VCI: German chemical production expected to fall by 8.5% in 2022

Due to the dramatic changes in the European gas and electricity markets, the German Chemical Industry Association (VCI) lowered its full-year forecast again on September 14, with German chemical production expected to decline by 8.5% in 2022.

Previously, the VCI forecast in July that German chemical production would fall by 4.0% for the year. Earlier this year, the association forecast a 1.5% increase in chemical production.

The VCI said astronomical energy prices, sharp rises in raw material costs and persistent supply bottlenecks had "collapsed production in all sectors" of the German chemical and pharmaceutical industry, thus threatening Germany's future as an industrial base.

The chemical and pharmaceutical industries are the third pillar industries in Germany. According to VCI data, the chemical industry accounts for about 15% of Germany's natural gas consumption, using about 2.8 million tons of natural gas as a chemical feedstock every year, and 99.3TWh of natural gas for the production of steam and electricity, accounting for 27% and 73% of the industry's natural gas use, respectively. %.

The industry has been hit particularly hard by the energy crisis, with chemical and pharmaceutical companies forced to slash production. In the first half of the year, German chemical production fell by 3% year-on-year. Among them, in the second quarter, the output of the German chemical and pharmaceutical industries decreased by 6.4% compared with the previous quarter; the capacity utilization rate was 81.4%, which was still lower than the normal level.

According to the semi-annual report released by VCI earlier, production in almost all areas of the German chemical industry declined in the first half of this year. Fine and specialty chemicals were particularly hard hit, down 9%; inorganic and organic raw materials and consumer chemicals were down 0.5% year-over-year, pure chemicals production was down 3% year-over-year, and the polymer division alone saw production up 3% year-over-year.

VCI President Christian Kullmann said: "The enormous challenge poses a serious threat to the competitiveness of our company... The production cuts are only a first step, and if some links are forced to shut down completely, they may never restart. ."

It is still uncertain whether Germany will need gas rationing this winter. The VCI said preparations for the shortage were in full swing, recession fears were high and business expectations for the coming months were low.

Due to higher producer prices, sales in the German chemical and pharmaceutical industry increased by 22% over the previous year to 130 billion euros. However, chemical industry sales in the second quarter rose by 3.4% from the previous quarter to 64.9 billion euros, a significantly smaller increase than the previous quarter.

However, the VCI said that many chemical companies in Germany experienced declining revenues, making it increasingly difficult for companies to pass on high energy and raw material costs to customers.

The VCI also expects a 5.5% reduction in German chemical and pharmaceutical production in 2022. Currently, more than 473,000 people work in the chemical and pharmaceutical industries in Germany.