FRANKFURT (dpa-AFX) - After weak business in 2023, the crisis-hit chemical industry does not see a rapid turnaround, but does see the first signs of recovery. After the long drought phase, in which the chemical industry suffered heavy production losses amid the energy crisis, the first signs of hope are emerging, said Wolfgang Große Entrup, Managing Director of the German Chemical Industry Association (VCI), in Frankfurt. "Since February, individual companies have reported a slight improvement in the order situation - especially abroad." Hopes are pinned on the USA and China. However, these are isolated glimmers of hope, emphasized Große Entrup. A recovery is not expected until the second half of the year at the earliest.

Overall, the waters remain rough for the chemical and pharmaceutical industry, the association emphasized. Germany's third-largest industrial sector after automotive and mechanical engineering expects turnover to fall by 3.5 percent this year with falling prices. At the same time, production is expected to stagnate, according to the VCI.

"Not only the chemical-pharmaceutical industry, but the entire domestic economy continues to suffer from the sluggish economy and structural problems," stated Große Entrup. Due to the economic downturn, there is still a lack of orders from industrial customers.

Far from pre-crisis levels - but first rays of hope

Last year, turnover in the chemical and pharmaceutical industry fell by a good 12 percent compared to the previous year to 229.3 billion euros. Production shrank by 7.9% with weak capacity utilization and by over 10% in the chemical industry alone. The pre-crisis level of 2021 was missed by almost 15% overall.

At the end of the year, there were further declines overall, but also a little hope. Production in the chemical industry alone grew slightly by 1.2% in the fourth quarter compared to the same period of the previous year. Despite the headwinds, employment remained stable at around 477,000 people in Germany - in 2020 it was still around 464,000.

Ifo Institute sees hope for an end to the trough

The Munich-based Ifo Institute also recently saw some hope for the battered sector. According to the institute, the business climate in the chemical industry improved slightly in February, albeit at a low level. "The climate in the German chemical industry is still rough, but there were also some surprising rays of hope," said Ifo industry expert Anna Wolf.

For the first time in almost two years, demand for chemical products increased and there were more orders than in the previous month, according to the Ifo Institute. Companies had expanded production in February and the first companies were refraining from further price cuts. "These results, together with the normalization of electricity and gas prices, raise hopes that the trough will soon come to an end," said Wolf.

The chemical industry is experiencing a deep crisis due to the rise in energy prices as a result of the war in Ukraine and the weak economy. In the pharmaceutical industry, on the other hand, the boom for vaccines during the coronavirus pandemic has subsided.

While gas prices have fallen significantly again, the energy-intensive chemical industry in particular is suffering from electricity prices that are high by international standards. While major industrial customers in Germany recently paid just under 16 cents per kilowatt hour, according to the VCI, competitors in the USA had to pay around 4.4 cents. However, the relatively expensive energy does not affect all companies equally: while around half of the companies reported stagnating or significantly rising profits in 2023, according to the VCI, the other half recorded significant declines or even losses.

Groups are cutting jobs

Some heavyweights have already reacted to the harsh environment. Industry leader BASF is cutting thousands of jobs, shutting down energy-intensive plants at its main site in Ludwigshafen and recently announcing further cuts there. Additional annual costs of one billion euros are to be saved at the headquarters by the end of 2026 - combined with job cuts that have not yet been quantified. And the Essen-based Evonik Group is cutting up to 2,000 jobs worldwide, including around 1,500 in Germany, as part of a major administrative reorganization.

In order for the industry to get back on its feet during its fragile recovery, it needs secure framework conditions and political support, Große Entrup demanded. The German government's Growth Opportunities Act and the planned reduction in bureaucracy were not enough. He called for less regulation, faster approvals and relief on energy prices. "We need massive relief for the German economy."/als/mne/DP/stk