Chemistry Sector Sees Growth at Start of Year After Prolonged Decline

The German chemical and pharmaceutical industry has experienced a notable resurgence at the beginning of the year, breaking free from a prolonged period of stagnation. According to the Association of the Chemical Industry (VCI) based in Frankfurt, the sector's revenue increased by 4.4% in the first quarter compared to the previous quarter, reaching a total of EUR54.8 billion. This rebound has allowed the industry, which employs approximately 480,000 individuals in Germany, to recover from the downturn observed in the preceding months.

Markus Steilemann, the president of VCI, expressed cautious optimism about the future, noting that if the trade conflict does not escalate further and the new government implements a growth package as promised, the outlook for the industry could brighten this year.

Production figures also indicate positive momentum, with an overall increase of 6.7% in the first quarter, driven primarily by a 4.7% rise in the chemical sector alone. The pharmaceutical industry saw even more significant growth, with production surging by over 10%. This spike is attributed to customers accelerating their orders for medications in anticipation of potential tariffs from the United States.

The VCI attributed this recovery to an uptick in various sectors, both domestically and internationally, leading to an improved assessment of the current business climate. However, expectations for future business conditions have become more pessimistic. The U.S. trade policy poses a threat to the export potential of the chemical industry and its clientele. There are concerns that products from China may increasingly be redirected to Europe, intensifying competitive pressure. Pharmaceutical companies remain particularly apprehensive about the prospect of high tariffs on the vital U.S. market.

Despite the positive signs in early 2025, the VCI has retained a cautious stance regarding the industry's outlook for the entire year. The association maintains its previous forecast that production will remain stagnant, with a slight revenue decrease of 1% anticipated, bringing the total estimated revenue to approximately EUR221 billion.

The energy-intensive nature of the chemical sector, which ranks as Germany's third-largest industry after automotive and machinery manufacturing, continues to pose challenges, particularly due to elevated energy costs and ongoing economic downturns. Major companies in the sector, such as BASF and Evonik, have announced significant restructuring initiatives, which include job cuts and the temporary shutdown of certain facilities.

Looking ahead, the VCI is pinning its hopes on the European single market. Steilemann emphasized that with the establishment of a stable government in Germany, the country has the opportunity to leverage its advantages. He urged the government to address structural shortcomings and initiate necessary reforms, particularly focusing on reducing energy costs, streamlining bureaucratic processes, and implementing tax reforms.