VCI warns outlook clouded by Iran conflict as German chemical output declines

Frankfurt, Germany — Germany’s chemical and pharmaceutical industry remained under pressure in the fourth quarter of 2025, with declining output, sales and prices in the chemical sector offset only partly by growth in pharmaceuticals.

In a 13 March statement, the German chemicals association (VCI) said the overall situation “remains tense,” with the sector continuing to face weak industrial demand, high import pressure and intense price competition.

While total production rose 0.9% year-on-year in the fourth quarter, driven by pharmaceuticals, chemical output declined 2.9% year-on-year and remained at a “very low level,” the VCI said.

Capacity utilisation in chemical plants averaged 72.5% in 2025.

For the year as a whole, industry production declined by 0.5% reflecting a 3.3% year-on-year decrease in chemicals, offset by a 4.5% growth in pharmaceuticals.

Producer prices in the fourth quarter were broadly flat and 0.6% lower year-on-year, with ‘continued declines’ in chemical prices due in part to rising import pressure.

Meanwhile, cost burdens remained high compared to international competitors, VCI noted.

Fourth-quarter sales came in at €51.8 billion, down 2.8% year-on-year.

Domestic sales declined 2.3% to €18.9 billion, while exports recovered slightly sequentially to €32.9 billion but remained 2.7% below the prior-year level.

For full-year 2025, combined chemical and pharmaceutical sales fell 1.4% to €220 billion, with chemical sales down 3.8% and pharmaceuticals up 5.5%, the VCI said.

Despite some support from pharmaceuticals and 'isolated large orders' at year-end, the association said “a turnaround is not in sight.” 

“The annual balance of the chemical industry is abysmal – production, sales and prices are all in the red,” said VCI director general Wolfgang Grosse Entrup.

Pharma, he said, is “a bright spot” with solid growth, noting that “2026 will not be any easier.”

“High prices and persistent uncertainty are pushing many companies to their limits,” said the VCI chief, adding that companies are increasingly operating on a short-term basis rather than long-term planning.

On the outlook for 2026, VCI said the war with Iran is “causing great uncertainty,” adding that the industry’s development “cannot currently be reliably forecast.”

The association warned that geopolitical tensions, including disruption to shipping routes through the Strait of Hormuz, are creating risks beyond energy market.

There are, Grosse Entrup said, raising concerns about supply shortages of key raw materials such as ammonia, phosphates, helium and sulphur, as well as early signs of supply chain disruption.