The Situation of the Chemical-Pharmaceutical Industry in Germany

Production Decreased by 2.5 %, Sales by 6.1 %

Production in the chemical-pharmaceutical industry in Germany in the first half of the year was 2.5 % lower than in 2019. For chemicals excluding pharmaceuticals, it was 3.6 % below the previous year’s level. Sales fell by 6.1 % to EUR 96 billion. “Despite this slump, our companies came through the global crisis significantly better than other industries,” said VCI President Christian Kullmann when assessing the situation at the half-year press conference of the Verband der Chemischen Industrie (VCI; German Chemical Industry Association).

All product areas of the industry were affected by the weak demand in Germany and abroad: The production of specialty chemicals decreased by 3.9 % compared with the previous year. The production of polymers fell by 8 % due to the slack demand from the automotive industry and plastics processors. The production of pharmaceuticals recorded only a slight minus (–0.3 %), and the decline in soaps, detergents, and cleaning agents was also limited (–0.7%).

Despite the difficult business situation, chemical and pharmaceutical companies have so far succeeded in maintaining their high level of employment. Currently, there are still around 464,000 employees working in the industry. Vacant positions are often not filled at present, and approx. 15 % of employees, mainly from suppliers to the automotive industry, have been on short-time work since spring.

Return To Pre-Crisis Level At the End Of 2021 At the Earliest

At one in four companies, the lack of orders continues to have a strong impact on business activity. It will still take some time to overcome the corona crisis: According to a member survey, 49 % of the companies expect to return to pre-crisis levels by the end of 2021. Around 20 % assume that they will need an additional year to do so. 13 % expect to be able to compensate for the decline later or not at all.

For the year as a whole, the VCI expects a 3 % drop in production and a 6 % decline in sales.

Political Future Program Necessary for Sustainable Growth

The VCI president praised the rapid and consistent action of the German government during the corona crisis, which prevented the worst from happening for companies and employees in terms of the economic effects. Now a political program for the future must follow that creates a tailwind for sustainable growth: “Our country must become attractive again for major industrial projects: in terms of tax policy, innovation policy, and regulation. That’s why it’s important to remove the brakes on growth so that investments and innovations can be mobilized,” said Christian Kullmann. Five measures must urgently form the core of a reform package according to the VCI:

Reduce corporate taxation to 25 % (international competitiveness).
Substantially lower energy costs, especially for green electricity (switch from fossil to renewable resources).
Establish a moratorium on bureaucratic and financial burdens to unleash the potential of small and medium-sized businesses (SMEs).
Streamline planning and approval procedures (investments).
Launch an investment program for climate protection and the circular economy (greenhouse-gas neutrality).

To pull Germany out of the crisis economically, it needs a strong industry. The chemical-pharmaceutical industry is Germany’s third-largest industrial sector. The industry is the motor for successful change in society through sustainable products, innovative problem solutions, and secure jobs. “We need an economy that uses its innovative power for the benefit of people and the environment. Growth is a prerequisite for this. Because without sustainable growth, there will be a lack of funds for research, technology development, and investment in solutions that require fewer natural resources”.

It is not without pride that Christian Kullmann recalls that during the corona pandemic, the chemical and pharmaceutical industry provided the country with large quantities of disinfectants and thus provided the backbone for fighting the pandemic. This is another indication of how important this industry is.