The half-year results for the German chemical-pharmaceutical industry are disappointing. Hopes that a recovery would set in after a mild winter and significantly lower gas and electricity prices have not been fulfilled. On the contrary: "Demand for chemicals is declining. The figures for the first half of the year are red and production costs in Germany are not competitive," Markus Steilemann, President of the German Chemical Industry Association, commented on the current situation. The VCI is therefore correcting its forecast for the year downward. Production in the first six months of the year was 10.5% lower than a year earlier. If the pharmaceuticals business is excluded, the drop in production was as much as 16.5%. At an average of 77%, capacity was underutilized. Although pharmaceutical production remained stable year-on-year, there are already clear signs of a slowdown. The basic materials divisions continued to show double-digit declines. Production of inorganic basic materials was around 26% lower than a year earlier. Petrochemicals (-21%) and polymers (-19%) were also down sharply. While production of consumer-related chemicals and hygiene and surface protection products was sharply curtailed (-12%), the decline in the production of fine and specialty chemicals was comparatively low at -6%. Order intake in the chemical-pharmaceutical industry has been falling almost continuously for over a year, order backlogs melted away and industry sales fell sharply both in Germany and abroad. At 114 billion euros, sales in the chemical-pharmaceutical industry in the first half of the year fell 11.5% short of the previous year's level. Domestic sales fell by 15.5%. Foreign business also fell sharply by -8.5%. The decline in sales in the first half of the year is accompanied by the continued difficult earnings situation of the companies. According to a survey of members, almost two thirds of companies are reporting declines in profits or even losses. High price pressure has contributed to the poor earnings situation. This is because chemical prices came under pressure despite persistently high production costs. Overall, however, they were still 5% higher in the first half of the year than a year earlier. In view of the weak industrial economy, the VCI is forecasting an 8% decline in production for 2023 as a whole. Excluding the pharmaceuticals business, chemical production is expected to fall by 11%. With prices declining overall, industry sales are expected to fall by 14%. Exports (-12%) will hardly fare better than domestic sales (-17%).
The challenges facing companies are considerable. However, the economic downturn is not the biggest problem. The structural deficits of Germany as a business location are also a cause for concern, according to the latest member survey. "Faith in Germany as a business location is waning. We are not notorious doomsayers. But this lump of high energy prices and corporate taxes, poor infrastructure, shortage of skilled workers, digitalization backlog and bureaucracy madness is robbing our entrepreneurs of confidence," says Steilemann. In particular, almost 90% of companies rate energy costs as poor or very poor in an international comparison. No wonder: the chemical industry depends on competitive electricity prices. Even though electricity costs have fallen, they are still higher than pre-crisis levels and were a decisive location disadvantage even then. "That's why we are fighting for an industrial electricity price as a bridge to the future until we have enough energy from renewable sources. Because that's the only way we can survive in international competition," says Steilemann.