The chemical industry is increasingly outperformed by the foreign sector
The location in Germany is increasingly losing its appeal for the chemical industry, according to a survey by the Ifo Institute. Hopes for an improvement in the situation are not being fulfilled. The industry continues to complain about high energy costs and complex bureaucracy.
The mood among the top executives of the German chemical industry has turned negative again in July. The business climate barometer fell to minus 10.5 points, from plus 4.5 points in June, according to the business survey by the Munich-based Ifo Institute. "Chemicals are being dragged down by the general economic slowdown," said Ifo industry expert Anna Wolf. "Hopes for a revival in demand have not been fulfilled."
The assessment of the current business situation and the outlook for the next six months has deteriorated. Demand for chemicals continues to decline. Order backlogs are expected to be even lower than in the previous month. "No noticeable impulses are expected from abroad," it said. Companies have therefore further reduced their production and are planning significant staff cuts for the coming months. Capacity utilization fell to 74.8 percent. In comparison, the long-term average is 82 percent.
"More and more chemical companies in Germany are at a price disadvantage in international competition. This is not just due to energy costs," said Ifo expert Wolf. "Complex bureaucracy also burdens the already high labor costs. As a result, the location in Germany is increasingly losing its appeal for the chemical industry."
No impulses from other markets
The industry association VCI expects production to increase by 3.5 percent this year, while sales are expected to rise by 1.5 percent. "After a positive start to the year with significantly increasing production volumes and sales, the recovery lost momentum in recent months," it said in a recent statement. "Impulses from other markets also remained weak, for example, the Chinese economy grew significantly slower in the second quarter. Accordingly, demand for 'Made in Germany' chemical products was also weak."
At the same time, VCI CEO Markus Steilemann calls on the federal government to make Germany more competitive again. The energy transition threatens to become too expensive, infrastructure is dilapidated, digitalization is progressing slowly, and bureaucracy is overwhelming, he said recently. "A cascade of sensible measures is needed to ensure that the industry (..) remains viable."
The chemical industry is experiencing challenges due to its location in Germany, with high energy costs and complex bureaucracy being major concerns. In this information society, these issues are leading to a loss of appeal for the chemical industry in Germany.
Despite the challenges, the industry association VCI still expects a modest increase in production and sales this year, but they note that demand for 'Made in Germany' chemical products has been weak due to a slowdown in other markets like China.
