EU Chemical Industry Under Global Drip. Oil Flows to EU Through Ports in Wide Stream

By Marek Grzybowski

In the first half of 2024, seaborne crude oil imports to the European Union market rose by 1.2% y/y to 238.0 million tonnes, accounting for 21.4% of global trade. The European Union is now the world’s second-largest seaborne crude oil importer, after briefly overtaking China in 2022. Seaborne crude oil imports to the European Union rose by 4.7% y/y to 472.4 million tonnes in January-December 2023, with the EU accounting for 21.9% of global seaborne crude oil imports, according to a study by Banchero Costa based on LSEG data.

Around 15% of crude oil deliveries to terminals unloaded in the EU in the period January-June 2024 were carried in VLCC tankers, around 39% in Suezmax tankers and around 44% in Aframax tankers. This is a similar structure of deliveries to previous years. In 2021, European terminals pumped imports of well over 402.5 million tonnes, while in 2022 only 388.8 million tonnes were received. By comparison, in 2019, ships docked at European terminals much more frequently, bringing 446 million tonnes of crude oil.

 

The EU is addicted to oil
2024 continues the trend from 2023, which was another positive year for the seaborne oil trade. Despite high oil prices and the risk of an economic recession, the EU chemical industry has been driving demand for crude oil. Global crude oil cargoes rose 4.7% year-on-year to 2,186.8 million tonnes in January-December 2023, excluding all cabotage trade, according to data from the maritime division of LSEG, formerly Refinitiv Maritime.

This positive trend continued in January-June 2024, when global cargoes increased by 0.8% y/y to 1,109.2 million tonnes from 1,100.2 million tonnes carried by tankers in the same period in 2023. Exports from the Persian Gulf to global markets fell by 2.3% y/y to 434.6 million tonnes in January-June 2024 and provided 39.2% of the global seaborne trade in crude oil. Exports from Russian ports (in Kazakhstan) also decreased by 0.7% y/y to 114.4 million tonnes. Oil from Russian ports accounts for 10.3% of the global market on the supply side. Exports from South America increased by 16.3% y/y to 86.6 million tonnes. Exports from ASEAN countries increased by 18.1% y/y to 65.9 million tons.

The largest importer of crude oil by sea in January-June 2024 was the PRC economy, which generated 23.1% of global oil trade on sea routes. Supplies to China increased by 2.1% y/y to 257.5 million tons in January-June 2024, compared to 252.2 million tons in H1 2023, and above 241 million tons in the same period of 2021. ASEAN countries imported 135 million tons, recording an increase in demand of 11.0% y/y. India increased its crude oil imports through ports by 0.9% y/y to 118.8 million tons in the period under review in 2024.

EU Chemical Industry on the World Map
In the European Union, demand for crude oil by sea was created by countries that cut off supplies from Russia via pipelines and maintained the activity of the chemical industry. And it should be noted that the EU is the second largest producer of chemicals in the world. Their sales reach a value of around 760 billion per year, according to data from CEFIC, the European Chemical Industry Council.

The chemical industry is also the fourth largest industry in the EU, accounting for around 7% of industrial production. This industry directly employs 1.2 million highly skilled workers and indirectly generates 3.6 million jobs. It also supports another 19 million jobs in all other supply chains in the EU. The EU chemical industry has 67% higher labor productivity than the average in the manufacturing sector – emphasizes CEFIC in the report “HE EUROPEAN CHEMICAL INDUSTRY A VITAL PART OF EUROPE’S FUTURE. FACTS & FIGURES 2023”.
The activity of the chemical industry is of great importance for seaports and European tanker operators, where the Greeks dominate. This is because the EU chemical industry is an area where we still record a large share of exports. As a result, seaports play a major role in maintaining the activity of the European chemical industry. It is important to note that around 70% of the EU27 chemical trade in 2022 is carried out with 10 overseas countries. After the pandemic and the Russian attack on Ukraine, there was significant turmoil in the trade of chemical products.

