The business situation of the German chemical industry in the 4th quarter 2008

The chemical industry in the global economic crisis

The 4th quarter 2008 saw a surprisingly strong slump in chemical production in Germany, according to the latest Quarterly Report by the German chemical industry association VCI in Frankfurt. Due to the global economic crisis, the largest customers of chemistry – namely industrial enterprises – barely ordered any chemicals. Because of the falling demand, chemical companies reduced their production activities. Capacity utilization in the chemical industry dropped to 75 percent, as compared with 84 percent in the 3rd quarter 2008. The pharma business alone withstood the crisis.

Professor Dr. Ulrich Lehner, President of VCI, comments the developments: "All major industrial nations are in recession. The falling demand for chemical products on global markets and especially in the European Union is strongly felt by our industry. We must assume that we have not yet reached the trough of the crisis. 2009 is a difficult year for chemistry."

The VCI is expecting a slight improvement of the situation in the months to come, once customers have depleted their stocks. However, the VCI emphasizes that this trend toward normalization will not be the much-hoped for upswing. Therefore, the VCI is expecting a drop in production by 3.5 percent for the overall year 2009. Chemical industry sales are likely to fall by some 6 percent, as compared with the previous year.

Marked drop in production: In a 12-month comparison the chemical production fell by 10.9 percent in the 4th quarter 2008. Compared with the period from July to September 2008, a drop by 11.4 percent was recorded. Except for pharmaceuticals - where a slight production growth by 0.2 percent was achieved - output figures were clearly lower in all chemical sectors. Manufacturers of basic chemicals were particularly hard hit, with a production decrease by ca. 20 percent against the 3rd quarter 2008.

Decline in producer prices: In the 4th quarter 2008 the price level for chemical products was around 0.7 percent below of the level of the previous quarter.

Clearly lower sales: In the period under review, sales by chemical companies amounted to 38.3 billion euros. Seasonally adjusted, this means a drop in sales by 11 percent against the previous quarter. Domestic business was even less favourable than business abroad.

Constant employment: With some 440,000 staff, the employment situation was practically unchanged in the 4th quarter 2008 in the German chemical industry. Initially, companies were using flexible instruments to adapt working hours to the sales crisis. However, meanwhile short-time work is on the increase.