Chemical industry in Germany forecasts no significant reversal in trends by 2025 - Chemical sector in Germany forecasts no shift in trajectory by 2025
The German chemical and pharmaceutical industry is navigating a complex landscape as it moves towards 2025, with a mix of challenges and opportunities on the horizon.
In the first half of 2021, the industry experienced a slight dip in production, with a 1% decrease compared to the same period in 2020. Despite this, the number of employees remained stable at around 480,000, a testament to the industry's resilience. Notably, the pharmaceutical sector saw a 2% increase in production, while chemical production decreased by 3%.
Major players like BASF and Evonik have announced large-scale savings programmes and job cuts due to challenging conditions. However, other companies in the industry are not expecting an upturn until next year. President Markus Steilemann of the Association of the Chemical Industry (VCI) in Frankfurt has stated that no trend reversal is expected by 2025.
The industry has faced numerous challenges, including rising energy prices, an economic downturn, and the trade dispute with the US under President Donald Trump. The energy-intensive sector has not fully recovered, with sales decreasing by 0.5% to 107 billion euros in the first half of 2021.
Despite these challenges, the industry is focusing on strategic growth through innovation and sustainability. There is a growing focus on sustainable and bio-based chemicals, driven by EU Green Deal mandates. Companies are investing in green hydrogen and e-fuel production to support a hydrogen economy and reduce carbon emissions.
The pharmaceuticals sector is also expected to grow, driven by demands for chronic disease management, biologic therapies, and preventive care supplements. Partnerships with Contract Development and Manufacturing Organizations (CDMOs) and investments in Good Manufacturing Practice (GMP)-compliant production are crucial for this growth.
There is an increasing focus on research and development, especially in high-end chemical formulations for precision agriculture and specialty pharmaceuticals. This will likely strengthen industry growth and competitiveness.
However, the industry faces several challenges. Stabilization and recovery are yet to be achieved, with predictions indicating no strong recovery before 2026. Shipping disruptions, such as those caused by low water levels in the Rhine River, are posing challenges to the supply chain. The industry must also comply with stringent regulations like REACH and Seveso-III, which can be a challenge but also drives operational excellence and sustainability.
Global economic uncertainties and fluctuations in raw material prices can also impact the profitability and stability of the industry.
Despite these challenges, the German chemical and pharmaceutical industry is poised for strategic growth through innovation and sustainability, particularly in the later part of the decade. The new federal government has taken first important steps in this direction, and the industry is optimistic about the future.
- In response to the challenges faced by the German chemical and pharmaceutical industry, a community policy might prioritize strategies for sustainable and bio-based chemical production, green hydrogen technology, and investments in Good Manufacturing Practice (GMP)-compliant pharmaceutical manufacturing, as these areas are crucial for industrial growth and competitiveness.
- As part of their strategic growth plans, chemical and pharmaceutical businesses may consider vocational training programs to upskill their workforce, which could help navigate industry complexities related to rising energy prices, compliance with regulations like REACH and Seveso-III, and fluctuations in raw material prices, ensuring financial stability and business success in the future.
