Quarterly report 4.2024

The year 2024 ended with a severe setback for the chemical and pharmaceutical industry.

• Globale Chemi Global chemical markets: recovery without Europe
• Production: new low
• Producer prices stagnate
• Total sales: negative domestic business
• Employment still stable
• Outlook: no growth in sight

The year 2024 ended with a severe setback for the chemical and pharmaceutical industry. The economic recovery failed to materialize for both the German and European industry. On the contrary, the downtrend continued in many sectors. As a result, the demand for chemicals “made in Germany” remained weak, especially on the home market Europe. Production slumped sharply in the fourth quarter. The only positive impetus came from countries outside Europe. The hopes of the German chemical industry association (VCI) now rest on the new German federal government, which needs to return Germany on the path to competitiveness with bold reforms.

VCI director-general Wolfgang Große Entrup says: “2024 was another year to forget for the industry. We want to leave this low point behind, even though Trump’s unpredictable tariff policy, another rise in energy prices and unresolved structural problems continue to cause uncertainty among the companies. We need a radical change of course in the economic policy. There is no proverbial grace period for the incoming federal government, it must deliver now. Economy First must be the motto.”

The VCI praises the rapid conclusion of the exploratory talks as a strong signal and the results on taxes, electricity prices and bureaucracy reduction as steps in the right direction. However, the association sees considerable room for further improvement. Große Entrup emphasizes: “Europe is not happening, while this should be a top priority. And those who proclaim 'whatever it takes' must not forget to save money. We are calling for an honest check of the financial situation. There is no alternative to upgrading our defence. But when it comes to investment in infrastructure, we cannot approve of the ‘get spending out of the budget and into the special fund' approach. The wear and tear at the business location Germany is not due to a shortage of money but to a lack of prioritization.” The VCI’s director-general urges the political parties to overcome rifts. “We can no longer afford a war of the roses. Get together. This is about our country.”

Overview of business figures

• Irrespective of the disappointing last quarter, the VCI keeps up its forecast for the business year 2025. Production is likely to stagnate, as the increase in the pharmaceutical industry can make up for the decline in chemistry. Overall, the industry’s sales are likely to fall by 1 percent.
• Production dropped noticeably by 4.2 percent against the previous quarter (minus 1.2 percent against the previous year). Capacity utilization declined to 74.7 percent and remained below the profitability threshold.
• Prices for chemical and pharmaceutical products stagnated. This meant that producer prices were only just below the previous year's level.
• Compared to Q3 2024, total sales in the chemical and pharmaceutical industry increased slightly to 53.1 billion euros, still visibly falling short of the previous year. Sales to customers outside Europe had a stabilizing effect. Business in Germany and Europe remained weak.
• The number of jobs in the industry was still stable at a high level of around 480,000 employees because of growth in the pharmaceutical sector.

Although the global economy had slightly more momentum in Q4 2024, the European Union's gross domestic product was merely just under 0.2 percent higher than in the previous quarter. To put this into perspective, it was the weakest growth among the major economies worldwide. At the very bottom in Europe was the German economy, which contracted again in the last quarter and thus went through a recession for the second consecutive year.

Production in the German chemical and pharmaceutical industry declined in the final quarter of 2024 to a new negative record. The previous quarter's level was clearly missed by 4.2 percent. Thus, production was 1.2 percent lower than a year earlier. The industry continued to move backwards, with no momentum coming from construction either. As a result, demand for chemical products in Europe remained weak. There were no impulses for an expansion in chemical production. The production of pharmaceuticals was somewhat more encouraging. Although the result of the previous year was not achieved, the decline in production appears to be coming to an end. Compared to the previous quarter, production stabilized and went up significantly in the course of Q4 2024.

In the fourth quarter of last year, total sales in the chemical-pharmaceutical industry rose slightly by 0.3 percent to 53.1 billion euros, compared to the previous quarter. This was attributable to countries outside Europe. Pharmaceuticals, detergents and personal care products as well as inorganic chemicals were in demand. However, the industry still fell 1.5 percent short of the relevant quarter of the previous year.

Domestic business in the German chemical industry was particularly poor at the end of 2024. Sales at home went down by 1.4 percent and only reached 19.5 billion euros, missing the previous year’s level by 4 percent. As already mentioned, the sluggish sales were stabilized by foreign business. Sales abroad of chemical products and pharmaceuticals rose by 1.4 percent to 33.6 billion euros. Importantly, this was driven by non-European markets. Growth was particularly strong in North America at the end of the year. Not only did sales of pharmaceutical products boom there, sales of chemicals also improved significantly.

Prices for chemicals and pharmaceuticals stagnated in the final months of last year. Compared to the relevant previous year’s quarter, chemical and pharmaceutical products were around 0.2 percent less costly overall.

The number of staff in the chemical and pharmaceutical industry remained stable at around 480,000. However, this figure should be treated with caution: The level of employment within the industry was only maintained because of growth in the pharmaceutical sector. The pressure in the chemicals sector remains high. There have already been slight drops in the number of employees here.

The VCI keeps up its forecast for the business year 2025: The production of chemical and pharmaceutical products will continue to stagnate, with growth in the pharmaceutical sector (2 percent) making up for the drop in chemistry (2 percent). The industry’s sales are anticipated to fall by 1 percent in the present year. This is with the following breakdown: chemicals (-3 percent) and pharmaceuticals (+2 percent). The industry does not expect an economic upturn until 2026 at the earliest.

The association is calling on the incoming German government to quickly and purposefully tackle the much-cited restart. Wolfgang Große Entrup states: “As the world’s third largest economy and the industrial driver of Europe, we have a responsibility that we must live up to. Economic strength and political influence are two sides of the same coin – this applies to Europe just as much as it does to Germany. Speaking in metaphors, it is in our country’s own hands. Now, political deciders in Berlin should resolutely implement the economic turnaround. This is an immense effort, but not an insurmountable challenge.”