The first half of 2024 brought more pleasing results than forecast for the chemical and pharmaceutical industry in Germany, reports the German Chemical Industry Association (VCI). Although the industry was confronted with a decline in turnover and falling producer prices, slight production growth was recorded. However, despite some positive signs, the mood in the industry remains subdued, particularly due to weak domestic demand.
Order situation expected to improve over the course of the year
VCI President Markus Steilemann comments on the current situation: "There is a silver lining, but there can be no talk of a stable upward trend. The slight signs of recovery are no reason to rejoice. We do expect the order situation to improve over the course of the year. However, the signs of a slight easing should not obscure our view of the location problems: In addition to a lack of orders, energy prices and bureaucracy are our biggest concerns."
Overall, the first half of the year was similar to the weather in the industry - it was characterised by sunny and rainy spells. More orders from customers in Germany and abroad ensured that the industry was able to increase its production by 3% in the first half of the year. However, this was still around 11% lower than in 2021, meaning that many plants were still underutilised and remained below the profitability threshold.
After the previous sharp slump, basic chemicals in particular regained ground. In the first half of the year, the production of inorganic basic materials was 12% higher than in the previous year. The production of organic raw materials also increased strongly by 8.5 %. Production growth in the other chemical divisions was significantly lower: Production of consumer-related chemicals rose only slightly (2%), as did polymer production (1.5%). Production in speciality chemicals declined again (-2%). This was due to the fact that many industrial customers had cut back their production in the first half of the year and were therefore reluctant to place orders.
Confidence is coming from the pharmaceutical business. Since the beginning of the year, the signs have been pointing to growth again. Production increased by 1.5% in the first half of the year. The high demand resulted in sales growth of 6%.
Chemical industry records slightly lower turnover
Overall, turnover in the chemical and pharmaceutical sector in the first half of the year was around 1% lower than in the previous year at around 112 billion euros. This was primarily due to producer prices, which came under pressure in the first half of the year. They fell by 4% on average in the sector.
The revenue situation in domestic business in particular remains disappointing despite rising sales volumes. Here, the books show a drop of 5%. After a long dry spell, international business is doing better. Sales of export products recorded a slight increase in the first six months of the year and were 1.5% higher than in the previous year.
Foreign business as a driver
In economic terms, the order situation in the chemical industry should continue to improve over the course of the year. In view of this development, the VCI is maintaining its forecast for the year as a whole: a 3.5% increase in production and a 1.5% increase in sales. Foreign business remains the main driver.
However, the mood in the industry remains subdued. According to the results of the latest VCI member survey, only 30% of companies are feeling an economic recovery. Around 50 per cent hope for an improvement in the second half of the year or in the course of 2025.
VCI President Markus Steilemann emphasises: "The truth is that one in five companies still sees no light on the horizon and the economic recovery is a long way off. We must not forget one thing: Although we have ramped up production, our plants are still not running profitably, and have been for over two and a half years."
The structural disadvantages in Germany are too much of a burden. The companies therefore expect the earnings situation to deteriorate again in 2024 as a whole.
