Stocktaking 2024

An end to the drought is not in sight for the chemical-pharmaceutical industry.

• Production increase by 2 percent
• Drop in sales: 2 percent to 221 billion euros
• Forecast 2025: stagnation of orders and sales
• Economic policy should unleash positive forces after federal elections

Another difficult year is coming to an end for the chemical and pharmaceutical industry. In view of the ongoing recession in the industry, Markus Steilemann (President of the German chemical industry association VCI) comments: “Our stocktaking is bleak. The only ray of light is that the rapid downturn of the last two years has not continued.”

Production is far below the previous years’ levels

2024 saw a production increase of 2 percent in the chemical-pharmaceutical industry – this is less than the industry had hoped for after the positive start of the year. Overall, the output is far below the previous years’ levels. In 2024, production in the chemical-pharmaceutical industry was roughly 16 percent lower than back in 2018, with a decrease by 17 percent for chemistry.

There was a lack of orders in the present year – and the order shortage persists. On average, capacity utilisation of production plants was only 75 percent. In four consecutive years now, the chemical and pharmaceutical industry has been clearly below the base value for profitable operation. In consequence, first plants were permanently shut down in recent months. Yet more closures are likely to follow.

The output of basic chemicals increased by around 8 percent in 2024. However, this is no reason for cheer: In the previous years, basic chemicals production had been reduced by more than a quarter. This also applies to polymers and consumer chemicals where production figures recovered somewhat more slowly in 2024, i.e. by 4 percent and 2 percent, respectively. For the third time in a row, the output fell among manufacturers of specialty chemicals – with a drop of 2 percent in the present year.

In 2024, there was a decline by 1.5 percent in pharmaceutical production, due to supply chain problems, capacity bottlenecks and high costs at the location Germany. Add to this much fewer orders from Europe and the USA.

In the present year, chemistry and pharma realised sales of 221 billion euros

(-2 percent). Foreign business decreased by 1 percent (139 billion euros) while domestic sales in Germany declined by 4 percent (82 billion euros). The drop in sales was exacerbated by falling prices. On average, chemicals were 2.5 percent less costly than in the previous year.

Outlook 2025

For the year 2025, the VCI forecasts a slight production increase of 0.5 percent. A small rise (0.5 percent) is expected for pharmaceuticals whereas chemicals should stagnate. Due to high producer prices and few orders in hand, the industry’s sales will slacken (0 percent). Prices in the industry could fall slightly (-0.5 percent).

In a recent representative membership survey, the picture is divided between VCI member companies: On the one hand, confident enterprises are anticipating an upward trend for summer or autumn 2025. On the other, every second company is expecting demand to recover only in 2026 or later.

Need for more competitiveness and investment

Germany is further falling behind internationally in terms of momentum – both in the overall economy and in industry and chemistry. According to the German Council of Economic Experts, the potential economic growth is 0.4 percent per annum. The underlying reason is a lack of competitiveness due to high production costs and growing bureaucracy.

Steilemann emphasizes: “Politicians talk about cutting red tape but in real life they are getting us entangled in ever more petty regulations. This is not only the German federal government’s fault. The epicentre of bureaucracy is Brussels where the Commission is regulating Europe into a standstill.” In order to regain their competitiveness, German chemical and pharmaceutical companies need to increase their productivity, efficiency and effectiveness by 10 to 30 percent. This is a recent analysis by the management consultants Boston Consulting in a study mandated by the VCI.

Innovation and investment are required to return to the road of success. However, because of the current situation and the lack of perspectives, some investment projects are shelved and innovation budgets are cut. On the industry average, VCI members are reducing these budgets especially in Germany – while foreign investment (USA, Asia and Europe) is on the increase among almost half of VCI members.

2025 must bring a start into the future for the economic policy

There is a lot to do. In this setting, Markus Steilemann brings forward the following demands: “Berlin and Brussels must find convincing answers to several urgent challenges. Green transformation and economic success should be attuned to each other.”

The given conditions are good for unleashing positive forces under the economic policy. Federal elections will be held in Germany in February.

The EU Commission wants to strengthen the competitiveness of the Member States. Therefore, the VCI President is calling on politicians: “Let’s make 2025 the year of the economic turnaround. The chemical and pharmaceutical industry is ready for the start into the future.”

The VCI is addressing these demands to the next federal government:

• Competitive energy prices – Total costs of electricity are too high in an international comparison. There is a lack of reliable generation capacities, storage facilities and sufficient power grids.
• Reduce bureaucracy and speed up licensing.
• Company tax reform with a significant reduction of the tax burden.
• Prioritise spending – No savings on infrastructure, security and education. Alongside the debt brake, there is a need for binding fiscal rules and public asset and debt accounting.

Photos from the press conference will be available from 12:30 PM at the following link: https://vci.canto.de/v/VCIJahrespressekonferenz2024