After a year of crisis, the German chemical and pharmaceutical industry has little hope for 2024. The industry association assesses both the situation and the expectations for the coming months negatively.
After a difficult year with weak demand, the chemical industry in Germany is also pessimistic for 2024. “We are in the middle of a deep, long valley. And it is still unclear how long we have to go through it,” said the President of the Association of the Chemical Industry (VCI), Markus Steilemann, in Frankfurt today.
No upturn is expected in the short term. According to a recent survey of 350 member companies, almost half do not expect the situation to improve until 2025 at the earliest. A third expect a recovery in the second half of 2024.
Industry sales are also expected to fall in 2024
VCI boss Steilemann had already warned in November that the industry had probably bottomed out, but that a turnaround was not yet visible. The companies’ hopes were therefore based on 2024. However, it is now clear that the industry is still lacking orders.
Both the current business situation and the expectations for the coming months are negative, explained Steilemann. The VCI therefore does not expect chemical production to increase again in 2024. Industry sales are expected to fall again by three percent.
Germany’s third largest industrial sector has had difficult times due to the rise in energy prices in the wake of the Ukraine war and the weak economy. In the current year, sales in the chemical and pharmaceutical industries fell by twelve percent to around 230 billion euros. Production fell by eight percent, and in chemicals alone it was eleven percent.
40 percent of companies complain Profit drops
Weak demand and high production costs are putting a massive strain on companies. According to the association, the industry’s capacity utilization is around 77 percent – production has been below the economically necessary basic utilization of 82 percent for a good two years now. As a result, there have been a number of profit warnings recently – for example from industry leader BASF and the specialty chemicals companies Lanxess and Evonik.
According to the VCI member survey, almost 40 percent of companies are experiencing a decline in profits. 15 percent of the companies posted losses. “The longer this situation lasts, the more we have to expect that more plants will be shut down,” warned Steilemann.
He also did not rule out shifting investments abroad or reducing staff numbers. This year, however, employment remained stable at around 477,000 people.