European chemical and heavy industrial capacity isn’t closing gradually — it’s closing at a pace industry trackers describe as unprecedented. Cefic’s Closures Radar counts 37 million tonnes of European chemical capacity shut down between 2022 and 2025 — roughly 9% of the entire European chemical base, at six times the historical closure rate.
This isn’t a cyclical dip. It’s a structural repricing of where industrial production makes economic sense, and it’s worth understanding precisely, because the same forces that are closing plants in Germany are opening opportunities elsewhere.
The Math Behind European Industrial Capacity Closures
The driver is almost entirely energy cost, not demand or competitiveness in any broader sense. European chemical producers pay roughly three times US energy costs and roughly double Chinese energy costs. In the second half of 2025, Germany paid above €0.22/kWh for industrial electricity against an EU average of €0.18 — 25% more than France pays, and the gap is widening. On the gas side, the spread between European (TTF) and US (Henry Hub) benchmark prices sits at three to four times, a structural gap tied to the physics of LNG shipping, not a temporary market anomaly.
BASF’s Ludwigshafen site is the clearest single case. Between 2023 and 2025, BASF shut down ammonia, caprolactam, and adipic acid production lines at its largest global site — while committing roughly €10 billion to a new production complex in Zhanjiang, China. The ammonia line closure is worth pausing on: it’s the exact category of high-pressure, valve-intensive process infrastructure covered in an earlier post on nitrogen fertilizer production. When a plant like that closes in Germany, the underlying demand for ammonia and its derivatives doesn’t disappear — production, and the equipment decisions that go with it, relocates to wherever the energy math works.
Where the math works
Global energy reserves are heavily concentrated. The top five countries hold close to 63% of the world’s proven oil reserves; just three countries — Russia, Iran, and Qatar — hold more than half of proven natural gas reserves, according to the Energy Institute’s 2025 Statistical Review. That concentration is simply geology, not strategy, but it does mean that industrial capacity has a strong long-term incentive to move closer to where energy is abundant and cheap, rather than paying to ship both energy and raw materials to where the factories have traditionally been.
The Balkan angle most manufacturers overlook
Not every advantaged location is a hydrocarbon giant. Serbia currently operates about 3,018 MW of hydropower capacity, with an estimated 17,600 GWh of undeveloped potential concentrated on the Drina and Danube rivers. Bosnia and Herzegovina’s hydropower potential is even larger in relative terms — over 24,000 MW technically available, with only around 2,200 MW (roughly 9%) currently developed, one of the largest untapped hydro resources left in Europe.
This isn’t theoretical. The Buk Bijela hydropower plant is currently under construction on the Drina in Bosnia, and a 600 MW pumped-storage project on the same river basin in Republic of Srpska has already signed a power purchase agreement with EU member-state buyers — concrete evidence that European demand is already reaching into this river basin for reliable, low-cost power, years before most industrial planners have it on their map.
For a region with an existing industrial and metalworking tradition, EU-adjacent logistics, and a growing, underused energy base, that combination is exactly the kind of quiet opportunity covered in an earlier post on why large incumbents tend to arrive late.
What this means for component sourcing
As production capacity relocates toward regions with a genuine energy cost advantage, the manufacturing and component supply chains that serve it need to relocate with it, or at least extend into reach of it.
A foundry or machining partner based in a region with cheap, secure power and existing industrial capacity isn’t just a cost play — increasingly, it’s simply where the plants themselves are heading. Building those supplier relationships before the shift is complete, rather than after, is the same quiet-market logic this blog keeps returning to.
That is the space AvraFlow operates in—connecting Western industrial needs with the physical realities of the new energy landscape.
Mile Avramović, founder, AvraFlow
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