German chemical business in 2014 and forecast for 2015

Dekkers: „Moderate upward trend in the chemical industry“

Wrap-up and outlook for the business situation of the German chemical industry: * Chemical business 2014: Slight increase in production and sales / Further rise in employment / Investments total 7 billion euros. * Forecast 2015: Sales +1.5 %, production +1.5 %, prices –0.5 %. * VCI President Marijn Dekkers: Call for more innovation capability and competitiveness in Germany.

f.r.: VCI President Marijn Dekkers and VCI Director-General Utz Tillmann: Cautious optimism for 2015 © VCI/Mendel
f.r.: VCI President Marijn Dekkers and VCI Director-General Utz Tillmann: Cautious optimism for 2015 © VCI/Mendel

After changeable business developments, in the end the German chemical industry did not come up to its expectations in 2014: With an altogether restrained rise in the demand for chemical products, production and sales went up by 1.5 percent. Business with customers abroad was disappointing. By contrast, on the domestic market, Germany’s third largest industry sold clearly more products than last year.

Outlook: The German chemical industry association Verband der Chemischen Industrie (VCI) expects that the economic stabilisation in the eurozone will continue in 2015. The VCI sees positive signals in the markets outside Europe too. VCI President Marijn Dekkers outlined to the press the chemical industry’s expectations: “For the German chemicals business, there will be a moderate upward trend also next year.” He explained: “On the domestic market we can count on the stable demand from our customers in the industrial network. The demand continues to rise in Europe, our most important market outside Germany. Business with the USA is turning out very good. Against this backdrop, chemical exports should further improve in 2015. But the growth rates will remain moderate.” According to the VCI, business is unlikely to pick up soon in the coming months.

Forecast 2015: As explained above, the chemical industry starts 2015 with cautious optimism. The VCI is expecting the chemical production to rise by 1.5 percent also in the coming year. With slightly falling producer prices (-0.5%), sales could go up by 1.5 percent to over 196 billion euros. Here, the Frankfurt-based VCI thinks that the business activities of its ca. 1,700 member companies will improve somewhat more with customers abroad (+1.5%) than at home in Germany (+1.0%).

The chemical year 2014: Facts and figures

  • Employment: Irrespective of low economic dynamics, chemical companies once more built up over 4,000 jobs. At present, the German chemical industry has 442,500 staff (+1%).
  • Investments: In 2014 chemical companies increased their funds for fixed asset investments and spent well over 7 billion euros for this purpose in Germany, i.e. 2 percent more than back in 2013. Half of these investments went into production capacity expansions.
  • Sales and prices: With falling prices (-1%) the chemical industry achieved a slight increase in total sales: At 193.6 billion euros, total sales were 1.5 percent higher than in 2013. Domestic sales went up to 77.8 billion euros and exceeded the previous year’s level by 2 percent.
  • Foreign trade: Foreign trade overall improved by 1 percent to 115.8 billion euros. Business with the NAFTA countries grew vigorously (+5.5%). In particular, the trade in pharmaceuticals gave positive impulses. There was only a minor rise in exports to the European countries (+1.0%). Irrespective of the Crimean crisis, sales to Eastern European countries developed positively altogether (+2.0%). Chemical and pharmaceutical exports to the region Russia-Ukraine fell significantly (Russia: -6%, Ukraine: -20%) but both countries only account for roughly 4 percent of the total of German chemical exports (share of Russia: 3.3%). Thus, the impacts on the German chemical industry kept within limits.

Strengthening the innovation capability of Germany as a location of industry and chemistry

For improving the competitiveness of Germany as a location of industry and chemistry, VCI President Dekkers identified two fields for action by politicians: strengthen the innovation capability and make sure that energy is affordable. Dekkers: “Those who lastingly strengthen innovation in the chemical industry also encourage the performance ability and the competitiveness of the entire industrial network in Germany.”

In this context, Dekkers renewed the VCI’s demand to introduce fiscal incentives for research in the ongoing legislative period. Two thirds out of the 34 OECD countries already grant such incentives, stimulating more research spending by their companies and, consequently, more economic growth. Dekkers also called for better fiscal incentives for venture capital investors, e.g. by enabling tax loss carryforwards without limitation in terms of time or amount. Dekkers: “We need to establish a more courageous start-up culture in Germany so that young companies can successfully put their ideas into practice. Reasonable proposals are on the table. Now, the politicians need to make them a reality.”

The VCI also sees an urgent need for action in the education policy. Here, for many years all studies with international comparisons find considerable weakness in Germany. The VCI speaks for giving more room to mathematical-natural science subjects in school teaching, across all levels of education. According to the VCI, the share of mathematical-natural science subjects in the mandatory lessons should be increased from currently 28 to 33 percent in all types of secondary schooling. The goal of good education and excellent science should not fail due to the decentralised competencies of the federal states. The VCI President emphasised: “Therefore, the planned amendment of the German Basic Law for a participation of the federal administration in university funding is a step in the right direction. Such cooperation would be desirable also for the education sector.”

Arguments for a strategy change in the energy and climate policy

Regarding the costs of electricity, VCI President Dekkers spoke for a strategy change in the German energy and climate policy. Irrespective of burden-easing provisions – which are only granted to somewhat over 140 out of around 2,000 chemical companies – the chemical industry is paying in 2014 nearly 1 billion euros in EEG-reallocation charge. This burden is borne essentially by small and mid-sized enterprises. Dekkers proposed the following: “With an alternative financing of the Energiewende – for example, through the federal budget – the promotion commitments of the EEG could be met without driving up the electricity price.”

Furthermore, in the climate policy the VCI sees the need for a close attunement to the requirements from Brussels. National go-it-alone actions hardly make sense any more, as is shown by the European Council decision to reduce greenhouse gases in the EU by 40 percent (basis 1990) by 2030. This means for the chemical industry within emission trading that – additionally to its early action reductions of nearly -50 percent – this industry is to achieve a further reduction by 22 percentage points to a 70 percent reduction target.

Dekkers said: “We accept this political requirement, and we want to make our contribution. But at present, we see no technical or economic solution for how the German chemical industry could reach this extremely high target.” Other relevant CO2 emitters – e.g. the housing or transport sectors – should be included in the emission trading scheme for a fairer burden sharing in climate protection. “However, if the status quo is maintained, restricting production is likely to be the only way for the German chemical industry to meet the EU’s reduction target.” For this reason, the VCI President urged the political leaders of Europe to do whatever they can for an adoption of a global agreement with comparable reduction requirements at the UN climate conference 2015 in Paris: “All major emitters need to be included also at the international level. Only in this case will the burdens not adversely affect the competitiveness of Europe. If the negotiations fail in this respect, the persistent deindustrialisation will progress in Europe – mainly against the backdrop of low energy prices in the USA.”

Please note:

A table with key figures for the German chemical industry, all charts of the press conference in diverse formats (only in German, sorry), the full statement of VCI President Dr Maijn E. Dekkers (in Engilish) and - starting from approximately 12.30 h p.m. - a set of photos in high resolution for your reporting purpoeses stand ready for you in the download section at the top of this page.

The VCI represents the politico-economic interests of over 1,650 German chemical companies and German subsidiaries of foreign businesses. For this purpose, the VCI is in contact with politicians, public authorities, other industries, science and media. The VCI stands for over 90 percent of the chemical industry in Germany. In 2013 the German chemical industry realised sales of more than 190 billion euros and employed around 438,000 staff.

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Stud. Ass. Manfred Ritz