Chemical production in the 27 EU countries has continued to recover, and the market recovery is still cautious

Entering 2024, the chemical production of the 27 EU countries exceeded the same period in 2023 for two consecutive months, showing a warming trend.

The European Chemical Industry Council said that in the first quarter, production increased by 0.6% compared with the same period last year, and increased by 1.2% since the beginning of 2023. However, we still need to be cautious, as this 0.6% year-on-year growth may only be a short-term replenishment effect, rather than a signal of a truly stable and sustained recovery in demand. At present, the market demand for chemical products has not shown clear signs of a strong recovery, and structural issues such as order shortages and high costs continue to weigh on market expectations.

The EU chemicals business environment has shown positive changes 

In April 2024, chemical production in the EU 27 countries grew again, achieving three consecutive months of positive growth. Since turning positive for the first time in February 2024, the ongoing destocking trend appears to be coming to an end. It is worth mentioning that after six consecutive declines, inventory levels recovered for the first time in April 2024. In addition, managers are increasingly optimistic about the overall order level, showing a gradual improvement trend. However, the export order indicator declined slightly in April 2024, reminding us that the road to recovery in demand is still long.

Eu chemical prices remain high 

Prices in the EU27 chemical industry are now at least 30 per cent higher than pre-Covid-19 levels. Similarly, in the United States, chemical sales prices in the first quarter of 2024 were 27% higher than pre-crisis levels. However, the selling price of EU chemicals decreased by 8.8% in the first quarter of 2024 compared to the same period in 2023. Prices of fertilizers and "other inorganic chemicals" fell by more than 20 percent. For plastics, industrial gases and man-made fibers, the decline is between 9 and 10 percent.

Germany's chemical industry is showing signs of recovery 

The German chemical industry, long anticipated, is finally seeing the first glimmers of recovery. According to the latest VCI report, German production has reached its highest level since July 2022. The order situation improved with the reduction of customer industry inventories and the increase in demand outside Europe. Both production and sales increased from the previous quarter. While Germany still faces structural problems, the dampening effect of order shortages and cost issues on business sentiment is gradually diminishing. However, Europe still needs to work hard to boost exports to markets such as Asia and the United States for a broader recovery.

Global chemical production is growing steadily and the outlook remains challenging 

Global chemical production increased by 5.8% in the first quarter of 2024 compared to the first quarter of 2023. Although the level of chemical production in China remains high, chemical companies do not mention the significant increase in demand from Chinese customers. Most analysts see the increase in Chinese chemical production as a positive sign, but the intention of Chinese companies to increase production capacity through increased exports could have an impact on the global competitive landscape. In addition, weak global demand in key downstream industries and persistently high energy costs are expected to continue to challenge the industry outlook in 2024-2025.