Weak Q1 for German chemicals industry – VCI

LONDON (ICIS)–The German chemicals industry had a weak start to the year, according to the quarterly report from VCI, the German chemicals industry association on Tuesday.

It reported a decline in production and sales in Q1 2023, and said “a strong recovery is not in sight” for the sector as input costs remain elevated.

The VCI predicts a 5% drop in production for the industry in 2023, with chemical production excluding pharmaceuticals expected to fall 8%.

The dour sentiment has been driven by persistently high prices for gas and electricity, which are still elevated compared to historic levels and left European players at a distinct cost disadvantage compared with their global rivalss.

Although supply pressures have eased and enabled producers to work through order backlogs, demand for chemicals products remains weak which could cause further pressures.

Change in %	Compared to Q4 2022	Compared to Q1 2022
Production	-0.9	-14.8
Production excluding pharma	3.5	-18.7
Producer prices	0.5	10.8
Sales	-6.7	-8.2
Domestic sales	-8.2	-11.5
International sales	-5.8	-6.1

Production in Q1 fell by 0.9% on the previous quarter with capacity utilisation rates at 78.6% – which is below normal – although they were up from 76.5% in Q4 2022.

Producer prices edged up compared to Q4 2022, but prices were up more significantly compared with Q1 2022.

Sales were 6.7% lower than in Q4 2022 and settled below the previous year’s level for the first time in two years.

Employment in the sector has remained stable with around 447,000 people working at chemical and pharmaceutical companies in Germany.

VCI president Markus Steilemann raised concerns about the cost of energy and raw materials saying that despite the decline on the previous quarter, rates are still twice as high as they were in previous years.

“Germany as an industry location is becoming less and less competitive internationally. For the energy-intensive chemical industry, there is a great danger of ever more investments and jobs being moved abroad,” said Steilemann.

“It is positive that meanwhile the politicians have recognised the seriousness of the situation too. But now action must follow – and this must happen fast, without much bureaucracy and in a targeted manner, for example, through an industrial electricity price as a bridge to the future and to secure Germany as an industry location,” he added.

Front page picture shows fog over the banking district in Frankfurt, Germany (image credit: Michael Probst/AP/Shutterstock)