Chemicals expect production decline

Created: 07/06/2022 12:39 p.m

Industrial plants are located on the factory premises of a chemical company.

The German chemical and pharmaceutical industry expects little improvement in the tense situation this year.

© Uwe Anspach/dpa

The enormously high prices, especially for gas, are a burden for the energy-hungry chemical and pharmaceutical industry - the fear of a supply stop from Russia is great.

Companies are preparing for the crisis.

Frankfurt/Main - In view of the gas crisis and a weaker economy, the German chemical and pharmaceutical industry expects little relief from their difficult situation.

The Association of the Chemical Industry (VCI) expects production to fall by 1.5 percent this year, as it announced on Wednesday, given that the supply of energy and raw materials is more expensive but sufficient.

For the pure chemicals business, he even promised a production minus of 4 percent.

In the second half of the year, too, high pressure on earnings is expected for the important industrial sector with over 530,000 employees.

"We currently do not see any noticeable relaxation in energy and raw material costs," said VCI President Christian Kullmann in Frankfurt.

Natural gas is likely to remain significantly more expensive than in other regions of the world.

Big worries

The gas supply is currently such that the industry can produce, said Kullmann.

But the prices are "breathtakingly" high.

The industry is doing everything to remain able to deliver.

She is already stocking up so that she can still supply customers in the event of a crisis.

In the chemical and pharmaceutical industry there is great concern that Russia will completely stop the already restricted gas supplies to Germany after the maintenance of the Nord Stream 1 pipeline on July 11th.

According to the VCI, the industry is the largest German gas consumer with a share of 15 percent, accounting for almost a third of industrial consumption.

The pharmaceutical and chemical industry needs gas as a source of energy and as a raw material for further processing in products - such as plastics, medicines or fertilizers.

Risk: domino effects

The chemical and pharmaceutical industry is involved in around 80 percent of the value chains, added VCI Managing Director Wolfgang Große Entrup.

Anyone who takes gas away from the industry risks domino effects throughout the industry.

"We are preparing for a throttling or even cessation of gas imports," said Große Entrup.

Businesses in the South and Southeast would suffer first.

This is related to the pipeline system.

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After a record year in 2021, the chemical and pharmaceutical industry are also having problems with the economy due to rising energy costs, tight supply chains and the consequences of the Ukraine war.

The chemical industry in particular, as a supplier to many sectors such as the automotive, consumer goods and construction industries, is dependent on the economy and is feeling the effects of weaker economic growth worldwide.

The VCI reported that sales volumes in the classic chemical business were declining and the order backlog was largely reduced.

In the first half of the year, the industry was hardly able to increase production by 0.5 percent.

Excluding pharmaceuticals, production fell by 3 percent.

According to the VCI, industry sales rose by 22 percent to 130 billion euros due to sharply rising producer prices.

Since companies can only partially pass on the rapidly increasing energy and production costs to customers, profit margins are increasingly under pressure.

dpa