Germany H1 chems, pharma sales fall 6% but sector posts 'signs of recovery'

Author: Tom Brown

2020/09/08

LONDON (ICIS)--Germany's chemicals and pharmaceutical sales fell over 6% in the first six months of 2020, trade body VCI said on Tuesday, with the projected fall for the year likely to at a similar level.

A temporary spike in demand for cleaning agents and medicines was insufficient to offset the extent of the fall in demand and productivity caused by the coronavirus pandemic and the lengthy lockdown the country underwent through March and April, VCI said.

The fall was most dramatic for the second quarter - sales fell 11.5% year on year and quarter on quarter, with producer pricing dropping an average of 3.2%.

Analysts have identified the healthcare sector as one of the more resilient end-markets for petrochemicals and packaging producers.

The decline for the chemicals sector was less pronounced than when pharmaceutical was also factored in, with sales dropping 3.6%.

Average chemicals capacity utilisation stood at 77.5% during the period.

First-half polymers production fell 8% year on year due to the decline in automotive and plastics processing demand, while specialty chemicals volumes fell 3.9%, VCI said.

Although the fall in volumes for the year is likely to be of a similar magnitude to that seen during the first half of the year, the demand drop bottomed out in the second  quarter, VCI said.

"Despite this slump [in H1], our companies came through the global crisis much better than other industries," said VCI president Christian Kullmann.

Germany's chemicals industry is the largest in Europe, with sales in 2019 at €193bn, which represented a 5% fall compared with 2018.

RECOVERY: END OF 2021
A poll of member companies showed that operational disruptions are declining and that liquidity problems are only an issue for a small number of players, it added.

Under half of VCI member firms expect sales to reach pre-crisis levels by the end of 2021, and a fifth of respondents expect the recovery will take another year.

However, 13% of responded project the recovery will take longer, or that demand will never fully rebound.

Around 15% of the sector’s 464,000 employees are currently on short-time work (“kuzarbeit” in German) measures, VCI added.

"We are seeing the first signs of recovery. If another shutdown [to contain the pandemic] can be prevented, the demand for chemicals and pharmaceuticals should stabilise in the second half of the year."

VCI applauded the German government’s policy response to shore up business and household budgets during the crisis, but stated that more measures are needed to help drive the recovery.

It asked for cuts to corporate taxes, reduced energy pricing, tightening approvals processes, and a reduction in red-tape burdens on smaller businesses.

Front page picture: New cars are stored in front of containers at the 'logport' (logistic port) in Duisburg, June 2020
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