In 2023, with a decrease of 10.6%, the EU27 chemical industry recorded the third largest decrease in production (January-September). Capacity utilisation in the EU27 chemical industry fell once again to 74.1% in the third quarter of 2023, CEFIC warned, emphasising that “This comes at a time when the EU chemical industry must undergo the biggest transformation in the history of the industry to become climate neutral, recyclable and computerised” while ensuring “at the same time a transition to safe and sustainable chemicals, all by 2050”.

Gdańsk in the lead

All these factors mean that the role of ports and maritime transport in maintaining the potential of the European chemical industry and its transformation will grow. This is only visible in the share of ports in the transfer of crude oil. The largest transshipments in EU crude oil terminals in the period January-June 2024 were recorded in Rotterdam (49.5 million tons), Trieste (18.9 million tons), Gdańsk (17.6 million tons) and Wilhelmshaven (10.3 million tons) – as calculated by analysts from Banchero Costa Research. Below 10 million tonnes were received in the ports of: Fos (9.7 million tonnes), Le Havre (9.2 million tonnes), Cartagena (6.8 million tonnes), Sarroch (6.3 million tonnes), Algeciras (5.4 million tonnes), Augusta (5.2 million tonnes), Tarragona (5.2 million tonnes), Sines (5.2 million tonnes), Bilbao (5.0 million tonnes).
Supply markets continue to change. This reflects the economic consequences of political decisions and the embargo on Russian crude oil. Seaborne imports from Russian ports (including non-Russian crude oil, such as Kazakh oil) decreased again by 7% y/y in January-June 2024 to 31 million tonnes. This is half of the supplies compared to the 59 million tons imported by EU countries in January-June 2022.
Novorossiysk is the largest port from which imported Russian and Kazakh oil arrives by sea. From this EU port, 27.6 million tons of oil were delivered by tankers in H1 2024. Russian ports have now fallen to fourth place in terms of the volume of oil supplies by sea to the EU. This direction accounted for 13.0% of volumes in January-June 2024.
Kazakhstan exported over 70 million tons of oil in 2023, recording a 10% increase compared to 2022. The country’s revenue amounted to $42.3 billion, down 10% year-on-year. The largest buyers are the European Union countries, China, Korea, Turkey and Singapore – reports Almaz Kumenov from Euroasia.net.
Oil producers from North Africa (including Sidi Kerir) provide the EU with 19.3% of oil supplies from ports on the North Sea. The EU imports 18.6%, and from the USA with 15.7%. Imports from North Africa (including Sidi Kerir) increased by 9.6% y/y to 46 million tons in the period January-June 2024. Supplies from the North Sea (Norway and the UK) decreased by 0.6% y/y to 44.3 million tons. Imports from the USA increased by 17.7% y/y to 37.4 million tons. The half-year record was broken once again.
Shipments from West Africa to Europe fell 1.0% YoY to 25.7 million tonnes in January-June 2024. Direct shipments from the Gulf fell a massive 15.2% YoY to 17.1 million tonnes. Volumes from Turkey (Ceyhan) fell a record 31.2% YoY to 9.1 million tonnes from 13.2 million tonnes in January-June 2023.

In January 2023, the European Commission published the Chemical Industry Transformation Pathway. This plan assumes maintaining the potential of the European chemical industry, in which Poland also intends to participate, for example by planning to launch the production of wind turbine blades or building factories for offshore wind farm components. The beneficiary of the development of the European chemical industry is also the Polish yacht and boat industry.
The plan published by the European Commission was created in cooperation with the governments of the EU Member States, representatives of the chemical industry, non-governmental organizations and other interested entities, including universities and research institutes.
The EC study states that “The developed transformation path identifies around 190 actions necessary to achieve the green and digital transformation of the EU chemical industry and improve its resilience, in line with the goals set out in the updated EU industrial strategy”. On this basis, it can be assumed that crude oil will flow to the EU in a wide stream for a long time, as it did in 2023 and the first half of 2024.