Newsletter_02-2024_EN

The german chemical-pharmaceutical industry
has presented its results for 2023
– Production drop by 8 percent
– Sales decline by 12 percent
– Forecast 2024: further sales reduction
– Policy change is needed, focusing on a competitive economy
Prospects remain stormy also for 2024.
A difficult year is coming to an end for the chemical-pharmaceutical
industry. Hopes of an economic upswing have not materialised.
Markus Steilemann, President of the German chemical industry association
Verband der Chemischen Industrie e. V. (VCI), comments
on the situation: “We are in the middle of a long, deep trough. And
it is still unclear how long we must persist to pass it.” A fast upturn is
not in sight.
Germany is in a crisis which is not only affecting the chemical
industry alone. The entire German economy is suffering from the
weak business climate and structural problems. In order to get Germany
back to the road of success, the association takes the view that
a profound policy change and a focus on a competitive economy
are urgently needed – as this will secure the basis for a sustainable
future. Steilemann emphasises: “The endless discussion and the
outcome of the budget agreement dramatically underline that politicians
need to wake up at long last so that the prosperity model
Germany does not suffer failure.”
Drop in chemical production by 11 percent
2023 was a bad year for the industry. Overall, chemical and pharmaceutical
production fell by 8 percent. When excluding the pharma
business, the decline was 11 percent. Companies increasingly lacked
orders. With an average of around 77 percent, the industry’s capacities
were underutilised. This means that production has been below
the economically necessary basic capacity utilisation of 82 percent
for nine quarters.
Manufacturers of inorganic basic chemicals as well as soaps, detergents
and cosmetics cut their production by 10 percent. The output
of fine and specialty chemicals fell by 4 percent. After the boom
for vaccines, the pharma sector too struggled with adverse location
conditions and recorded a reduction by 3 percent.
At around 230 billion euros, the industry’s sales were 12 percent lower
than back in 2022. The drop was particularly marked in domestic
business were sales declined by 16 percent to 86 billion euros. Foreign
sales amounted to 144 billion euros and were 10 percent below
the previous year. Also, falling prices of chemicals contributed to the
sales decrease. In 2023, producer prices for chemical-pharmaceutical
products were on average around 1 percent lower than one year
earlier.
Outlook 2024: Recovery is long in coming
At the end of 2023, the industry remains in recession mood. Both
the current business situation and the expectations for the next
months are negative. Thus, there should be a further lack of orders
in chemicals business. In this setting, the VCI does not anticipate
chemical production to be back on the increase in 2024. Sales are
expected to fall by 3 percent.
This forecast is endorsed by the results of the latest membership
survey: Companies are not hoping for an upswing in the short term.
45 percent see an improvement in 2025 at the earliest.
40 percent of companies are complaining about falling profits
The sales decline, falling sales prices and high production costs put
strong pressure on the profits of companies. According to the most
recent VCI membership survey, almost 40 percent are complaining
about significant profit drops. Roughly 15 percent of companies are
already in the red.
At the same time, the continuously difficult state of business is
forcing companies to make painful adjustments. Steilemann warns:
“The longer this situation lasts, the more we must expect the shutdown
of further plants.” Meanwhile, abandoning loss-making business
areas, investment shifts abroad or staff reductions can no longer
be ruled out.
Germany needs an “Offensive 2030”
Industry also needs competitive energy pricing for a competitive
economy and a green transformation. This means in the short run:
burden-easing on energy prices. And in the long run: high speed in
the rebuilding of the energy system – widening the offer of electricity,
expanding grids and creating reserve capacities with backup
power plants and energy storage facilities. But for the electricity
price package, which is still being planned under the agreement in
the budget dispute, merely the status quo is maintained.
However, the energy issue is just one of many unresolved problems.
The list of shortcomings continues to include the dilapidated
infrastructure, the skills shortage or excessive bureaucracy and regulation.
Steilemann demands: “We have to rethink Germany, and we
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