Chemically pure crisis: how the EU industry is disappearing
There are more and more signals about the growing crisis of the global economy. First of all, from Europe, where losses in the manufacturing sector are increasing from year to year. The process of reducing investments in fixed assets began several years ago and is not related to the situation around Iran, but the current energy crisis may worsen it several times. About the dynamics of the investment and industrial recession in the EU and the development of events in the future — in the material of Izvestia.
Without a gap
In previous years, politicians in Brussels preferred to talk about temporary difficulties and a green transition, but the current figures from investment reports and quarterly balance sheets show that this period has not only dragged on, but also shows a deteriorating trend from year to year. We are no longer talking about a decline in production, but about "industrial deportation" — the transfer of capital, technology and production chains outside the European Union.
The data on foreign direct investment (FDI) shows this more than clearly. According to a recent Ernst & Young report, after a weak post-bubble rebound in 2022 (+1%), Europe has recorded a steady decline in the number of new investment projects for three consecutive years.: -4% in 2023, -5% in 2024 and -7% by the end of 2025. The dynamics within the largest European economies, which historically attracted half of all projects, looks depressing. Germany, which has been the main victim of the energy crises of recent years (as well as the intensification of competition with China), has been falling for the eighth year in a row. In 2025, the number of new projects in Germany collapsed to a 17-year low, amounting to 547 (-10% compared to last year and -34% by 2022). Henrik Ahlers, head of EY Germany, described the situation in an obvious way: the German economy has been moving in only one direction for many years — downwards. Investors are deterred by exorbitant energy prices, taxes, and regulatory pressure.
France, which holds slightly better positions due to a certain effect from the reforms of previous years, is also on the decline. The number of projects decreased from 1,259 in 2022 to 852 in 2025 (a drop of 17% over the past year). The UK, which is currently outside the EU but remains the bloc's most important trading partner, also returned to stagnation after a short surge, registering 730 projects in 2025 (-14%).
The capital structure itself is changing. Money is leaving the real sector: FDI in the production of medical equipment in 2025 fell by 28%, in chemicals — by 19%, in the automotive industry — by 11%. Investment growth is observed exclusively in the segments of artificial intelligence (+96%) and the military-industrial complex (+84%). The largest European powers are trying to militarize their hard-pressed IT sector, while simultaneously losing their traditional industrial base.
Total capital investments in the modernization of production facilities are being reduced synchronously. In 2024, the total volume of gross fixed capital accumulation in the EU fell by 1.9%. With high ECB rates and energy inflation, businesses are freezing infrastructure construction projects. It should be added that chronic problems with excessive regulation, standards, compliance and the constant imposition of new sanctions are also not helping development.
The data on individual corporations demonstrate this quite clearly. In its quarterly report, BASF chemical concern recorded a net loss on ammonia and base polymer production lines in Ludwigshafen. With the price of gas at the TTF hub in the region of €55-60 per 1 MWh (about €600 per 1 thousand cubic meters), it is physically impossible to compete with American plants that receive gas at €12-15 per 1 MWh. BASF management announced the indefinite conservation of two more production lines. At the same time, the company redirected €4 billion of capital expenditures intended for European assets to expand its complex in Louisiana (USA), where cheap shale raw materials are available.
ThyssenKrupp Metallurgical Corporation reported an 18% year-on-year drop in steel production in Germany in April. A large-scale project to convert blast furnaces to "green hydrogen" has been recognized as economically unworkable at current electricity tariffs. The company records asset write-offs worth more than €2.5 billion and is switching to a model of importing steel slabs from abroad.
The situation is similar in the automotive industry. The Volkswagen Group in its report notes an increase in the "energy tax" on each chassis produced in Europe by 25-30%. The concern is accelerating the construction of a battery factory in Canada and expanding assembly lines in Chattanooga (USA), diplomatically calling this an optimization of its global presence.
Chemistry, chemistry...
The crisis is most dramatically manifested in the chemical industry, the basic sector that provides materials to all other industries. Over the past year, two out of ten companies in the cluster have closed their factories. The conflict in Iran has inflated energy costs and triggered price volatility for critical raw materials such as naphtha, triggering a chain reaction in deeper processing markets.
The scale of the damage is visible according to the industry association Cefic. Over the past four years, the number of closed businesses across Europe has increased sixfold. A tenth of the EU's production capacity has been lost, and about 20,000 direct jobs have been eliminated. Confirmed capital investments in the European chemical industry have collapsed by more than 80%: from €7.6 billion in 2022 to €1.5 billion by 2025. In February 2026, Mitsubishi has already curtailed the construction of an advanced complex in Rotterdam for the production of chemical components for high-performance coatings.
The plant closures threaten Europe's ability to produce basic materials, from chlorine for water purification to phenols for printed circuit boards. Cefic CEO Marco Mensink states that European businesses can no longer cope with the regulatory burden and energy prices, preferring to eliminate production.
They count in the fall
Macroeconomic indicators fully confirm corporate pessimism. Business activity indices (PMI) in the manufacturing sector of the eurozone in May 2026 remain in the recession zone. According to preliminary estimates, the eurozone industrial PMI was recorded at 42.8. In Germany, the indicator fell back to 39.2, in France — to 41.5. The volume of new industrial orders has been falling for the twelfth month in a row, and the backlog reserves are almost exhausted. This is not a new situation, but we see that the bet on the military-industrial complex (rather half-hearted, in fact, contrary to the vociferous statements of the leadership of Germany and a number of other countries) is not very successful.
If the situation in the Strait of Hormuz is not resolved in the next two or three months, the European economy will face a very difficult autumn. The season of gas injection into underground storage facilities is held at prohibitive prices. It will be impossible to achieve regulatory stock levels of 90% by November without critical damage to industrial consumers.
Firstly, by the middle of summer, the reserves of raw materials and medium distillates formed before the start of the military campaign will run out. The transition to logistics bypassing Africa will finally consolidate the logistics premium in fuel prices, making European exports uncompetitive in the Asian and American markets.
Secondly, against the background of low filling rates of underground gas storage facilities, the risk of administrative rationing of energy for industrial consumers will increase in the coming autumn. Awareness of this risk will force corporate boards of directors to transfer temporarily suspended plants to the status of permanently closed ones.
Thirdly, there will be an irretrievable loss of market share. The niches vacated by European chemical and engineering companies will be quickly occupied by competitors from the United States and China. In the United States, by the way, foreign investment has been growing in recent years, both under Biden and under Trump. In China, they are falling, and strongly (by 27%), but this is offset by increased investments from local manufacturers. China's problem may be something else — excessive investment amid the weakness of the domestic consumer market, but this is a separate issue.
In these circumstances, the Made in Europe (Industrial Accelerator Act) plan, actively promoted by Brussels, looks like a political declaration loosely connected with reality. The requirement to ensure 70% localization in the production of solar panels or electric vehicles within the EU, when energy costs three times more in Europe than in the United States or China, is like suicide for businesses. No subsidies from the European Sovereignty Fund are able to cover this difference in operating costs.
A prolonged blockade of supplies from the Middle East will accelerate the "segregation" of the global economy. Europe will finalize its status as an importer of manufactured goods, turning into a service economy with weakened industrial potential. The problem is that the legislation in Europe is too inflexible for the service model, and the regulation is too strict. The main beneficiary of this process will remain the United States, where European capital is migrating in search of cheap gas, secure logistics and a predictable tax environment.
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