Europe’s Chemical Industry Crisis Deepens as Domo Files for Insolvency

Belgian group’s German subsidiaries collapse amid weak demand, Chinese competition and surging energy costs in latest sign of sector’s structural decline

The insolvency of three German subsidiaries of Belgium’s Domo Chemicals has laid bare the existential crisis facing Europe’s once-dominant chemical sector, as industry executives warn that 2026 will bring a “painful continuation” of plant closures and production shifts away from the continent.

Domo Chemicals, Domo Caproleuna and Domo Engineering Plastics—employing 585 workers at sites in Leuna and Premnitz—filed for insolvency late last month after negotiations over short-term financing broke down. The Ghent-based parent company, which manufactures polymers and engineering plastics for the automotive and industrial sectors, cited persistently weak demand, soaring energy costs and a flood of imports from China as primary culprits.

The collapse is symptomatic of broader malaise. Industry analysts estimate that three-quarters of Germany’s energy-intensive chemical companies are now shifting investments abroad, with production increasingly migrating to regions with cheaper feedstocks and lower regulatory burdens.

“Producing basic chemicals in Germany is becoming increasingly unattractive—now the industry is migrating,” says Jan Haemer, a partner at consultancy Simon-Kucher. High energy prices and regulatory uncertainty around sustainability legislation are driving the exodus, according to the firm’s analysis.

Lucas Flöther, the preliminary insolvency administrator appointed by German courts, emphasized that day-to-day operations at the affected sites continue uninterrupted. Employee wages are secured for three months through statutory insolvency benefits, providing breathing room while restructuring options—including potential investor solutions or creditor settlements—are explored.

Yet the structural headwinds remain formidable. Domo attempted a restructuring programme throughout 2024, but management ultimately concluded the effort was insufficient against the combined weight of anaemic European demand and relentless price competition from Asian imports, particularly polyamide resins from China.

The Domo insolvency follows a cascade of closures and downsizings across European chemicals. Swiss specialty chemicals firm Clariant told the Financial Times in late 2025 that it anticipates “more production shifting away from Europe,” with over half its sales growth in the next five years expected to come from China. BASF, Europe’s largest chemical producer, has cut 2,600 jobs at its flagship Ludwigshafen site. Evonik axed 2,000 positions. Dow is shuttering operations in Barry, Wales, and Terneuzen in the Netherlands.

In the Netherlands, another caprolactam producer, Fibrant, is evaluating major reorganization options. Across the Channel, some 60 per cent of UK chemical firms surveyed by the Chemical Industries Association reported declining sales, with site closures mounting.

“Chemical plants are up for sale and closing on an unprecedented scale in Europe,” says Richard John Carter, an independent consultant and former BASF executive. “2026 will see a painful continuation of the pressure to review traditional business models and beliefs.”

The crisis has multiple dimensions. Europe’s chemical production volumes have dropped 6 to 8 per cent from pre-pandemic levels, with Germany experiencing declines as steep as 15 per cent. More than 20 major plants have closed across the continent in the past two years, reducing ethylene cracking capacity by 8 to 10 per cent.

Energy costs remain the sector’s most acute challenge. While natural gas prices have retreated from the peaks reached after Russia’s invasion of Ukraine, they remain approximately 40 per cent above pre-2022 levels, according to BASF. Meanwhile, US producers benefit from abundant shale gas, and Middle Eastern and Asian competitors enjoy advantaged access to low-cost feedstocks.

The competitive disadvantage is compounded by European regulatory complexity. The Carbon Border Adjustment Mechanism, designed to prevent carbon leakage by taxing imports from regions with laxer environmental standards, currently applies only to fertilizers and hydrogen—leaving most chemical products unprotected from cheaper, higher-emission imports.

“I don’t think anything on the legislative front is going to be happening quickly enough to stop the near-term closures,” says Stewart Hardy, a consultant with FGE NexantECA.

Marco Mensink, director general of the European Chemical Industry Council, warned last year that the sector is “beyond the breaking point,” calling for urgent action on energy affordability for an industry that directly employs 1.2 million workers.

The chemical sector’s troubles ripple through interconnected supply chains. Automotive manufacturers, already grappling with the transition to electric vehicles, face disruption as their chemical suppliers struggle. The broader deindustrialization threatens Europe’s ambitions for strategic autonomy in critical materials and advanced manufacturing.

Some analysts argue that specialization offers a path forward. Europe retains strength in specialty chemicals, high-purity polymers and green chemistry. Companies like Clariant, Evonik and Solvay lead in innovation, and the continent’s commitment to decarbonization could theoretically create competitive advantages in sustainable chemical production.

But Carter cautions that “specialties will not provide sufficient impetus to replace the collapse in commodity margins.” The harsh reality is that without affordable energy and streamlined regulation, Europe’s chemical industry faces continued erosion of its production base—regardless of technological prowess or environmental credentials.

For the 585 Domo employees awaiting their fate, and thousands more across Europe’s chemical belt, the question is no longer whether the sector will shrink, but how rapidly—and whether policy makers will act decisively enough to preserve what remains of the continent’s industrial chemistry capacity.