Update: The global situation of the chemical industry: challenges and outlook
The chemical industry continues to struggle. Last year, it was mainly European and German manufacturers who complained about falling sales and insufficient capacity utilisation, but the phenomenon is now global – the world economy is showing clear signs of slowing down. We look back to the year 2024 and venture an outlook.
The chemical-pharmaceutical industry in Germany looks back on a challenging year 2024. Despite a slight increase in production of 2 per cent, the industry continues to be in a low valley, characterised by falling sales, a low order situation and ongoing pressure to adapt. The economic situation not only reflects the difficulties in Germany, but also global trends, as highlighted in reports by 德勤 and Cefic .
Markus Steilemann , CEO of the plastics manufacturer 科思创 and President of the German Chemical Industry Association ( Verband der Chemischen Industrie e.V. (VCI) ) , drew a sobering conclusion when presenting the industry's balance sheet on 13 December 2024: ‘The only bright spot is that the rapid downturn of the last two years has not continued.’ Despite a 2 per cent increase in production, the chemical industry's output is still well below 2018 levels. By way of comparison, production in the chemical-pharmaceutical industry fell by 16 per cent, and in the chemical industry alone by as much as 17 per cent. This illustrates the industry's deep structural crisis.
In addition, production facilities were only operating at 75 per cent of capacity in 2024 – a figure that has been below the profitability threshold of 82 per cent for four years. This underutilisation has already led to plant closures and further shutdowns being planned, particularly in Germany. At the same time, companies are struggling with falling prices: Chemicals were on average 2.5 per cent cheaper than in the previous year, which further exacerbated the 2 per cent decline in sales to 221 billion euros. Domestic sales were particularly affected, falling by 4 per cent. Pharmaceutical production recorded a decline of 1.5 per cent, weighed down by supply chain problems, capacity bottlenecks and declining demand from Europe and the US. Specialty chemicals also faltered, with production falling for the third year in a row, this time by 2 per cent.
Global economy falters
Global trends illustrate the divergent development of the chemical industry: While Europe and especially Germany are struggling with high energy prices and a complex regulatory environment, the US is benefiting from cheap shale gas and government investment programmes. Nevertheless, even in the US, the sky is not the limit in view of a weakening economy that is expected to continue: the US chemical industry association ACC reported in December that the volume of chemical imports and exports in 2024 had fallen significantly to its lowest level since 2021. No data is currently available for the Asian region, which includes China as the world's largest chemical producer – in 2023, chemical production in China had still increased by 6.1 per cent.
By contrast, the European chemical industry is lagging well behind its expectations for a recovery in the chemical industry in 2024. According to Cefic, although exports have increased by 8 per cent, competitiveness is being affected by high production costs and low momentum. For example, gas prices in Europe will remain almost four times higher than in the US in 2024.
Little optimism for 2025
The outlook for 2025 gives little cause for optimism and is characterised by many uncertainties. According to the VCI, production could increase by 0.5 per cent, driven by a slight increase in pharmaceuticals?(+0.5 per cent) and stagnation in chemicals. Sales are expected to remain at the 2024 level.
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The ACC also sees further difficulties: ‘Looking ahead to 2025, a number of challenges and opportunities will arise for U.S. chemical producers,’ says Martha Moore , chief economist at the American Chemistry Council : ‘Against the backdrop of new political leadership, weak global demand and production from China, the U.S. chemical industry is looking forward to building on its energy advantage...’.
In Germany, the member companies of the VCI have mixed views about a possible recovery: while the more optimistic companies expect a turnaround as early as autumn 2025, half of the companies do not expect a significant recovery in demand until 2026 or later.
Improving competitiveness remains a key lever for the future of the industry. According to a study by Boston Consulting, German chemical companies need to increase their productivity by 10 to 30 per cent to be able to keep pace internationally. This requires innovation, investment and a business-friendly environment. However, there is a worrying development when it comes to investment: while German companies are cutting their innovation budgets, investment abroad is increasing – particularly in the US and Asia.
Global perspectives: trade as an opportunity
The EU-Mercosur agreement offers new opportunities for the industry. According to Cefic, the agreement could strengthen trade with South America, reduce tariffs and promote investment. This would give the European chemical industry a much-needed boost to growth, and also reduce dependence on China.
In view of the challenges that continue to exist in Europe, the VCI appeals to politicians. The central demands are
Conclusion: The chemical-pharmaceutical industry in Germany is at a crossroads. The course set in 2025 - whether by political decisions, technological progress or strategic investments - will determine whether the industry can regain its competitiveness and benefit from global growth impulses.