Chemical sector in Germany anticipates no shift in current trajectory by 2025
The German chemical and pharmaceutical industry, a significant contributor to the country's economy, is grappling with a series of challenges in the current economic climate. According to Markus Steilemann, President of the Association of the Chemical Industry (VCI), the ongoing trade dispute with the US, fueled by protectionist policies, is a significant burden for the industry.
Production in the chemical industry saw a 1% decline, while the pharmaceutical sector managed a 2% increase in the first half of the year. This marks a 20% drop in chemistry production compared to the pre-crisis year of 2018. Around 40% of member companies in the chemical industry are currently experiencing a lack of orders, a concerning trend for the industry's growth prospects.
The economic downturn and rising energy prices have been affecting energy-intensive chemistry for some time, with companies like BASF and Evonik announcing large savings programs and job cuts. The VCI confirms its forecast for the year, stating that production will stagnate and sales will decrease slightly by one percent.
However, the industry is not entirely pessimistic. The pharmaceutical sector benefited from strong business in the first half of the year, partly due to customers stockpiling medicines in anticipation of US tariffs. The VCI also reported that the industry has managed to stop the rapid decline of recent years but has not yet experienced a strong recovery.
Steilemann believes there is a change in thinking in Berlin and Brussels, with competitiveness, resilience, and bureaucracy reduction being prioritized. He called for an industrial electricity price and a reduction in bureaucracy, which costs the German economy 146 billion euros annually, according to the Ifo Institute.
Looking ahead, the industry is optimistic about its growth prospects. The fine chemicals segment, dietary supplements market, and pharmaceutical chemicals market are all projected to expand significantly in the coming years, driven by strong demand and a focus on sustainable and bio-based chemicals, increased health consciousness, and robust demand for pharmaceuticals.
Despite the challenges, the German chemical and pharmaceutical industry remains a vital part of the country's economy, with the number of employees in the sector remaining stable at around 480,000, despite plant closures by companies like BASF. The new German government has taken some important first steps, according to Steilemann, and there is no sign of a trend reversal by 2025 for the industry.
The ongoing trade dispute with the US and protectionist policies are impacting the economic and social policy surrounding the German chemical and industry, specifically finance, due to the burden they pose for the industry. Despite the 20% drop in chemistry production in comparison to the pre-crisis year of 2018, the pharmaceutical sector, while benefiting from stockpiling of medicines, is expected to show significant expansion in the coming years, driven by factors such as demand for sustainable and bio-based chemicals, increased health consciousness, and robust demand for pharmaceuticals.
