By Rhod Mackenzie
The German chemical industry association VCI believes that the situation in the German chemical industry, one of the flagships of Europe's first economy, is worse than its economists predicted in the latest forecast,
The VCI President Markus Steilemann, who also heads Covestro, listed the main, in his opinion, the problems of the German chemical industry. These are high energy and electricity prices, an aging infrastructure, a shortage of skilled workers, slow digitalization, and a powerful bureaucracy. All of this, and a host of other problems, “take away confidence from our industrialists,” he explains.
The association which unites approx. 1900 chemical enterprises and companies believe that by the end of 2023, the production of the sector, including the pharmaceutical industry, will decrease by 8%. In the previous forecast, it was expected that the German chemical industry was predicted to decline by 5%.
Sales in the third sector of the German economy, according to the new forecast, will decrease this year by 14%, which is twice the previous forecast.
In the first half of the year, the decline in production of the chemical industry, including pharmaceuticals, amounted to 10.5%, and sales - 11.5%. At the same time, producer prices increased by 5%.
By the way, in the last couple of months, in most cases, dozens of chemical companies, including the industry leader, BASF, changed their forecasts for the worse.
The chemical industry is particularly dependent on energy and energy prices. In the case of Germany, this axiom is further strengthened by the very high dependence on energy carriers of the entire German industry, which has “risen” in the last couple of decades on the availability of cheap Russian oil and gas. Demand is falling, it has collapsed the number of new orders sharply.
The slow and inconclusive recovery of the Chinese economy, which accounts for more than 40% of all demand in the chemical markets, as well as increased competition from Chinese competitors, increase pressure on the world's second largest economy.
The VCI warned this week that the European chemical industry is facing a "perfect storm" with an 8% decline in production.
Against the backdrop of growing problems, the German chemical industry is moving its production to the US and China, where it can maintain its competitiveness due to cheaper energy.
By the way, the chemical industry in Germany is considered a kind of litmus test of all European economy, because its products are used in a very wide range of sectors from the automotive industry and construction to agricultural products and products, say, the textile industry.