German chemical industry recovery to occur only in 2026 or later

LONDON (ICIS)–A hoped-for recovery in Germany’s chemical industry has been pushed out to 2026, as shown by an industry survey presented at a webinar hosted by chemical producers’ trade group VCI.

• No recovery before 2026
• Chemical production seen flat in 2025
• Persistent lack of orders

The VCI survey, conducted in November, found that 52% of German chemical companies expect a recovery to only take place in 2026 or later, whereas a previous survey conducted this summer showed that a majority had expected a recovery in 2025.

Now, only 22% expect a recovery in the second half of 2025 while 8% expect it to occur in the first half, according to the latest survey

As for sales and profits, 33% expect a sales decline in 2025 and 46% expect lower profits.

Companies are particularly pessimistic about sales expectations for Germany and Europe, but are less pessimistic about business outside Europe.

With nearly every second company expecting falling profits next year, business will remain difficult, said VCI economist Christiane Kellermann.

LACK OF ORDERS
The share of companies complaining about a lack of orders is around 40%, the same level as at the start of the coronavirus lockdowns in early 2020, she said.

Producers have been complaining about a lack of orders since the end of 2022, and there was still no prospect of an improvement, she said.

The share of companies stating that a lack of orders was no problem for them and that business was good was “vanishingly small”, she added.

New orders were weak both domestically and internationally, she said.

LOSS OF COMPETITIVENESS
Germany as a place for industrial production is losing competitiveness because of its high bureaucratic costs, high labor costs, high taxes and levies, and high energy costs, she said.

Adding to these challenges is rising geopolitical uncertainty, in particular in the wake of Donald Trump’s victory in the 5 November US presidential election, she said.

Companies were trying to determine what Trump’s second term as president will mean for them in terms of trade conflicts and tariffs.

They were not only worried about direct tariff impacts, but also about the impact on China where the tariffs are likely prompt producers to ship more product to Europe, she said.

As for German politics, there are hopes that a new government next year will address at least some of the challenges the country faces, she said.

The coalition government of Chancellor Olaf Scholz collapsed last month, and new elections are expected to be held in February.

CHEMICAL PRODUCTION TO STAGNATE IN 2025
In 2024, total chemical-pharmaceutical production rose 2.0%, led by a 4.0% increase in chemicals, according to preliminary data, Kellermann said.

2024, percentage change in production, by major segments:

• Inorganic basic chemicals: +7.0%
• Petrochemicals: +8.5%
• Polymers: +4.0%
• Fine and specialty chemicals: -2.0%
• Consumer chemicals: +2.0%
• Pharmaceuticals: -1.5%

While some segments saw a significant year-on-year increase in production, the increases did not offset the declines in 2023, she said.

Demand for chemicals across industrial customers was weak, especially in Germany, she said.

For 2025, VCI currently forecasts that chemical/pharmaceutical production will inch up 0.5%, with chemical production expected to stagnate:

Production, year-on-year %-changes  

	2025 forecast	2024 (based on preliminary data)	2023
Chemicals & pharmaceuticals	+0.5%	+2.0%	-7.9%
Chemicals (ex pharma)	flat	+4.0%	-10.4%

COMPANIES REACT
Companies are reacting to the challenges they face in Germany with a range of measures, Kellermann said.

They include restructuring; improvements in productivity and energy efficiency; cost cutting programmess; shifting production abroad; divestments of businesses lines; and plant closures, she said.

The country was seeing a permanent shutdown in production, and this trend may accelerate, she added.

Only 25% of the chemical companies surveyed expect their investments in plants, equipment and machinery at German locations to increase next year, whereas 40% expect their investments to decline.

On the other hand, 46% expect an increase in their investments abroad.

Companies were investing, but not necessarily in Germany, Kellermann said.

VCI chief economist Henrik Meincke, who also presented at the webinar, said following steady growth in the years after the 2008-2009 global financial crisis, “multiple shocks” have hit Germany’s economy and its energy-intensive industrial producers since 2018:

• 2018/19: US-China trade conflict
• 2020: Pandemic lockdowns
• 2020/21: Supply chain crisis
• 2022: Ukraine war and energy price shock
• 2023: Inflation, and high interest rates to contain it

Germany was currently in a stagflation phase, with core-inflation above 2% – and this has come at a time of enormous political and economic risks as well as the challenge of transforming the economy to net zero-emissions, he said.

Thumbnail photo of BASF’s Ludwigshafen site; source: BASF