planning stage, or in the execution phase,” he says.

China overcapacity has long been a concern for the chemicals sector. In March this year, the UK’s Chemical Industries Association raised the issue in a letter to Sir Keir Starmer.

It warned: “The chemical industry is trade intensive, with both export and import dependency: “An ongoing challenge to UK producers is that Chinese overcapacity (production at a level beyond market demand) has resulted in Chinese material continuing to flood UK and European markets.”

It goes on: “Whilst the industry still supports the principle of free trade, that trade must be fair; current evidence shows it is not.”