The chemical sector demonstrates minimal signs of progression.
The downside for German chemical businesses is glaringly apparent as they reflect on a dismal business year, with high expenses, low demand, and unprofitable manufacturing capacities. Regrettably, the situation appears to have hit rock bottom, albeit the long-term slide from the industry's perspective has legacy implications.
According to VCI, orders and sales are projected to stay flat in 2025, and production growth is merely anticipated to be 0.5%. VCI President Markus Steilemann expressed the overwhelming pessimism among the industry's companies, revealing little optimism for a swift upturn in the economic condition. Over half of the companies anticipate a decline in their financial standing, according to a VCI member survey. As Steilemann put it, "the financial report is disappointing, and the future is uncertain."
The original forecast for the current year remains unaltered: the sector's revenue is projected to decrease by 2%, while producer prices are expected to drop by 2.5%. Although a 2% upsurge in production is predicted for the chemical-pharmaceutical industry following a positive start to the year, it falls short of the industry's aspirations after a promising beginning. Since 2018, production has dropped by a total of 16%. The Corona pandemic, which led to a near halt in daily life throughout many parts of the world, was also part of this timeframe.
"It's not a very optimistic outlook," Steilemann conceded. "The only silver lining is that the drastic decline of the past two years did not escalate further." Nonetheless, the industry persists in grappling with a scarcity of orders, with manufacturing facilities only operating at an average of 75% of their capacity in 2024. This is significantly short of the minimum level necessary for profitable operation for the fourth successive year. Companies have already shut down certain plants permanently, and further closures are imminent. "In essence, anything that's gone, is gone," Steilemann reflected. However, while investments in Germany are dwindling, nearly half of the VCI members are expanding their foreign investments.
As a significant player within Germany's industrial sector, the chemical industry ranks third after the automotive and mechanical engineering industries. The sector is plagued by still relatively high energy prices, high raw material costs, and unfavorable economic conditions. For quite some time, the VCI has been harping on the unfavorable business climate in Germany and is particularly advocating for reduced bureaucracy and a competitive industrial electricity price on an international level.
"The primary challenge we face is unreasonably high production costs relative to international competitors," Steilemann explained. "The most problematic aspect is the rapidly accumulating bureaucracy jungle. We need regulatory intervention to slash excessive bureaucracy, speed up protracted approval procedures, and curtail minor and inconsistent regulations."
Despite the chemical industry's third-larger presence in Germany's industrial sector, the industry is grappling with high production costs due to factors such as high energy prices and raw material costs. The VCI President, Markus Steilemann, highlighted that the chemical industry is facing a substantial challenge with unreasonably high production costs compared to international competitors, attributing this issue to excessive bureaucracy and prolonged approval procedures. The chemical industry, currently experiencing a dismal business year with high expenses and low demand, is also looking towards reducing bureaucracy and advocating for a competitive industrial electricity price on an international level to improve its financial standing.
