The chemical industry is hoping for better business

Massive drop in 2009 / Demand is back on the rise / Unsatisfactory capacity utilization / Forecast 2010: production increase by 5%, sales increase by 6%

One of the most difficult years in the history of the German chemical industry is nearing its end. With a drop in chemical production by 10 percent against 2008 - which affected all chemical sectors - a comparison is possible only with the situation in the first oil crisis some 35 years back. However, confidence has returned, and companies are hoping for better business. The German chemical industry association VCI assumes that next year the chemical production will increase by 5 percent and sales will rise by 6 percent. Here, the basis for comparison is important. The VCI's President Professor Dr. Ulrich Lehner emphasized at a press conference in Frankfurt: "We are emerging from a deep crisis. It will take several years to get back to the peak level, where chemistry was as recently as in the 1st half 2008."

In the 2nd half 2009 most production plants, which had been idle temporarily during the crisis, went back into operation. Lehner: "But this does not mean that we can simply forget about the crisis." At currently 77 percent, capacity utilization in the chemical industy is still far below the usual level of 83 to 85 percent.

Sales

As compared with 2008, total sales of the German chemical industry fell by 12.5 percent to 154.4 billion euros. Within this overall picture, foreign business was somewhat more stable than domestic business. Foreign sales dropped by 12 percent to 85.4 billion euros. Domestic sales declined by 13.5 percent to 69.0 billion euros.

Prices

The year 2009 saw a general drop in chemical prices: in 2009 as a whole, prices were – on average – 2.5 percent lower than last year. This was due to falling raw material costs for oil and gas and the weak demand. The price situation has been stabilizing since mid-2009.

Employment

As compared with the production decline, there was a relatively low drop in employment: in 2009, the number of staff employed in the German chemical industry averaged 435,000 persons – i.e. 1.5 percent fewer than last year. Lehner explains: "Short-time work and flexible instruments under the collective bargaining agreement prevented higher staff cuts. During the same period of time, the German manufacturing industry as a whole lost almost twice as many jobs."

Investment

According to the VCI, chemical companies clearly reduced their investments in 2009 – due to the global economic crisis and within cost-cutting programmes. Smaller investment projects were postponed, and companies were cautious in the planning of major projects. Consequently, investments of chemical companies dropped by 10 percent to 6.3 billion euros. In view of low capacity utilization, there were no capacity increase investments. In the given situation, the VCI believes that higher investments of companies are unlikely for 2010. Lehner: "But we think that the level of investment will remain more or less stable."

Exports and imports

In 2009, exports – this term comprises foreign sales by German chemical companies, re-exports and chemical exports by third parties – fell by 12 percent to 123.2 billion euros. Given the weak situation of industry, imports of chemical products dropped considerably against 2008 – i.e. by some 11 percent to 86.8 billion euros.

Irrespective of the global economic crisis, the VCI estimates that in 2009 the chemical industry is once more recording a foreign trade surplus of over 36 billion euros. At present, over 55 percent of the German chemical industry's production go abroad. This shows that chemistry "made in Germany" is a quality mark of international appreciation. For many years, no other chemical nation has been working more successfully on export markets worldwide: most recently, German companies accounted for 12.6 percent - the lion's share - of global exports of chemical-pharmaceutical products. The European Union is by far the largest export market for German chemical companies: almost two thirds of their exports are sold to the other 26 EU Member States.

Whether the German chemical industry will be able to maintain its strong role in the export sector largely depends, according to Lehner, on the international competitiveness of chemical companies located in Germany – where suitable framework conditions and support from the political side are needed. Lehner: "In global competition, no nation can claim 'traditional' market shares. Figuratively speaking, the cards in industrial countries are now being reshuffled for the time after the crisis."