Hardly any other industry needs as much energy as the chemical industry – and hardly any other industry groans so much under the high electricity, gas and oil prices. What is the remedy?
“The house is on fire,” says the President of the Chemical Industry Association (VCI), Markus Steilemann, “the numbers are red.” On Friday afternoon, the former model branch of German industry presented data on business development in the first half of the year in Frankfurt am Main. Production in the chemical industry (excluding pharmaceuticals) fell by a sixth compared to the same period of the previous year. “We are the first domino to wobble,” said Steilemann. “If we are doing badly, others will soon follow.”
VCI General Manager Wolfgang Große Entrup described the figures for the decline in production and sales (estimated for 2023: minus 14 percent) as “highly representative” for the entire industry. They result from 320 complete responses to a survey of the association’s 1,900 member companies.
The decline of the chemical industry is also visible in official figures. While employment in the entire manufacturing sector rose by 1.4 percent in May, employment in the chemical industry fell by 0.8 percent. Although only 350,000 people work in the industry, most of them are highly qualified skilled workers and academics. Industry President Steilemann pointed out that high tariffs are paid and that formal co-determination by employees is common.
Electricity and gas are scarce and expensive
The chemical industry is also the sector with the highest energy demand. Electricity and gas have become scarce and expensive. That is the reason for the current decline. The Federal Statistical Office states an annual requirement of well over 300 terawatt hours (2020) for the chemical industry. That is half of what all German private households consume. The largest German chemical site, BASF in Ludwigshafen, burned natural gas alone last year with 24 terawatt hours of energy.
One terawatt hour is one billion kilowatt hours. Electricity is currently available wholesale for around ten cents per kilowatt hour. Industry, trade unions and also the Green Federal Minister of Economics agree that this is far too expensive for adequate business in energy-intensive sectors.
Subsidies for industrial electricity?
Federal Minister of Economics Robert Habeck advocates subsidies: Industrial electricity should be reduced in price to six cents per kilowatt hour with state money. The hope is that, after a transitional period, enough green energy will be available, prices will fall and the chemical industry will be able to pay for its own energy again. Market-oriented economists, on the other hand, fear that subsidies will keep sectors alive that no longer have a chance in Germany and that necessary adjustments to renewable economies will be delayed. Chemical President Steilemann called it “short-sighted and irresponsible”.
“We fought with ourselves for a long time, because we are convinced market economists,” said Steilemann on Friday. But in order to save the industry, the subsidization of the energy requirement is necessary: ”The industrial electricity price is about extinguishing water”. Like Economics Minister Habeck, Steilemann speaks of a bridge to a future with more and cheaper green energy. “Under the best assumptions, we’re talking about six to seven years,” said Steilemann, “but that’s highly speculative.” Because renewable energy sources are not being expanded as quickly as politically demanded. “When does the federal government intend to take the path that it has defined itself?” warned the chemical president.
Migrate abroad?
Along with mechanical engineering, the chemical industry has been the core of the German economy for 150 years. In principle, the industry is still well positioned today, said Steilemann. There is stable cooperation with universities, numerous patent applications and many small, medium and large companies scattered throughout the country. Industry President Steilemann reported that companies that had scarcely dared to leave Germany and Europe are now also considering investing in China – partly because energy is significantly cheaper there.