Industry in the European Union

Main article: Economy of the European Union

2024

Eurozone industry degradation to 2007 level

The industrial production index in September 2024 in the Eurozone countries fell to a minimum since mid-2017 - the same level is comparable to the beginning of 2007, i.e. for 17 years, prolonged stagnation with a downward trajectory.

Over the past year, there have been significant changes in the trends and structure of European industry.

If in 2022-2023 there was a tendency to replace low-margin and/or energy-intensive production with high-tech and/or knowledge-intensive production, almost everything is reduced from 2024.

The most fair comparison will be from 2019, because in 2020-2021 the factors of forced lockdowns intervened, and from 2022 the energy crisis and a large-scale and very volatile transformation of the European industry began.

Of the growing industries in Europe (YeS-27) over 5 years (9 months 2024 to 9 months 2023), we can single out:

• Pharmaceutical industry: 55% growth over 5 years, but a 0.9% YoY decline;

• Computer and microelectronics manufacturing: 22.7% growth, but 7.5% YoY collapse;

• Production of tobacco products: + 11.4% and + 4.7% yoy, respectively;

• Food: + 3.5% and + 2.3%;

• Aerospace production and other types of equipment and transport (including military-industrial complex products): growth by 3% and + 4.8%;

• Production of electrical equipment and components: + 2% and collapse by 9.8% YoY.

In the reduction phase, the list is much wider:

• Everything related to textiles, the production of clothes and shoes decreases by 15-28% over 5 years, and this, unlike the United States, is a very important industry, historically so happened.

• Steel production decreased by 13.5% over 5 years and -2.2% YoY;

• Automotive production (the most important segment of industry in Europe): a significant decrease of 12.4% and -7.3% YoY;

• Production of primary construction materials from mineral raw materials: a decrease of 11.4% over 5 years and -4.9% YoY;

• Furniture and fittings production: -10.6% and -4.2%, respectively;

• Chemical production (very capacious and significant in Europe): a decrease of 9.5%, but + 2.5% g/g;

• Refining: -7.6% and + 0.8%.

In the last year, what has fallen very much in 2022-2023 amid the energy crisis is growing: chemistry and oil refining, so this is just a low base effect.

Withdrawal of energy-intensive and low-cost production from the European circuit

As part of deindustrialization, especially in the segment of the energy-intensive segment, the development of the service sector and the digital economy, the weight and importance of industry is decreasing. However, in countries, YeS-27 industry forms at least 1/5 of the economy in a direct way.

It should be borne in mind that through a complex combination of intersectoral ties, the importance of industry is always higher, since a significant segment of the service sector is directly or indirectly dependent on the industrial sector (transport, warehouse and logistics, IT and telecom, financial, consulting and legal services, R&D, marketing, security, etc.).

The structural restructuring of European industry with different intensities has been going on since 2009, accelerated after the COVID-19 pandemic and a sharp acceleration in restructuring after the 2022 energy crisis caused by the severance of ties with Russia.

The essence lies in the consistent withdrawal of energy-intensive and low-cost production from the European circuit to the periphery with a low labor cost and/or low energy cost, and in Europe there remains a predominantly knowledge-intensive production with high added value and/or high integration/cross-industry connectivity.

For example, the aircraft industry is a knowledge-intensive production of high redistributions with high integration connectivity, since it closes many sectors of the economy, that is, it means a deep interconnectedness of various components and processes within the production system.

• With mining, everything is bad, but this segment is not decisive in Europe.

• The level of production in electricity and utilities is at its lowest since 1999 and is about 15-18% lower than in 2007.

• The protected industry (food and beverage production) has not been affected and is in the region of historical high.

• Textiles, clothes, shoes in a tough downtrend, updating historical lows.

• Woodworking and publishing are very bad with no signs of activity.

• Chemical production after the collapse by 20% in 2022-2023 began to revive as gas and electricity prices stabilized, but metallurgy continues to decline.

• The knowledge-intensive segment is much better than the products of low and medium-sized redistributions, but since June 2023 there has been a steadily downward trend in the production of electrical equipment and mechanical engineering, which is associated with a drop in demand for products of means of production.

• Automaking has begun to decline for the past 6 months after strong growth in 2022-2023.

• In a good plus so far, pharma, microelectronics and other transport production (mainly the aviation industry).

2023: Europe's petrochemical industry on "deathbed" due to conflict with Russia

The last time European petrochemical plants processed so little of their favorite raw materials was when the Swedish group ABBA was the most popular on the continent, and the "Fall of Saigon" marked the end of the war in. Vietnam It was 1975 and the region was still licking its wounds after the first oil crisis. After almost half a century, the industry is dying.

