German chemicals makers issue energy price-break plea

Frankfurt, Germany – The German chemical industry association VCI has warned of “more dark months” ahead as the chemical-pharmaceutical segment continues to be “heavily confronted” by the ongoing energy crisis.

Production in Germany's third-largest industrial sector fell 4.2% year-on-year during third quarter, as “almost all divisions” were affected, said a VCI report 15 Nov.

At 79.3%, capacity utilisation during the three months to September fell “well below normal”, reported the association.

Furthermore, margins were affected as it became “increasingly difficult” for companies to pass on the sharp rise in energy costs in the value chain.

“Despite enormously rising energy costs, producer prices rose by only 2.6% in the third quarter,” said VCI, noting that compared to last year, chemicals were 23.7% more expensive.

Severe production cutbacks, lower price increases and weakening demand also resulted in a decline in sales.

Total sales in the chemical and pharmaceutical industry fell by 1.6% to a total of €63.1 billion, marking the first quarterly decline in two years.

In particular, VCI said, domestic sales fell sharply, as the weakening global economy and weak industrial activity in Germany led to a drop in demand.

For the whole year, the association said it continued to expect an overall 5.5% decline in production, reflecting an 8.5% cut in chemicals output excluding pharmaceutical.

“The chemical industry faces more dark months,” said VCI president Markus Steilemann.

“Many companies are already in an extremely dramatic situation with their production in Germany, mainly because of the massive increase in energy costs,” he said.

According to Steilemann, medium-sized companies in particular have considerable problems concluding new or follow-up contracts, as their supply contracts for electricity or gas are expiring.

And with the onset of winter and falling gas storage levels, the Covestro CEO said the situation will not improve.

Therefore, Steilmann called for “energy price brakes” that act quickly and unbureaucratically, to stop the situation from worsening.