German chemicals association: Industry past its rock bottom, but export-driven model might be over

4 months ago 27

Germany’s chemical industry has overcome its low point, but the previous model of exporting basic chemicals has ended, the sector’s umbrella association VCI said on Monday (8 July).

The group, representing industrial giants such as BASF, Bayer and Fresenius, expects chemical and pharma industry production to climb 3,5% this year and sales to gain 1.5%.

This comes after two years of faltering production – with an aggregate 15% slide between 2021 and 2023.

However, production was still 11% below the “pre-crisis level”, said VCI president Markus Steilemann while presenting the sector’s half-year results in Berlin on Monday, referring to the energy crisis that was triggered by the full-scale invasion of Russia in Ukraine in February 2022.

The recovery was particularly strong in the production of inorganic basic chemicals – such as hydrogen, chlorine and sulphuric acid, which saw a year-on-year increase of 12% in the first six months of 2024.

Similarly, the production of petrochemicals – i.e. chemicals based on oil and gas – saw an increase of 8.5%.

“Energy prices are back at a more tolerable level,” said Steilemann, “and at the same,ame time it has to be said that we still do not have competitive industrial prices for the basic chemicals industry in Germany due to the overall international energy price situation,” he added.

The combination of relatively high electricity prices and high prices for oil and gas derivates, needed as feedstock for some products, “continues to put products manufactured in Germany at a competitive disadvantage,” he said.

In terms of exports, therefore, many basic chemicals produced in Germany are “no longer competitive,” he said.

Hundreds of closures

Steilemann said he believed that “what Germany actually did very successfully in the chemicals sector for many decades up to 2016/2017 – the basic chemicals export model – has come to the end of its life for Germany”.

In 2023, Germany’s biggest chemical company, BASF, made headlines by closing one of its ammonia production sites in Ludwigshafen. The site, which is currently for sale, is only one of numerous examples.

“To our knowledge, around 300 companies in the chemical industry actually ceased operations last year,” Steilemann said, noting,g however, that this would also include small firms such as laboratories.

Nevertheless, he said, “Those who recklessly assumed that production would return 1:1 after the energy crisis were wrong.”

“Unfortunately, for many companies, what’s gone is gone.”

Shift away from prescriptive regulation?

From the next European Commission, Steilemann joined the ranks of many stakeholders calling for the Green Deal to be complemented by an Industrial Deal.

“We need to put a business plan behind this transformation because, so far, it has led to more rules, more regulation – very fine-grained regulation,” he said.

He said the chemical industry alone was affected by 43 laws adopted over the last legislative term. He said this would lead to up to 600 additional regulations, such as implementing acts or national implementation, parts of which are still outstanding.

“In this respect, no matter what approach the new Commission takes, we will initially see a knock-on effect from the legislation of the last Commission,” he said.

[Edited by Anna Brunetti/Alice Taylor]