VCI warns ‘no recovery in sight’ for German chemicals industry

Frankfurt, Germany – Germany's chemical and pharmaceutical industry remains in crisis, with "no recovery in sight," the German Chemical Industry Association (VCI) has warned.

During the first six months of 2026, production was 3% year-on-year, while sales fell 1% to €106 billion, VCI reported 16 July.

Within the chemicals sector, polymer production fell 4% year-on-year, while petrochemicals and derivatise saw an output decline of 5.5% compared to the first half of 2025.

Producer prices improved slightly, with chemicals prices up 2% year-on-year, said VCI in its first half report.

Investment in the industry, meanwhile, declined "for the third consecutive year", which the VCI described as "a clear warning signal."

"The first-half results are disappointing," said VCI president Markus Steilemann.

"A slight uptick is no reason for complacency," he said. "It is largely the result of temporary factors linked to the armed conflict in the Middle East."

"What we are seeing is a brief respite, not a turning point," Steilemann continued.

Fundamentally, however, Steilemann said he remained convinced of the industry's "enormous potential to drive the necessary transformation toward sustainability and resilience."

According to the VCI leader, companies are rebuilding inventories in response to the conflict in the Persian Gulf region to guard against potential supply disruptions.

At the same time, competitive pressure from Asia has "temporarily eased" following the closure of the Strait of Hormuz.

Against this backdrop, domestic business has "shown signs of stabilising in recent months."

Exports, Steilemann noted, "remain weak", while many plants continue to operate below capacity.

Output and sales volumes, the VCI leader warned, remain "significantly below their 2021 levels."

According to Steilemann, many companies expect business conditions to “remain challenging” in the months ahead.

“Rising costs, weak sales volumes and intense international competition continue to weigh on profitability,” he added.

The VCI said it expects production to decline 1.5% for the full year but, given the current geopolitical volatility, it refrained from issuing any further forecasts.

The association described the continued decline in capital expenditure on property, plant and equipment as "particularly alarming", noting that investment is now around 15% below its 2023 level.

According to the VCI, high energy and production costs, together with other unfavourable framework conditions in Germany, remain among the "most significant barriers to investment."

The association, therefore, called for internationally competitive corporate taxation, lower labour costs, faster permitting procedures and less bureaucracy.

Despite the continuing crisis, Steilemann said Germany retains "a strong industrial base and a strong capacity for innovation."

"Now is the time to harness these strengths once again," he concluded. "Above all, we must recognise that the cost of inaction will ultimately exceed the cost of pursuing reforms together."