Germany’s VCI pulls 2020 forecast, expects ‘severe recession’

LONDON (ICIS)–Germany’s chemicals trade group VCI expects a “severe recession” with a significant drop in chemical and pharmaceutical production and sales because of the coronavirus pandemic, it said on Wednesday.

The group dropped its previous projection from March when it forecast a production decline of 1.5% this year and sales of €196bn.

VCI expects to publish an updated 2020 forecast only after Q2.

A decline in orders, disrupted supply chains and a lack of transport capacities were causing problems for the industry, VCI said.

“2020 is going to be a difficult year for the chemical-pharmaceutical industry,” said Christian Kullmann, VCI president and CEO of chemical firm Evonik.

“Companies will strongly feel the effects of the coronavirus crisis in the coming months.”

According to a recent survey, 75% of VCI members are expecting a sales decline in Europe, he said.

“Therefore, not only our industry but the entire German economy urgently needs an investment and growth programme – instead of new burdens,” he said.

“Furthermore, we need genuine and holistic sustainability strategies and not projects that are solely oriented to the ecological component.”

‘ROBUST’ Q1 
In the first quarter, Germany’s chemical industry did not yet feel the full force of the pandemic.

Both production and sales in Germany’s third largest industry even went up from Q4 2019, driven by strong demand for pharmaceuticals, hygiene products and packaging materials, which spared the industry major setbacks.

Sales rose 0.6% from Q4 2019, to €49.5bn in Q1, but were down 1.0% year on year from Q1 2019.

Domestic sales grew “vigorously” by 3.3% from Q4, while foreign sales fell by nearly 1% due to the pandemic, VCI said.

Q1 production rose 3.2% quarter on quarter and 0.9% year on year from Q1 2019.

Despite falling oil prices, chemical prices were stable.

Employment in the chemical-pharmaceutical industry was at around 464,000 in Q1.

Front page picture: The Marl chemicals hub in Germany 
Source: Hans Blossey/imageBROKER/Shutterstock

Visit the ICIS coronavirus topic page for analysis of the impact on chemical markets and links to latest news.