European chemical producer Clariant signals further shift of production to China amid high energy and labour costs

Swiss chemicals producer Clariant expects a growing share of its manufacturing footprint to relocate outside of Europe as elevated energy and labor costs continue to erode the continent’s competitiveness, the Financial Times reported.

Chief executive Conrad Keijzer said the company is increasing its presence in China, targeting 14% of group sales from the country by 2027 compared with about 10% today. He noted that China is likely to account for more than half of the global chemicals market growth in the next five years.

Clariant recently completed a CHF 180 million (approximately US$ 197 million) expansion of two plants in Huizhou, which will allow the group to produce about 70% of the chemicals it sells in China locally, up from roughly half. “Most of the growth by and large is coming from China,” Keijzer said, warning that if the company doesn’t act, it risks “long-term losing out.” He added that this strategy “automatically means more production shifting away from Europe.”

European chemical producers have struggled with higher gas prices following Russia’s invasion of Ukraine and with intensifying competition from China, prompting a series of plant closures. Keijzer said this pressure, combined with Europe’s carbon pricing policies, has contributed to a structural disadvantage for the region’s industry.

Labour costs are also a factor. According to Keijzer, an operator at a German facility costs about €100,000 a year, including tax and other expenses, compared with roughly €10,000 in parts of China.

Clariant, headquartered in Muttenz and active in 68 plants worldwide, plans to close its last Swiss production site next year. The company produces speciality chemicals for sectors including cosmetics, agriculture and industrial applications.

Analysts cited by the Financial Times noted that China’s expanding output is challenging European groups across commodity and specialty segments. Consultancy Roland Berger recently said China’s chemicals production could, in some categories, meet Western demand with surplus.

Some European companies are responding with trade actions. UK-based Ineos has filed 10 anti-dumping cases concerning imports into the EU, warning of mounting risks for the sector.

Keijzer said continued retrenchment of Europe’s chemicals base could have wider industrial implications. A deep reliance on imported steel, plastics and other inputs would undermine the region’s ability to manufacture competitive electric vehicles, he warned.

Source: Financial Times