Chemical sales in Germany up 0.5% in H1 2015, chemical prices down 3%

The first half (H1) of 2015 was mixed for the German chemical industry with production witnessing an increase, while sales remaining sluggish due to falling chemical prices, according to German chemical industry association (VCI), which represents over 1,650 chemical companies in Germany.
 
The devaluation of the Euro has stimulated overseas exports while the domestic demand for chemical products remained restrained. Overall, the production in Germany’s third largest industry rose by 1 percent in the first six months of the present year.
 
Marijn Dekkers, President, VCI, said, “It is true that the upward trend is discernible. But it seems to be lacking in strength. There are no vigorous impulses from the global economy.”
 
Irrespective of the progressing economic recovery in Europe, the VCI does not anticipate any significant improvements in the business situation of the chemical-pharmaceutical industry in the second half (H2) 2015. Dekkers stated, “All in all, we are expecting a moderate upward trend in the coming months.”
 
German chemical companies should continue to benefit from the weak euro for their exports and from cheap oil. The latter mainly reduces the disadvantages in the production costs of basic chemicals, as compared with competitors from the USA and the Middle East.
 
For the overall year 2015, the VCI maintains its forecast of 1.5 percent growth in chemical production. Total sales should rise by 0.5 percent to Euro 191.8 billion, with a strong contribution of over 2 percent from foreign trade.

ALSO READ: European chemical industry reports stagnant growth in 2015
 
German chemical companies are increasingly investing abroad. A recent VCI survey highlights that this is not only to open up new markets but also because of lower costs. For example, two thirds of investments in the US are made for the latter reason. The favourable raw material and energy prices through the shale gas boom stateside play a role. But the survey also shows that meanwhile one third of foreign investments in European neighbouring countries are made because the costs at those EU locations are lower than in Germany. Dekkers noted, “Germany as a location continues to lose in attractiveness, as compared with the US and other European countries.” Since 2012, foreign investments of companies have been clearly higher than domestic investments.
 
Even among small and medium-sized chemical enterprises now the cost argument significantly influences investment decisions. While investments by SMEs had been going up continuously until 2008, investments are being postponed since then. Dekkers added, “The massively risen EEG-Umlage – the charge in connection with the German renewable energy act – is a particularly heavy burden on SMEs.”
 
Over the past 25 years, foreign investments by German chemical companies in production plants and buildings have doubled to currently Euro 8.6 billion. By contrast, domestic investments of the chemical industry in Germany have been stagnating for 25 years; adjusted for prices, they thus even dropped.
 
But according to Dekkers, there is no guarantee of chemical companies making future domestic investments in Germany at the usual level. This is emphasised by the VCI survey among the member companies. Dekkers said, “We need an industry policy initiative which significantly improves the investment climate. We cannot lose even more investments to other countries.”
 
Most importantly, the VCI President called for more planning security for companies as regards the energy political requirements. Dekkers deplored: “In the energy policy, costs and reliability are visibly moving apart in different directions.”
 
For Dekkers, reducing the obstacles to innovation is another lever for political measures. This would be helpful not only for the chemical industry with its structural change towards research-intensive products but for Germany as a land of industry overall. “Figuratively speaking, we need more tailwinds for innovations, so that we can market our products faster and remain fit for the future in this manner,” he added.
 
Many relevant proposals have already been brought forward, inter alia, introducing fiscal incentives for research and a venture capital act. At the European level, the VCI would find an innovation principle useful: as an instrument for examining regulation as to its impacts on the innovation capacity of industry.