Tentative Signs of a New Departure in the Chemical Industry

The German chemical industry, as a crisis-ridden heavyweight, looks cautiously optimistic towards the future. The sector, which suffered significant production declines due to the energy crisis, now seems to detect signs of a quiet recovery. Wolfgang Große Entrup, the chief executive of the German Chemical Industry Association, points to the noticeably improved order situation since February, especially from overseas. The glimmer of hope primarily includes markets such as the USA and China, although according to Große Entrup, these are only isolated positive developments. The real turnaround can be expected at the earliest in the second half of the year. To the chagrin of the sector, however, the economic environment remains difficult for the chemical-pharmaceutical industry. A shrinking sales forecast of 3.5 percent is on the horizon, while production is expected to maintain its current level, according to the VCI's communication. The ongoing economic downturn also causes concern; a shortage of industrial orders is negatively impacting the sector. Looking back, despite a decline in sales of over 12 percent last year, the industry managed to record a slight increase in production in the fourth quarter. The number of employees remained stable and shows a positive trend compared to 2020. The Ifo Institute also observes a potential improvement in the situation. According to Ifo industry expert Anna Wolf, the business climate in the chemical sector has slightly recovered. Increasing demand and production expansion may suggest that the end of the downturn could be near. Nevertheless, the industry remains afflicted by rising energy prices and a weakening economy, though gas prices have been relative, while high electricity costs continue to burden the industry. There are also developments in personnel behavior. The industry leader BASF plans extensive cuts and job reductions at its Ludwigshafen headquarters to reduce costs. Similarly, the Essen-based Evonik corporation is compelled to cut jobs as part of an administrative restructuring. The gently budding recovery of the chemical industry calls for stable conditions and political support, warns Große Entrup. In his opinion, current legislative initiatives and administrative facilitations by the federal government are insufficient. He appeals for less regulation, faster approval processes, and overall relief from energy prices.