Chemical Industry Faces Ongoing Crisis Despite Pharmaceutical Growth

The German chemical and pharmaceutical sectors are grappling with persistent challenges as they enter 2025, with no signs of a recovery in sight. The industry, which ranks as the third-largest in Germany, is contending with high energy costs and a sluggish economy, leading to a projected stagnation in production levels and a slight decline in revenue.

According to the Chemical Industry Association (VCI), the sector anticipates a revenue decrease of approximately one percent, bringing total earnings down to around EUR219 billion for the year. The chemical production is expected to contract by an additional two percent, while the pharmaceutical segment is projected to grow by two percent, benefiting from strong export demand.

VCI's CEO has emphasized the urgent need for governmental action, stating that the new administration must act swiftly to address the industry's challenges. The 2024 figures reflected a two percent decline in revenue from the previous year, totaling EUR221 billion, despite a modest production increase of one percent earlier in the year. While domestic sales in the chemical sector were disappointing, there was notable growth in North America during the latter part of 2024, particularly in pharmaceuticals and personal care products.

Employment in the sector saw a slight uptick, with the workforce reaching approximately 480,000, driven by gains in the pharmaceutical industry that offset job losses in chemical production. The outlook for widespread insolvencies remains optimistic, with no significant downturn anticipated.

High energy prices and a contracting economy have heavily impacted the energy-intensive chemical industry, prompting many companies, including major players like BASF and Evonik, to initiate restructuring efforts that include job cuts and facility closures. The VCI is hopeful that the new government's policies, particularly in relation to tax reform and energy costs, will pave the way for improved conditions.

However, the association expressed concerns over budgetary practices, particularly regarding the handling of defense spending and infrastructure investments. They call for more strategic prioritization of expenditure to support the industry's recovery.

As the chemical industry continues to navigate these turbulent waters, the pharmaceutical sector's resilience offers a glimmer of hope, highlighting the need for concerted efforts to bolster both segments of this critical industry.