Wilton International, Teeside, Aerial View
SABIC's Teesside Closure: A Strategic Retreat Amid Europe's Industrial Decline
Saudi Basic Industries Corporation (SABIC) has confirmed the permanent shutdown of its Olefins 6 ethylene cracker at Wilton International, Teesside, ending 46 years of operations and placing approximately 300 jobs at risk. The decision, communicated to employees on June 25, 2025, follows a months-long pause on a £200 million conversion project to shift the plant to gas feedstocks. This move underscores a calculated corporate realignment driven by structural economic pressures rather than isolated financial struggles.
Vetted Motives: Beyond Profitability
- Energy Cost Crisis — SABIC’s closure directly results from Europe’s unsustainable energy economics. UK natural gas prices remain 3–5 times higher than U.S. and Middle Eastern benchmarks, eroding the plant’s competitiveness. Internal sources cited Britain’s "crippling energy prices" as a primary factor, compounded by insufficient government support for energy-intensive industries. The paused conversion—intended to modernize operations—became economically unviable amid these conditions.
- Policy and Regulatory Pressures — The UK’s carbon taxation regime added approximately £50 per ton of CO₂ emissions, disproportionately impacting cracker operations. Tees Valley Mayor Ben Houchen condemned the closure as "another symptom of national policy failure," noting the chemicals sector’s absence from the government’s newly unveiled Industrial Strategy. This regulatory burden, coupled with perceived governmental indifference, accelerated SABIC’s exit calculus.
- Global Market Realignment — SABIC’s retreat reflects a deliberate pivot away from high-cost regions. CEO Abdulrahman al-Fageeh explicitly linked the Teesside closure to a broader "rationalization of [SABIC’s] footprint in Europe," including options for "partial or full exit". The company recently shuttered its Geleen cracker in the Netherlands and is marketing €3 billion in European assets through Lazard and Goldman Sachs. These moves prioritize investment in integrated hubs in Saudi Arabia, Asia, and the U.S., where feedstock and energy advantages bolster margins.
Profitability Paradox and Strategic Reality
While Unite union criticized SABIC’s "disgraceful" closure amid £300 million in 2024 net profits, regional financial data reveals a stark contrast:
- SABIC’s European operations bled SAR 1.89 billion ($504 million) in Q4 2024 alone.
- Profits derived overwhelmingly from Middle Eastern and Asian assets, not European facilities.
- The Teesside plant—idle since 2020—represented stranded capital in a region where ethylene overcapacity and import competition suppressed margins.
Industry Implications
The shutdown intensifies Europe’s ethylene deficit, forcing derivative units like SABIC’s adjacent System 18 LDPE plant to rely on imported feedstocks. It also signals sector-wide vulnerability: BASF, Dow, and LyondellBasell face similar portfolio reviews amid what SABIC termed "sustained pressure on capacity utilization rates". Without intervention on energy costs and carbon leakage protections, Europe risks losing 20–30% of its ethylene capacity by 2030.
Stakeholder Responses
- Unite Union: Demanded government intervention, noting limited alternative employment for skilled workers.
- Tees Valley Mayor Ben Houchen: Urged "urgent intervention" to protect industrial jobs and supply chains.
- UK Government: Faced criticism for excluding chemicals from its Industrial Strategy days before the closure.
Conclusion
SABIC’s Teesside exit is not an anomaly but a bellwether for European heavy industry. The shuttered cracker epitomizes a structural shift: capital is fleeing high-cost, policy-constrained regions for competitive hubs. As SABIC’s al-Fageeh asserted, this closure aligns with "strategic portfolio optimization"—a euphemism for Europe’s industrial decline. Without coherent energy and industrial policies, such retreats will accelerate, eroding the continent’s manufacturing base irreversibly.
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