Producers of chemicals in Germany are sending distress signals: deindustrialization, low prices on the global market due to supply surplus, reduced foreign revenue because of tariffs, and high energy expenditures have resulted in lost competitiveness.
German chemical firms are facing another year of decline as Europe’s largest economy enters an initial stage of deindustrialization, reports Bloomberg, citing the industry association VCI.
According to its preliminary figures, facilities operated at 70-percent utilization this year, a record low since 2002 and below the profitability threshold of 80%. While pharmaceutical production and revenue grew this year, the output of the chemical sector decreased by 2.5%.
VCI President Markus Steilemann stated, “the sector is sending an SOS signal”: 2025 has become another difficult year for the industry, with no improvement in sight.
The industry group forecasts an even steeper drop in prices next year and a 3.5% reduction in sector revenue. Tariffs increase the strain, diminishing overseas revenue by 3.5%, which is a more substantial fall than the already shrinking domestic revenue.
The main issue is an oversupply, primarily from China, coinciding with persistently weak demand from key buyers like automakers. According to the industry group, order volumes are 20% below pre-pandemic levels (January 2020). Their research indicates that every second company is facing a serious lack of orders.
Adding to this imbalance of high supply and low consumption are high energy expenditure levels and labor costs. German companies have forfeited pricing competitiveness, asserts the industry group. Roughly 75% of surveyed enterprises are cutting costs, and one in five firms is shutting down or relocating.
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