Despite various adverse factors, the majority of our companies expect to achieve growth, both at home and abroad, in 2022.

Christian Kullmann

More than 35 percent of companies have had to reduce their production, while 10 percent have temporarily shut down plants.

The VCI’s forecast takes into account the results of a recent member survey. It revealed that the overriding situation has deteriorated in recent months: 30 percent of companies are already reporting slight cuts, while 5 percent are even making significant cuts. There is no shortage of orders, but the bottlenecks in primary products and logistics have worsened. Due to supply chain issues, 35 percent of companies have had to reduce their production, while 10 percent have temporarily shut down plants.

However, the bottlenecks have consequences above all for the industry’s customers: Over 70 percent of companies can only process orders with delays, while 39 percent cannot fulfil them at all. According to the VCI, companies do not expect the situation to ease until the summer of 2022.

The rapid increase in gas and electricity prices in recent months is also causing problems for the industry: 61 percent of those companies surveyed reported that energy prices currently represent a significant hindrance for their operations. Companies are trying to pass on the rising costs to the customers in a timely manner. However, 16 percent do not see themselves in a position to do so. 67 percent said they would be able to pass on at least some of the costs. “The situation is likely to remain critical for some time. The majority of our companies do not believe that energy costs will ease significantly in the coming year,” explained the VCI’s President.

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With the coalition agreement, the new federal government has presented a host of suitable approaches to transformation, but the real test for this tripartite alliance will be to translate these into political action. Now, after the word must come the deed, emphasized Kullmann. Therefore, the VCI President welcomes the announced abolition of the EEG levy at the beginning of 2023, in order to reduce the price of electricity. “It is high time to muzzle this bureaucratic monster,” Kullmann emphasized. Above all, small and medium-sized businesses would benefit from this. In the chemical industry, this levy adds up to roughly 1.2 billion euros per year.

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In the view of the VCI, a massive and significantly accelerated expansion of wind power and photovoltaics is also indispensable for achieving the goal of climate neutrality. However, it must be accompanied by the construction of modern gas-fired power plants because of the political push to phase out coal-fired power generation. “We must not jeopardize the security of supply that we need every hour of every day,” warned the VCI President.

With more than 120 terawatt hours per year, natural gas is not only the most important energy source for the chemical industry, but also an essential raw material: Just under one-third of the natural gas it consumes per year flows into the production plants as raw material. This corresponds to approximately 3.2 million tons or 16 percent of all raw materials used by the industry for organic production purposes. In order to achieve carbon neutrality by the middle of the century, the industry wants to adopt a cyclical approach to the use of carbon.

The chemical recycling of plastic waste is an important part of this strategy, along with the direct use of CO2 from the air. The VCI, therefore, welcomes the fact that the current federal coalition government is taking a differentiated approach to the importance of chemical recycling and wants to include it as a recycling option in the German Packaging Act (Verpackungsgesetz). The VCI views this step as a paradigm shift for climate policy and the circular economy.

For more private and public investment, however, faster and more efficient approval procedures are needed. The coalition wants to act here and at least halve the length of time needed for this procedure. “We welcome this very much. Approvals are the driving force for innovation and investment.” The idea that less bureaucracy creates more growth is also proven by a recent study by the institute “IW” on behalf of the VCI. If, for example, a company could be incorporated in Germany one day faster than at present, according to one of the results of the IW’s analysis, this could trigger roughly 2 billion euros in additional direct investment.

The VCI also welcomes the fact that the German government wishes to play a constructive role in the debate on the EU chemicals strategy. “It is good and right that the coalition wants to focus on data, figures, facts and on the scientifically prudent principle of risk in this topic,” said Kullmann. “We support the goals of the sustainability strategy for chemicals. But these must be designed in such a way that they are practicable and capable of being planned for companies – especially for our SMEs – and can be implemented in a resource- and cost-efficient manner. Few things are worse for business than uncertainty. We, therefore, need a clear and solid transitional framework.”

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