Europe Chemical Prices Surge as Energy Crisis Deepens

A wave of price increases and surcharges announced by major chemical producers is set to raise costs across Europe's industrial supply chain, as energy and feedstock prices surge following disruptions in the Strait of Hormuz.

U.S.-based Huntsman Corporation said its building solutions business will impose a natural gas surcharge of €200 per metric ton on all products sold in Europe starting March 20, 2026. The move broadens an earlier measure announced on March 5, when the company applied the same €200/ton surcharge only to MDI products sold in Europe, the Middle East, India and Africa (EMEI), targeting energy-intensive polyurethane materials.

The latest decision extends the surcharge across all product lines in Europe, signaling mounting cost pressures tied to energy inputs.

On the same day, Covestro AG's Shanghai unit announced a 30% price increase for polyurethane (PU) system products effective April 1. Evonik Industries said it would implement price increases of up to 20% across Asia-Pacific markets, depending on product category and production origin, including fumed silica, metal oxides, precipitated silica, rubber silanes and functional silanes, with immediate effect.

Separately, on March 19, Hungary-based BorsodChem, a subsidiary of Wanhua Chemical Group, raised MDI prices by €500 per ton, effective immediately or as contracts allow.

Germany's BASF said it would increase prices for home care, industrial cleaning and formulation products in Europe by up to 30% from March 18. The company also raised prices for neopentyl glycol (Neol®) by €350 per ton and formic acid by €250 per ton in the region. Earlier, on March 4, BASF announced global price hikes of up to 20% for antioxidants, processing aids and light stabilizers used in plastics.

LANXESS said on March 17 it would raise prices for non-contract volumes of alkylated diphenylamine (ADPA) and diphenylamine (DPA) by 50% or more with immediate effect.

Meanwhile, Dow Inc. had already announced on March 5 price increases for MDI products, raising European prices by €200 per ton and those in India, the Middle East and Africa by $300 per ton. Since December 2025, BASF, Covestro, Wanhua and Huntsman have carried out multiple rounds of MDI price hikes.

Energy shock drives cost surge

Companies cited the same underlying factor: a sharp rise in energy, raw material and logistics costs triggered by shipping disruptions in the Strait of Hormuz, a critical artery for global energy flows.

The surcharge and price increases are expected to cascade through Europe's industrial ecosystem. Huntsman's products are widely used in construction insulation, adhesives, polyurethane materials and industrial coatings, with downstream exposure spanning construction, automotive, appliances and packaging.

A €200/ton surcharge across product lines is likely to directly raise procurement costs for manufacturers, compressing margins in end-use sectors already facing weak demand. Industries such as construction and home appliances may see further demand suppression, adding to broader pressures on European manufacturing.

Market participants are also watching whether other producers will follow Huntsman's lead in applying broad-based surcharges.

Industry warns of deeper crisis

Europe's chemical sector is highly dependent on natural gas, both as a primary energy source and as a key feedstock. Price volatility directly impacts production costs.

The recent escalation of geopolitical tensions in the Middle East has disrupted global energy supply chains, pushing up natural gas prices and sharply increasing import costs. Even before the latest shock, European energy costs were estimated to be three to four times higher than in Asia and the United States, compounding challenges for a sector still recovering from the previous energy crisis.

The German Chemical Industry Association (VCI) recently issued a warning that conflict involving Iran and a potential closure of the Strait of Hormuz could severely disrupt chemical supply chains. The group flagged risks of bottlenecks in ammonia, phosphate fertilizers, helium and sulfur, noting that prolonged conflict would deepen industry distress. VCI represents more than 2,000 chemical and pharmaceutical companies in Germany, employing over 500,000 people.

In the United Kingdom, INEOS said on March 11 that energy security must take priority over net-zero targets, warning of structural weaknesses in the country's gas storage and production capacity. Unlike Germany and France, which maintain several months of gas reserves, the UK has significantly lower запас levels, leaving it more exposed to supply disruptions and price spikes.

Data show that since 2022, nearly 25 million metric tons of chemical production capacity in Europe have been shut down, sold, or are under review for closure or divestment — equivalent to about 9% of the region's 2021 total capacity. Germany has been the hardest hit, with around 7 million tons affected, followed by the Netherlands. Plant closures and bankruptcies are eroding the integrated industrial clusters that have long underpinned Europe's competitiveness.

BASF Chief Executive Martin Brudermüller said more closures, bankruptcies and restructuring are likely, adding that ongoing asset sales may only delay deeper restructuring. 'The restructuring of Europe's chemical industry is not over,' he said.

Semiconductor supply risks emerge

Beyond chemicals, concerns are mounting over potential disruptions to the semiconductor materials supply chain if the Strait of Hormuz remains blocked.

Japanese producers including JSR Corporation, Shin-Etsu Chemical and Tokyo Ohka Kogyo have warned that prolonged shipping disruptions could break raw material supply chains, leading to significant production cuts or shutdowns of advanced photoresists.

Industry data indicate that more than 90% of global ArF photoresists and nearly 100% of EUV photoresists are supplied by Japanese firms. Companies said inventories of key raw materials could last only three to six months under current conditions.

Japan relies on the Middle East for over 95% of its crude oil and naphtha imports, with 70–80% passing through the Strait of Hormuz. Naphtha reserves cover only 20–30 days, while stockpiles of high-purity materials used in photoresists are limited.

Analysts warn that a short-term disruption of one to three months could drive raw material costs up by 20–50%, extend delivery times from four weeks to as long as 16 weeks, and reduce capacity utilization. A medium-term disruption of three to six months could force widespread shutdowns of ArF and EUV production lines, sharply reducing global supply. A prolonged closure beyond six months could erode Japan's dominant market position.

Advanced chips — from Apple's A-series processors to AI chips produced by Nvidia — depend on these materials. Without them, production of cutting-edge nodes below 2 nanometers would be severely constrained.