Germany’s chemicals hit hard by China lockdowns, automotive sentiment improves – Ifo
MADRID (ICIS)–Lockdowns in China to contain the coronavirus pandemic have had a major impact on export-intensive industrial sectors in Germany such as chemicals, research institute Ifo said on Thursday.
On a brighter note, Ifo said sentiment in the petrochemicals-intensive automotive industry has improved as pressure on supply chains after Russia’s invasion of Ukraine ease and selling prices for vehicles remain high.
CHINA ZERO-COVID POLICY
The two-month lockdown in China’s main industrial and logistics hub of Shanghai has greatly hurt several manufacturing German sectors, which have in exports a key end market.
In what was already a difficult environment for many industrial companies on the back of supply chain disruption globally, Ifo said that half of those already-pressured companies have reported further problems due to China’s lockdowns.
Following the strict lockdowns in China, companies surveyed by Ifo mentioned trouble sourcing inputs such as chemicals, electronic components, and plastics.
The hardest hit industry was automotive, with 82.6% of them reporting trouble.
“Industries such as automotive and chemicals as well as manufacturers of machinery and equipment and of electrical equipment, which are closely intertwined with the Chinese economy, have been hit the hardest,” said Lisandra Flach, director at the Ifo Center for International Economics.
China accounted for 9.5% of Germany’s trade in goods in 2021.
“[Moreover] The results of a recent Ifo Institute survey show that 46% of [German] manufacturing companies rely on inputs from China,” added Flach.
Sentiment in Germany’s beleaguered automotive sector “brightened considerably” in May, however.
Producers continue to “command high sales prices” while expecting now “only minimal” further constraints cause by the war in Ukraine after Russia invaded that country on 24 February.
According to Ifo’s index of sentiment in the automotive industry, expectations have sharply improved from minus 20.5 points in April to plus 38.0 points in May.
The indicator for selling prices expectations remained high at 82.6 points, down from 86.1 points in April.
“Automakers, too, feel positive about their current business situation, with that indicator rising from plus 11.9 points in April to plus 17.5 points. They also continued to rate their order situation as excellent. Inventories did decline somewhat month over month, however,” said Ifo.
Moreover, the director at the ifo Center for Industrial Organization and New Technologies, Oliver Falck, said automotive manufacturers are planning to increase production in coming months, despite the continued shortage of intermediate products.
Production expectations “remained at a solid” plus 41.0 points.
However, business expectations, despite a “somewhat better” current business conditions, remained in negative territory at minus 17.9 points.
“Suppliers are facing higher purchase prices and hoping that they can add these onto their sales prices,” Falck said.
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