Chemical industry in Germany anticipates no shift in patterns during the year 2025
The German chemical and pharmaceutical industry is currently experiencing a period of recovery and growth, driven by several positive factors, yet facing some persistent challenges. As the largest player in the European fine chemicals market, Germany is poised for growth with a compound annual growth rate (CAGR) of 5.2% between 2025 and 2035.
### Current Status and Forecast
The broader fine chemicals market in Europe is expected to grow significantly, with pharmaceuticals accounting for about 31-35% of the market share. The global fine chemicals market is set to grow from USD 210.7 billion in 2025 to nearly USD 392 billion by 2035, at a CAGR of 6.4%. German companies are heavily investing in research and development, green chemistry, and automation, focusing on sustainable, bio-based chemical production.
### Influential Factors
#### 1. Energy Prices
The chemical and pharmaceutical industries are high energy consumers, making fluctuations in energy prices a significant factor in production costs. The transition towards sustainable and low-carbon production processes presents both challenges and opportunities, given energy cost concerns.
#### 2. Government Policies
The EU Green Deal and Germany's regulatory environment are pushing the industry towards environmentally friendly, low-carbon technologies. Strict adherence to safety and chemicals regulations, such as REACH and Seveso-III, influence operational practices, ensuring high standards but adding complexity and cost. Government emphasis on carbon neutrality and emission reduction shapes industry transformation, compelling pharmaceutical and chemical firms to innovate while maintaining competitive pricing.
#### 3. Trade Disputes and Geopolitical Risks
Geopolitical tensions and supply chain disruptions are causing increased raw material costs for chemical companies. Trade restrictions and tariffs from ongoing disputes further complicate supply chains, influencing the pace and scale of recovery for the chemical sector.
### Summary
The German chemical and pharmaceutical industry's growth and recovery prospects are strong, bolstered by innovation, sustainability initiatives, and expanding demand, particularly in pharmaceuticals and fine chemicals. However, the industry faces challenges from volatile energy prices, stringent environmental regulations, and geopolitical uncertainties that increase costs and complexity. Continued advances in green technologies, automation, and strategic government policies are crucial to sustaining competitive growth in this period of recovery and transformation.
Despite the positive outlook, no upturn in the industry is expected until next year, according to Steilemann. The pharmaceutical sector in Germany had strong business in the first half of 2021, despite some companies like BASF closing down plants. The energy-intensive chemistry sector has been affected by high energy prices for some time, with production being around 20 percent lower than in the pre-crisis year 2018 in the first half of the year. The German economy is estimated to lose 146 billion euros annually due to bureaucracy, according to the Ifo Institute. The VCI confirmed its forecast for 2021, predicting production stagnation and a slight decrease of one percent in sales for the year.
Economic and social policy plays a significant role in the achievement of sustainable growth for the German chemical and pharmaceutical industry. Governments, such as the EU and Germany, are pushing the industry towards environmentally friendly, low-carbon technologies, while also emphasizing carbon neutrality and emission reduction (Energy Prices, Government Policies section). On the other hand, the finance sector is instrumental in supporting the industry's recovery, as German companies invest heavily in research and development, green chemistry, and automation to foster innovative, sustainable, and competitive business strategies (Influential Factors section).
