Business situation of the German chemical-pharmaceutical industry
Difficult 1st half 2019 for the industry
In the 1st half 2019, production dropped by 6.5% and sales fell by 4% ++ Forecast overall year 2019: production decrease by 4%, sales decline by 3% ++ Climate protection is an obligation and an opportunity for the chemical industry ++ Positive carbon-dioxide-stocktaking through products and participation in EU ETS.
In the 1st half 2019, the chemical-pharmaceutical industry did not maintain its high level of the previous year. In view of difficult framework conditions worldwide – slower growth of the global economy, weak situation of industry in some parts of Europe, and uncertainty in markets due to political trade conflicts – the production fell by 6.5 percent against the 1st half 2018. The marked drop in volumes and business results is also connected with the normalisation of the pharma boom in back 2018 when production had jumped up because of a special effect. Consequently, compared with the previous year the sales in Germany’s third largest industry shrank by 4 percent to just under 96 billion euros.
According to the half-year reporting by the German chemical industry association Verband der Chemischen Industrie (VCI), the weaker demand impacted almost all product sectors: The production of specialty chemicals decreased by 4 percent against the previous year. Due to the above-mentioned special effect, pharmaceuticals plummeted by 14 percent below the previous year’s level. Polymer production went down by 7 percent. The output of soaps, detergents and cleaning agents declined by 4.5 percent. Irrespective of the subdued business situation of the chemical industry, there was a minor employment increase to 464,800 staff (+0.5 percent).
At present, the business expectations of the industry are not very optimistic. The VCI anticipates, at best, a moderate recovery in the further course of the year. VCI President Hans Van Bylen assesses the framework conditions for the industry: “The risks for an economic recovery remain high. There is the threat of rising tariffs between the USA and China, and the danger of military conflicts in the Middle East is increasing. Should that came true, global trade would further slow – with strong impacts on German industry. The risk of a hard Brexit persists too.”
In this global economic and political setting, the VCI has made a slight downward revision of its earlier forecast for the overall year 2019. Now, the Frankfurt-based association projects for the industry a drop in production by 4 percent. With an expected price increase by 1 percent for chemical-pharmaceutical products, sales should fall by 3 percent to just under 197 billion euros.
Protecting the climate and maintaining competitiveness
Climate protection has moved in the focus of the societal and political debate in Germany. VCI President Van Bylen emphasises that climate protection is highly important to the industry in several respects: “We see climate protection not only as an obligation but also as a great opportunity. With innovative products and processes, our industry significantly contributes to making the Energiewende a success and to more climate protection.” For example, the use of plastics reduces the fuel consumption of all vehicles in Germany by 500 million litres per year.
The chemical industry’s own stocktaking in climate protection is positive too: Its greenhouse gas emissions have halved since 1990 – while chemical production has increased by almost 70 percent. Van Bylen explains that this is also because the industry, with its many plants, takes part in the European emission trading scheme for CO2 allowances (ETS). Since 2005, industry and the energy sector in the EU have been falling under ETS. Since then, greenhouse gas emissions of both sectors have dropped by a total of 26 percent. Thus, the minus 21 percent target for 2020 is more than reached already now. The VCI President underlines: “European emission trading works better than any other political instrument for climate protection.” As this system is prescribed until 2030, greenhouse gas emissions will reliably fall by at least 43 percent by then.
For this reason, the VCI is critical of considerations to extend or supplement EU emission trading. This comprises an inclusion of other sectors such as transport or buildings. From the VCI’s perspective, this would cause strong distortions of the system. In particular, the VCI holds that introducing a national CO2 price, which also applies to the energy sector and industry, would be the wrong way and significantly impair the competitiveness of German companies. VCI President Van Byler stresses: “National go-it-alone action makes no sense. Neither for the climate, nor for the economic performance, employment and prosperity.”
He points to the distribution of global CO2 emissions and their marked increase in other regions of the world. Currently, Germany’s share in global CO2 emissions is 2.2 percent; the total of greenhouse gases has dropped by over 30 percent since 1990. By contrast, the economies of the G20 countries account for roughly 80 percent of global emissions of the greenhouse gas CO2. Therefore, the VCI calls to intensify the political efforts for developing a global solution. Van Bylen: “If a common CO2 price could be agreed at G20 level, this would have a clear impact in climate protection and also maintain our international competitiveness.”
All information around VCI's press conference - a table with key figures, 11 charts in diverse formats, the full statement of VCI president Hans Van Bylen 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 more than 90 percent of the chemical industry in Germany. In 2019 the German chemical industry realised sales of ca. 193 billion euros and employed 464,800 staff.