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EU creates Critical Chemical Alliance for supply chain security

The European Commission said that it will work with EU members states and the chemical sector to support the production of chemicals identified by the EU executive as being critical for Europe's supply chains. The EU executive said that it would establish a Critical Chemical Alliance later this year, which will bring together the Commission and member states as well as various stakeholders, in order to revitalize Europe's chemical industry.

In a press release, the Commission stated that "the chemical alliance" will "identify key production sites in need of policy support and address trade issues such as supply chain dependence and distortions." This move is similar to another alliance that was set up in order to identify the metals and minerals crucial for energy transition. The EU set mining, processing and recycle targets for 17 strategic materials.

Chemicals are an essential input in nearly every industry, from textiles to defence and tech. They also account for over 1.2 million jobs directly in the EU. Chemical production plummeted during the COVID-19 epidemic and hasn't fully recovered due to the competition from U.S. and Chinese competitors who benefit from lower energy and production costs.

The Commission said that more than 20 chemical plants have closed in the past two years. Ammonia and petrochemicals are "under severe pressure".

Stephane Sejourne, Executive Vice President of the European Commission and Industry Commissioner, told reporters: "First and foremost is the question of sovereignty. We must keep our steam crackers."

Steam crackers are a unit of petrochemical factories that produce the building blocks chemicals ethylene, and propylene. These chemicals can be found in plastic food packaging, rubber, car headlights, and fleece hoodies. Around 40 steam crackers are located in the EU. The Dow Chemical Company announced on Monday that it would be closing two plants in Germany, and one in Britain in the next two-year period.

Sejourne said reporters that the alliance will evaluate the bloc's dependency on imports within the context of its importance.

We are dependent on foreign imports of methanol for example. If we examine the critical production sites we must safeguard and maintain European sovereignty... Work is being done to identify the molecules and the plan proposes moving forward with a sort of Critical Molecules Act." The Commission will also include chemicals in future agreements with other countries and increase the surveillance of chemical imports. Since 2024, the Commission has opened 18 trade defense investigations on different molecules.

In order to compensate for the high cost of energy, the Commission will increase state aids, accelerate permits and provide energy guarantee from EU funds. Sejourne stated that the Commission would also incorporate EU-content criteria into public procurements for chemicals. This is an effort being promoted by EU industries. The Commission will also present its sixth package of simplifications, called an omnibus for the chemical industry. The omnibus package, which is due to be presented before year-end, will simplify the rules for labelling dangerous chemicals and revise rules surrounding cosmetics, fertilizers, and other products. This will result in savings of up to 363 million euro ($425,47 million) per year.

(source: Reuters)