German Chemicals Growth Poised To Benefit from Domestic Demand

22 January 2001 00:00  [Source: ICB Americas]

The German chemical industry is expecting a 6- to 7-percent increase in its chemical sales this year with a 3-percent growth in output, despite the likelihood of a slowdown in the world economy.

Last year the sector also pushed up output by 3 percent, but with selling prices going up by an average 5 percent, sales rose by 12 percent to DM 213 billion ($100 billion), according to the German chemical industry association (VCI).

Domestic sales increased 9 percent in 2000 to DM 104 billion, while exports went up 15 percent to DM 109 billion.

This year, however, chemical sales could be boosted more strongly by domestic demand, even though economists are forecasting a drop in the growth rate of German gross domestic product (GDP).

"The [recent] revaluation of the euro against the US dollar, together with reduced growth in the US economy, could weaken the demand for our products," Manfred Schneider, VCI president, said at a press conference in Frankfurt.

"Nevertheless," he added, "we start the new year with confidence, because an expected lower inflation rate, a more relaxed situation where interest rates are concerned, the prospects for falling oil prices and a further reduction of unemployment indicate an improving demand situation."

Mr. Schneider, who is Bayer's chairman, warned that the VCI forecasts are based on the assumption that there would not be a major recession in the US. The association believes there will be economic growth above the long-term average in Europe and Asia.

Stronger consumer demand in Germany this year should help manufacturers of detergents and soaps, cleaning agents and personal care products, output of which dropped by 3 percent last year. "Most probably, high prices of gasoline and fuel oil and [Germany's] eco-tax reduced the purchasing power of private households in the second half of 2000," said Mr. Schneider.

The rise in exports last year was helped by the euro's 25-percent decline in value against the dollar. "Certainly exports were boosted by the weak euro, but this factor should not be overrated," said Mr. Schneider. "Only 20 percent of exports are settled in US dollars."

A rise in the cost of raw materials contributed to a 20-percent increase in imports to DM 93 billion.

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