Producers of the region import components for plastic production from abroad, since energy prices after refusing to supply from Russia make domestic production too expensive.

2022

Industrial production in the EU is growing, despite the strongest energy crisis in 50 years

Which industries suffered the most damage in a year?

As of December 2022, the chemical industry took on the whole blow - a fall of almost 15% per year (the strongest crisis in 30 years), the Spydell Finance channel noted. But the chemicals industry includes six major segments.

• The production of basic chemicals, fertilizers and nitrogen compounds, plastics and synthetic rubber in primary forms is the main blow here with a collapse of 26%, which is comparable to the 2009 crisis in terms of the sharpness of the reduction. The current level of the index is on track to break through the lowest in the last 30 years. This segment predominantly includes lower end products such as industrial gases (methane, propane, butane), fertilizers, sulfuric acid, hydrochloric acid and dozens of other chemicals, untreated plastic and rubber, i.e. the most basic materials.

• The production of pesticides and other agrochemical products has not changed in a year, however, production over the past 12 months has updated the historical maximum. This is a broader category that includes all types of agricultural fertilizers of a higher level of redistribution than nitrogen, phosphate or potash fertilizers from the first group.

• The production of paints, varnishes and similar coatings, printing ink and mastics - there is a decrease of 6% y/y, but the annual production corresponds to 2016-2019. Nothing critical, the energy crisis did not directly affect this segment.

• The production of soap and detergents, cleaning and polishing products, cosmetics and perfumes - an increase of 2.6% YoY and an update of the historical maximum of annual production. This is the most capacious, capitalized and marginal group.

• The production of other chemical products is reduced by 1.5%, and the annual production of 3-4% of its maximum is no impact of the energy crisis.

• The production of artificial fibers is reduced by 2% and stagnates in annual production. The trend of production compression over the past 20 years, there are no obvious distortions from 2021.

Thus, there is damage, but localized in the narrow segment of low-margin production of lower redistributions, the Spydell Finance channel noted.

The metallurgical industry is down 6.4%, iron ore production is down 12.6%, oil and gas production is down 7.6%. Production of other non-metallic mineral products - minus 4.4%. However, oil and gas services - plus 15%!

The production of paper and paper products is reduced by 6.8% y/y, a serious drop of 5% in the production of wood and wood products, with the exception of furniture, problems in the production of rubber and rubber products - a drop of 3.7%. Textiles and clothes are bad.

If everything falls, why growth? Production has shifted strongly into a knowledge-intensive and capital-intensive segment. The pharma industry is growing at a fantastic rate of 33% (the same has never happened), the production of computers and related electronics is growing by 18%.

The production of vehicles, trailers and semi-trailers is a sharp increase of 12%. Other transport equipment - plus 8.3%, electrical equipment - plus 9.6%, mechanical engineering for commercial and industrial purposes - plus 5.8%.

The defense order significantly supports the European and American economies.

As a result, the economy of high redistributions is growing as never before, and low-margin production is declining.

According to preliminary calculations, the affected segments occupy about 15% in the structure of European production. Yes, they are reduced by 20-30%, but since their share is relatively low, and the industry is shifted towards knowledge-intensive, the resulting effect is limited than in the mono-economy.

At the same time, unprecedented amounts of state assistance cannot be written off.

It should also be understood that the degradation of basic sectors of the economy may have a delayed effect, i.e. the production of medium and high redistributions is highly likely to have a negative impact in 2023 due to problems with primary production.

The localization of the energy crisis does not cancel the structural problems of the European economy: the debt crisis, which will fully manifest itself in 2023, demography, degradation of the labor force, a decrease in the pace of technological progress, limited transfer within income clusters of the population, deglobalization, trade wars and protectionism, political deformation and a lot of other problems.

The closure of fertilizer, gas chemistry and metallurgy enterprises due to attempts to put pressure on Russia and rising energy prices

In 2022, Europeans had to reduce gas consumption by 40-50 billion cubic meters. m of gas due to the closure of enterprises for the production of fertilizers, gas chemistry, metallurgy and "this is just the beginning," said at the end of December 2022, Deputy Prime Minister of the Russian Government Alexander Novak.

Dependence on China for procurement of raw materials

European Commission head Ursula von der Leyen, September 2022: "Of the 30 most important raw materials, 10 come mainly from China. The PRC essentially controls the global manufacturing industry. Nearly 90% of rare earths and 60% of lithium are processed in China. We should not fall into the same trap and addiction as with oil and gas. "

Reduction and shutdown of steel plants production due to rise in electricity prices after pressure on Russia

Since August 2022, European steel plants have been stopping production due to rising electricity prices amid sanctions imposed on Russia over the conflict in Ukraine.

2021: Per capita cheese production in European countries

2019