Scarcity of good news

The German chemical-pharmaceutical industry ended the year 2023 with a sobering last quarter.

• Little momentum in global economy
• Cutbacks in chemical production
• Falling producer prices
• Slight drop in chemical sales
• Employment still stable
• Outlook: situation remains difficult

The German chemical-pharmaceutical industry ended the year 2023 with a sobering last quarter. In particular, the lack of orders due to the weak economic position of industry in Europe as well as intense competition brought a sales decline at home and abroad. Yet more cutbacks in production were the consequence.

VCI director-general Wolfgang Große Entrup comments on the current situation: „The year 2023 was a disappointment throughout – and good news for the location Germany remains far and few between. Not only the chemical-pharmaceutical industry but the whole domestic economy is suffering from sluggish business and structural problems. Speaking in metaphors, however, first hope springs after a long spell of drought. Since February, some individual companies have been reporting a slight improvement regarding orders, especially with orders from abroad. Now, this proverbial tender plant needs water, fertiliser and much light – also from politicians.”

Despite these cautiously positive signals, the VCI does not yet see any signs of an economic turnaround. The situation on the energy and raw materials markets remains tense. The persistent lack of orders combined with high production costs in Germany continue to weigh on business.

Business figures at a glance:

• Production fell by 2.3 percent against the previous quarter, reflecting a drop by 4.3 percent compared with the previous year. At 77.2 percent, the industry’s capacities were underutilised.
• Producer prices dropped by 0.1 percent in a comparison with the previous quarter while chemical and pharmaceutical products were 5.3 percent less costly than one year earlier.
• Seasonally adjusted, sales of the chemical-pharmaceutical industry fell by 1 percent to a total of 51.3 billion euros. Sales declined by 11.9 percent compared with last year.
• With roughly 477,000 staff, employment in the chemical-pharmaceutical industry remained stable.
• When comparing 2023 as a whole with the previous year, production dropped by 7.9 percent and sales fell by 12.2 percent to a total of 229.3 billion euros.
• For 2024 as a whole, the VCI anticipates that production will stagnate at a low level. With declining prices, the industry’s sales are likely to fall by 3.5 percent in the present year.

The German economy is still struggling not only due to the weak economy, but also due to the competitive disadvantages in Germany. An upswing alone will not be enough to make the latter go away. Wolfgang Große Entrup states: “The German economy urgently needs a comeback. This takes a turnaround in the economic policy, in order to give emphasis on growth, transformation and resilience. We should tackle the causes for the weakness of Germany as a business location – instead of spending much money on curing the symptoms.” The association VCI is calling on the federal government to reset the course in the economic policy. The government must become predictable again in its policies and stand by its decisions. Companies must be able to trust in permanently affordable energy prices, smart regulation and reasonable company taxation. They must have air to breathe in bureaucracy and licensing procedures.

Clarity, predictability and trust are now essential at the European level too. The European elections in June offer good opportunities for readjustment. A new political style is needed for the next legislative period: The EU should give more support, create incentives, leave room for own action – and generally create an environment where our industry can develop appropriately. The Antwerp Declaration, which was launched jointly by business and politicians in February, is a ray of light with its 10-point plan for a European Industrial Deal. Necessary structural reforms invariably mean an immense effort for all those involved. But only an economically strong Europe can also demonstrate political strength in an increasingly volatile world.

The same applies for Germany. Große Entrup concludes: “Change is needed so that Germany can return to its former strength. In the end, this will benefit everyone: politicians, business and society. As an innovative and strong industry, we remain confident even in these difficult times and work as hard as we can for the comeback of this country.”