Domestic demand weakens: the chemical industry goes out of steam

The chemicals sector, which is sensitive to the economy, suffers from the reluctance of major industrial customers such as car manufacturers. Even the trade dispute under Trump is disrupted. A bad omen for the economy?

The weakening of the industrial economy in Germany and the slowdown in the global economy are weighing on the chemical industry.

In the third quarter, the key German sector was hit hard by the problems of major customers, such as the automaker, involved in the emissions crisis. As the industry badociation VCI explained Wednesday in Frankfurt, also insists on the international trade dispute. However, rising chemical prices have allowed the industry to increase sales in almost all sectors.

"In the German and European economies, more and more skid marks are visible," said VCI President Hans Van Bylen. Major customers such as the automotive and plastic industries have reduced their production and the demand for chemicals is weakening. The tariff dispute between the United States and China and the Brexit approach have created growing uncertainty.

In the third quarter, the country's third largest industrial sector, with nearly 460,000 employees, has barely made progress, said VCI. If you remove the booming pharmaceutical industry, production has even declined compared to the same quarter of the previous year.

Mainly because the prices of chemicals have risen sharply with rising oil prices, the business has been broadly solid. Crude oil is the most important raw material in chemistry. Sales were up 3.4% from the same quarter of the previous year, while production was up 2.4% under conditions of high capacity utilization. In the first half, however, growth rates were even higher. Chemical companies are still largely satisfied with their business situation, said the industry badociation, but expectations have declined.

While international business – for example with the United States – continued to be strong, sales in Germany declined considerably. In Europe and China also, the recovery slowed down, affecting cyclical chemistry. As a supplier to the automotive, construction and consumer goods industries, it is dependent on the economy and is a signal for the economy.

Meanwhile, VCI sticks to its forecasts for the whole year: it expects sales growth of 4.5%, which will reach a record of 204 billion euros. Production is expected to increase by 3.5% and producer prices by 1.5%.