German chemicals makers braced for tough year ahead

Frankfurt, Germany – The German chemicals industry association (VCI) expects to see a continuing decline in industrial production along with rising imports pressure in Germany during 2023.

At a 15 Dec annual press conference, VCI president Markus Steilmann said uncertainty remained high for the industry, with the energy crisis forcing the German and European economies into recession.

The Covestro CEO went on to list the challenges facing German chemicals producers as including: lack of orders, disrupted supply-chains and high energy costs.

Citing a recent survey, VCI said the jump in energy and raw material costs led to a 22% increase in the prices of chemical products.

Costs, however, rose faster than selling prices, said VCI, noting that profits are now falling at around 80% of the companies.

“Every fourth company is already making losses. Medium-sized companies in particular are affected,” it added.

Two-thirds of the survey participants were troubled by lack of orders in November.

Furthermore, in order to avoid major losses and to save energy, as many as 40% of respondents said they had already reduced production or intend to do so in the near future.

Some participants had relocated to foreign locations, and one in five companies also had to turn down orders because of the energy crisis.

Additionally, the industry is facing a shortage of individual basic materials, due mainly to a 10% reduction in production of chemicals, according to Steilemann.

Taking in a positive contribution of 3% year-on-year by the pharmaceutical industry, the overall decline in production stands at 6%, he added.

According to VCI, half of the survey participants reported raw material delivery problems in November.

Among other things, there is a lack of pigments, carbon and glass fibres, hydrochloric acid, caustic soda, technical CO?, organic silicone compounds or iron chloride.

Overall, during 2022, the industry’s revenue came in 17.5% higher than in 2021 at €266.5 billion.

However, VCI said the increase in sales was “solely price-driven” as volumes were lower than prior-year levels.

The petrochemicals business was hit particularly hard, recording a 15.5% drop in production for the year as a whole.

Manufacturers of inorganic base materials, polymers and speciality chemicals reported a nearly 10% decline in production.