VCI: German chemical industry achieves strong end to 2013; outlook positive for 2014

12:32 PM | March 12, 2014 | Michael Ravenscroft

The chemical industry in Germany rounded off a turbulent 2014 with a strong fourth quarter, says chemical industry association VCI (Frankfurt). Production in Germany’s third largest industry sector increased markedly—1.5%—in the period October—December 2013, VCI says. Turnover increased to €188.7 billion ($261.6 billion), or 1%, but prices fell again. Domestic demand for chemicals was stable, and exports rose on the back of increasing demand, according to VCI. Germany’s chemical producers were able to expand their business in almost all regions of the world, with the exception of Latin America. Sales to the core countries in the European Union went up for the first time in 2013, VCI says.

“The outlook for 2014 looks good for the sector at the moment,” says Utz Tillmann, managing director at VCI. “The upward trend we saw at the end of the year is continuing, and all chemical sub-sectors have revived. We are counting on increasing demand for chemicals, both domestic and foreign, in particular from our European industrial customers,” Tillmann says. “But setbacks cannot be ruled out. There is a risk for the world economy, especially in the light of the political crisis in the Ukraine,” he adds.

VCI says it expects an increase in chemical production of 2% for the year 2014. Prices look likely to fall by 0.5%, so that sales in the sector will increase by 1.5% to reach €191.5 billion, VCI says. Exports are expected to grow somewhat faster than domestic sales.

Chemical production increased in fourth-quarter 2013 by 3.7% compared with the year-ago period, and by 2.3% versus the previous quarter. Prices fell for the fourth quarter in a row, sinking by 0.5%, although the fall has been slowed by the revival in demand, VCI says. Chemical prices at the end of 2013 were 2.6% lower than at the end of 2012. Polymers were the exception, which is perhaps an indication that the fall in prices will soon come to an end, VCI says.

Turnover in fourth-quarter 2013 was €44.4 billion, an increase of 3.0% year-on-year (YoY), and 2.1% up on the previous quarter. The growth stimulus again came from exports, for the first time [in 2013], by 2.5% compared with the corresponding quarter in 2012, to reach €27.4 billion. Sales in North America grew strongly on the back of pharmaceuticals and petrochemicals. Foreign sales in Asia/Pacific exceeded the level of the previous year and the previous quarter. Sales of chemicals to the core countries in the European Union grew for the first time in 2013, and sales to Easter Europe also rose. Domestic demand stagnated at €17.0 billion, although this represents an increase of 3.8% compared with the year-ago quarter. The number of people employed in the chemical industry rose by 0.5% YoY, to reach a total of 436,500.

The demand for chemicals and pharmaceuticals revived markedly in fourth-quarter 2013, so that production grew for most segments to significantly exceed the year-ago level. Only sales of consumer chemicals were disappointing, VCI says. Production of basic chemicals, which include inorganic chemicals, petrochemicals, and polymers, rose by 3.3% compared with the previous quarter, and sales climbed strongly by 6.2%, partly because of a small drop in raw material costs but also because of the increase in demand. Fine- and specialty chemicals stagnated at the level of the previous quarter. Prices fell slightly, and sales rose a moderate 0.7%. Domestic demand was weak, with growth impulse coming exclusively from foreign demand. Nevertheless, sales rose by 4.3% compared with the year-ago quarter.

The mood in the chemical industry is positive, and the industry is satisfied with the current business situation, says VCI, quoting a report from the Institute for Economic Research (Ifo; Munich). The recovery in the economy and the increase in demand for chemicals have improved the business outlook. More chemical companies are anticipating a revival in the chemical industry, which is expecting growth in sales, both domestically and in foreign markets, says VCI.

Optimism in Germany is based on the strength of German industry, and industrial production should increase in 2014 as a result of the country’s high level of international competitiveness, VCI says. Some industrial customers of the chemical industry have already begun to top up their raw material stocks, according to VCI. The economic situation in Europe is of decisive importance for the German chemical industry, says VCI, as 70% of chemical exports are destined for European neighbors. Economic researchers are forecasting a moderate recovery for the European Union this year, which will have an effect on the chemical industry. An increase in industrial production will result in more demand for chemicals, VCI says.