Germany’s petrochemicals end year on brighter note than polymers, inorganics

LONDON (ICIS)–Petrochemicals production in Germany has not been hit as hard by coronavirus lockdowns and the economic slump as output from other sectors of the chemical and pharmaceutical industry, trade group VCI said on Wednesday.

Petrochemicals production volumes are expected to be down 1.5% in 2020, the trade group said, compared with much steeper falls in the output of polymers, base inorganic chemicals, and specialties.

Germany chemicals production
By segment, 2020

Segment	Change year on year (%)
Inorganic basic chemicals	– 6,0
Petrochemicals and derivatives	– 1,5
Polymers	– 6,5
Fine and specialty chemicals	– 5,5
Pharmaceuticals	– 0,5
Detergents and personal care products, cosmetics	– 2,5

Source:VCI

VCI said Germany’s chemicals production will be down 4% in 2020, compared with 2019; including pharmaceuticals, the drop in production is 3%.

Overall chemicals and pharmaceutical sales fell 6% during 2020 to €186.4bn although employment in Europe’s largest chemicals industry stood at 464,000, practically unchanged.

The German chemicals industry metrics are more than double those of Europe’s second largest producer, France.

Trade group France Chimie does not publish annual sales figures, but annual sales were estimated at around €75.0bn in 2019, employing 220,000 workers.

As Germany’s GDP returns to growth in 2021, production in chemicals and pharmaceutical is expected to rise by 1.5%; sales are expected up by 2.5%.

2020 has been characterised by ups and downs, the VCI said.

“The strain on our member companies is considerable … However, our industry as a whole has been hit less hard than other sectors of the economy,” said VCI president Christian Kullmann, also CEO of chemicals major Evonik.

Exports suffered more than domestic business as global trade of goods slowed down sharply; the hit to such an export-driven sector of the German economy being hard.

EMPLOYMENT SLIGHTLY DOWN
Structural change to the sector has been accelerated by the coronavirus pandemic, the VCI suggested, and it is forecasting a 1% drop in sector employment this year.

Chemicals demand at the end of the year is largely stable and the trade group noted that the business situation for German companies is improving, according to a recent Ifo business survey.

Earlier on Wednesday, however, Ifo did warn of the expected negative impact of further coronavirus lockdowns.

“Business sentiment is now confident in most of our companies,” added Kullmann.

“More than half of them expect sales to go up next year, both in Germany and abroad.”

RECESSION HANGOVER
VCI’s latest membership survey shows that many companies will need some time to recover from the crisis.

Only 17% of those surveyed believed they would return to pre-crisis levels this year, with 25% expecting to be able to make up for 202 declines in 2021.

“The majority of businesses surveyed (47%) think they will have overcome the crisis in 2022 at the earliest. 11% of enterprises did not want to give a concrete answer to this question,” the VCI said.

Emergency aid and economic stimulus, sanctioned last week by the EU 27 governments as well as by the central bank of the 19 eurozone economies (European Central Bank, ECB), cannot be separated from the need for sustainable investments in the EU and in Germany, the VCI added in its annual review.

Affordable, renewable energy is seen as a building block for the transformation towards climate neutrality, as is smarter regulation.

EU REGULATION
The “high density” of regulation is causing problems for chemical and pharmaceutical sector companies, particularly small- to medium-sized enterprises (SMEs), the trade group said.

It warned against climate tariffs being introduced by Brussels – the EU capital – but the trade group supported the EU working towards a global carbon price.

The outcome of the US presidential election, China’s new climate ambitions, and the commitment of Canada to climate neutrality by 2050 bring back more chances of success for this path in the G20 group of countries .

“A door has opened to advance climate protection jointly, globally, and with agreed rules in a political setting,” said Kullman.

“This opportunity must not be missed.”

Opportunities for a resumption of talks under a Joe Biden US Administration on a trade deal with the EU should also not be missed, the VCI said.

“From the VCI’s perspective, also the conclusion of the Asia-Pacific RCEP [free trade agreement led by China] as the world’s largest free trade area with 15 countries, comprising 30% of global economic output, increases the need for strategic alliances of the EU – in that region of the world and also in South America and Africa,” said the trade group.

“Therefore, the VCI urges Brussels to continue to pursue the EU trade agreements with the ASEAN [Association of Southeast Asian Nations] states, Australia, and New Zealand at full speed,” it added.

Front page picture: Bottles for chemicals; archive image from the industrial museum in Hattingen, built at disused ironworks
Source: Kfs/imageBROKER/Shutterstock 

Focus article by Nigel Davis