Actually, Wolfgang Große Entrup doesn’t like the role of constant complainer. Or so he says. The managing director of the Chemical Industry Association (VCI) has been complaining about the situation in the industry for a while. His lawsuit has now dragged on for years. After the recession, the country has “both feet stuck in the quagmire of stagnation,” says Große Entrup: “As a retired economic miracle, we live on substance.” The growth is taking place elsewhere – in the USA and Asia.
The VCI invited people to the Frankfurt Literaturhaus. There is still a sign at the entrance with a reference to a previous event: a reading of Deniz Ohde’s new book. Title: “I pretend to be asleep”. After that, maybe one or two people in this industry would also like to do this: keep your eyes closed until the misery is over. The year 2023 was bad for the German chemical and pharmaceutical industry due to weak global demand, and things are not getting any better. In 2024, production will stagnate and sales will fall by 3.5 percent, the VCI predicts. “We don’t expect a recovery until the second half of the year at the earliest,” says Große Entrup.
In 2023, production fell by almost eight percent, in the chemical industry alone by 10.4 percent. The last time there was a comparably low value was almost 30 years ago: in 1995, says Große Entrup. Sales for the entire industry fell by a good twelve percent in 2023. More than half of the companies had reduced profits or even losses, according to a VCI survey.
This is aggregated data that is no longer so surprising because some companies have published figures in the past few weeks that read like this: BASF, Bayer, Covestro, Evonik, Lanxess, Wacker Chemie – sales are collapsing, profits too, some are making Loss. And those are just listed ones. The association has around 1,900 members, including many medium-sized and family businesses. Many companies are announcing austerity programs, want to cut jobs, are shutting down plants – completely or temporarily, and are relocating production. Structural change has gained momentum, says Große Entrup.
Foreign companies are investing less in Germany
In the past two years, deindustrialization was a threatening backdrop, “now it is real,” said the VCI man. He’s not the first to talk about it this week. “De-industrialization in Germany is progressing,” warned Wacker-Chemie CEO Christian Hartel on Tuesday at the annual press conference in Munich. Große Entrup refers to a study published by the German Economic Institute (IW) on Thursday, according to which there are “first symptoms” of deindustrialization. According to the IW, foreign companies only invested around 22 billion euros in Germany in 2023, the lowest in ten years. The net outflow, i.e. the difference between investments by German companies abroad and foreign ones in Germany, was 94 billion euros. “Politics make it anything but attractive for companies to invest in Germany,” IW economist Christian Rusche is quoted as saying in a press release. Politicians must drastically improve investment conditions.
The chemical industry is energy-intensive, which is why Russia’s attack on Ukraine hit it hard because the prices for fossil raw materials such as natural gas rose dramatically as a result. Industry needs them as an energy source and raw material for preliminary products. Production costs in Germany are not competitive, says Große Entrup. When it comes to gas, Germany is better positioned than a year ago. But overall, the costs for energy and raw materials are still many times higher than in the USA and China, for example. Since domestic demand in the People’s Republic is weakening and there is overcapacity there, China is pushing vehemently into the world market and is putting pressure on European and German manufacturers in particular.
Large Entrup is struggling with politicians because they are not doing enough to strengthen the location. He doesn’t want to complain all the time, but then he does, extensively. The allegations are not necessarily new: the Bureaucracy Relief Act IV – from the lobbyist’s point of view – inadequate, the slimmed-down “Growth Opportunities Act”, the “crumbling infrastructure”, approval processes that took years, the lack of skilled workers, the high corporate taxes, the supply chain law. The party-political bickering on an open stage in the traffic light coalition. Compromises would be found and then revoked. Great Entrup also dislikes this. The government must become predictable again with its policies. Big Entrup is really good at nagging.