The business situation of the German chemical industry in the 2nd quarter 2009

Exports are stabilizing chemical business

After 9 months of downturn, growth was back for the first time in the German chemical industry. This is noted by the German Chemical Industry Association (VCI) in its report for the 2nd quarter 2009. Orders for chemical products increased mainly from customers abroad. This led to improvements in sales and production, as compared with the extremely weak 1st quarter 2009. However, the demand on foreign markets started to pick up from a very low level. There was still a production drop by some 16 percent against the previous year. Moreover, capacity utilization was much lower than normal.

Professor Dr Ulrich Lehner, President of VCI, comments the developments: "Obviously, the worst is over in the chemical industry. We see recovery in some sectors. Most of our industrial customers seem to have depleted their stocks. Now we must make the most of new chances for growth."

Forecast: For the 2nd half 2009 the VCI is hoping for a further upturn in chemical business, but the situation remains difficult. It will take some more time for the chemical industry to come back to the level before the crisis. For the overall year 2009 a production drop by 10 percent against 2008 is likely, so the VCI's unchanged forecast. According to the VCI, a decline in chemical industry sales by 12 percent must be expected.

Production: In the 2nd quarter 2009 the output of chemical products went up by 2.5 percent against the 1st quarter 2009. This benefited manufacturers of basic and specialty chemicals. By contrast, a drop in production was recorded for consumer-related products and, most recently, also for pharmaceuticals. Capacity utilization rose from some 72 percent to 74.4 percent but was still some 10 percentage points below the level deemed normal in the chemical industry.

Producer prices: Compared with the previous quarter, the period under review saw another drop in producer prices: on average by 0.9 percent. But the VCI believes the steep price decline to be over. In May and June there was a slight increase in prices for chemical products.

Sales: From April to June chemical industry sales improved – compared with the previous quarter - by 1.3 percent to 34.3 billion euros. Positive impulses in the chemical business came mainly from foreign markets (+5.1%). By contrast, domestic sales fell in many chemical sectors, resulting in a drop by 2.7 percent. This was largely due to the weak demand from industrial customers.

Employment: In the 2nd quarter 2009 the German chemical industry employed ca. 436,800 persons, so that employment figures fell by around 1.1 percent against the previous year.