The German chemical-pharmaceutical industry in 2017
A good year throughout for the chemical industry in Germany
2017 overall: production increased by 2.5 percent and sales improved by 5.5 percent ++ Highest level of employment for 13 years: 451,500 staff ++ Forecast 2018: Production plus 2 percent, sales plus 3 percent ++ No energy policy measures that increase electricity prices ++ Chemicals legislation: link the UK closely to the EU, irrespective of Brexit.
2017 was a good year throughout for the German chemical-pharmaceutical industry – with major sales growth by over 5 percent. Strong business of industries across Europe, which further picked up in the course of the year, brought significant production increases. Capacity utilisation remained high. All sectors, including basic chemistry, recorded volume growth – so the German chemical industry association Verband der Chemischen Industrie (VCI) at its annual press conference.
Foreign business benefitted from the robust demand from China, the brisker US economy, and the economic stabilisation of emerging markets. In total, chemical production (incl. pharma) rose by 2.5 percent. The upturn in Germany’s third largest industry led to the highest employment level for 13 years, i.e. 451,500 staff. VCI President Kurt Bock: “After the rather mixed results of the past three years, 2017 can be called “a good year” without limitations.”
Forecast: The VCI expects further growth in the industry also for 2018, anticipating a production increase by 2 percent. With slightly rising prices (+ 1 percent), sales should improve by 3 percent. In the year 2018 as a whole, thus the industry could reach for the first time a threshold of 200 billion euros. The VCI forecasts more or less similar growth rates for foreign and domestic business.
Regarding the prospects for the industry, Bock notes the following: “We are confident that the upward trend will last next year. Dynamics remain high in domestic industrial production. Also, the upward trend in Europe seems intact; this should further encourage the export business. But where political aspects are concerned, we need to brace ourselves for persistently turbulent times.”
The German chemical industry: facts & figures 2017
Capacity utilisation: Throughout the year, the capacity utilisation of production plants was above average (86.7 percent).
Sales: Positive volume business with rising producer prices (+ 3 percent) saw to a major sales increase for German chemical and pharmaceutical companies. In total, sales of the industry improved by 5.5 percent to just under 195 billion euros. Domestic sales climbed by 4.5 percent to 74.4 billion euros; sales in business with foreign customers even rose by 6.5 percent to 120.4 billion euros. Beside business in Europe (+ 5.5 percent) also sales to North America (+ 3 percent) and Asia (+ 8 percent) developed positively.
Employment went up by 1 percent to 451,500 staff, i.e. the highest employment level in the chemical-pharmaceutical industry since the year 2004. The lowest point was in 2010 with 414,800 staff.
Uncertain political environment
Regarding the problems in the difficult government formation in Berlin, VCI President Bock finds it deplorable and unsatisfactory that so far the politicians have been unable to agree on a common plan for safeguarding the future of the location Germany and modernising society. But he sees cross-party consensus when it comes to strengthening education, research and innovation. For this, also fiscal incentives for research are advocated as an instrument. Bock: “The chemical-pharmaceutical industry will invest every euro that the companies gain from an introduction of fiscal R&D incentives into additional research activities in Germany, at least to the same amount.”
Speaking for all energy-intensive industries in Germany, Bock warns against political concepts that bring further increases in electricity prices and put at risk the security of supplies. Therefore, the VCI opposes a national CO2 tax or an overly hasty end of coal-based electricity. Instead, the climate policy in Germany should focus on sectors outside EU emissions trading, which already comprehensively regulates industry and the energy sector where the climate policy is concerned. The reform of the relevant EU directive, which was adopted a few weeks ago, prescribes even more stringent emission reductions by industry from 2021 than this is the case today, so Bock. At the same time, the EU decided for measures to raise the CO2 allow-ance price and thus the costs for companies. The VCI President emphasises: “National regulation additionally to EU-ETS would mean duplicate regulation with no extra benefit for climate protection.”
The German chemical-pharmaceutical industry closely monitors the Brexit negotiations between Brussels and London. The United Kingdom is a major trading partner and one of the largest markets in the EU for the industry. In 2016, the industry sold products worth nearly 12 billion euros to the UK (6.7 percent of German chemical exports). Specialty chemicals and pharmaceuticals made up the largest share. During the same period, German chemical companies imported goods for more than 6.4 billion euros (5.2 percent). These mainly included pharmaceuticals and petrochemicals.
How far German chemical companies will be impacted by Brexit mainly depends on the result of the negotiations on the shape of future relations between the EU and the UK. Annual tariff payments of 200 million euros are possible, should the British government introduce chemical and pharmaceutical tariffs at the level of the EU’s existing external tariffs. Even higher burdens can be expected if specific regulation – e.g. the chemicals legislation REACH or the authori-sation of plant protectants and biocides – was to develop in different directions in the future. Bock underlines: “We need the largest possible degree of mutual recognition and the same standards.” For this, the United Kingdom should be linked as closely as possible to the EU by way of a comprehensive agreement.
All information around VCI's press conference - a table with key figures, 10 charts in diverse formats, the full statement of VCI president Kurt Bock as well as a set of photos in high resolution (the latter from around 1 p.m.) - stands ready for you in the download section at the top of this page.
The VCI represents the politico-economic interests of around 1,700 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 2016 the German chemical industry realised sales of around 185 billion euros and employed over 447,000 staff.