Chemical Industry Forecast Germany Cuts its Forecast: Chemicals Fallen on Hard Times

Weak demand for plastics and materials clouds perspectives for chemicals: Although German chemical trade association VCI had previously forecast a 1.5 percent rise in production, these figure had to be cut – for the third time in a row. Now, the industry calls upon policy makers in Berlin and Brussels to set the course for future growth.

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Verband der Chemischen Industrie e.V. (VCI)

Verband der Chemischen Industrie e.V.

Frankfurt/Germany – Already the first quarter of 2016 showed little reason for optimism: Now, production levels in chemicals and pharmaceuticals are stagnating at best. The German chemicals trade group VCI had to cut its 1.5 percent growth perspective.

Business is not going smoothly in Germany’s third largest industry. Production in the chemical-pharmaceutical industry stagnated in the 1st half 2016. Sales fell clearly, as compared with the previous year: With another drop in producer prices, sales of this industry declined by 3.5 percent to 90.4 billion euros. That equally impacted domestic and foreign business, so the German chemical industry association VCI at its half-year press conference.

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“Positive impulses are lacking for chemistry – both economically and politically”, stated VCI President Marijn Dekkers. “At the same time, the negative factors are increasing: like the growth weakness of emerging markets, low dynamics in global trade overall, and the end of the worldwide investment boom.”

For the 2nd half 2016, too, the VCI President is expecting headwind for chemical business. The positive effects of special factors, i.e. the low oil price and the weak euro, are wearing off. Dekkers: “Moreover, the Brexit and strong fluctuations of raw material prices and exchange rates are adverse framework conditions for solid growth in our industry.”

Against this backdrop, for the overall year 2016 the VCI is now expecting a production increase by only 0.5 percent for the German chemical-pharmaceutical industry. With further falling producer prices, sales by this industry should drop by 1.5 percent to 186 billion euros, so the VCI’s forecast.

Update: Brexit Insights

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Chemical Industry in Germany: Competitiveness at Risk

For around a decade, Germany has been the “world champion of exports”. In terms of sales, Germany ranks third in a comparison of countries. All the same, there are more and more signs that the competitiveness of this location is crumbling – because structural changes in the USA, in China and Saudi Arabia, which have led to low energy and raw material costs and a massive building of production capacities in these regions, have impacts that are felt in the heart of Europe. Dekkers emphasized: “A look at the various sectors of our industry shows that this is an acute problem already today.”

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