The Urethane Blog

German Chemical Update

Germany’s chems Q4 production jumps 9.2% but Q1 more challenging – VCI

Author: Tom Brown


LONDON (ICIS)—German chemicals production excluding the pharmaceutical sector jumped 9.2% in the fourth quarter, compared to the third, on the back of customer restocking but industry body VCI said conditions at the start of 2021 have been more challenging.

Customers looking to replenish empty warehouses toward the end of the year helped to galvanise the pace of recovery for chemicals, with production also substantially higher compared to the closing months of 2019.

Including the pharmaceutical sector, the level total sector productivity moderated slightly to 7.4% quarter on quarter, with pricing firming 0.4% compared to the July-September 2020 quarter.

However, chemicals prices remained in the fourth quarter nearly 2% lower year on year.

Conditions were less unambiguously bullish in the opening months of this year amid lockdown extensions and fears of a fresh wave of infections in parts of Europe, with almost half of VCI members responding to a survey expecting setbacks for the quarter.

Aside from coronavirus fears, the extent that the manufacturing sector has heated up through 2021 so far has led to material shortages for German chemicals producers, exacerbated by the logistics issues brought on by the ongoing shipping sector disruption.

The pace of demand growth has resulted in the second-greatest month on month decline in lead times for eurozone manufacturing in 24 years, according to data from analyst Markit Economics.

“If chemical business continues to develop positively over the year, the signs are good for our industry,” said VCI director general Grosse Entrup. “However, major fluctuations in demand cannot be ruled out.”

Fourth-quarter sales rose 8.1% for the sector, driven by firmer domestic and export demand, although overseas sales remained below late-2019 levels.

Capacity utilisation firmed from 81.6% to 85% quarter on quarter, and employment was stable, a sign that chemicals have managed to weather the lockdowns better than in the first wave of the pandemic.

In the fourth quarter, chemicals was one of the industries with fewer employees in short-time work – or Kurzarbeit in German – by which the state subsidises hours not worked by the employee at times of crisis.

The strong German chemicals industry employed 464,000 workers in the fourth quarter, a figure which remained stable in the first quarter, said VCI.

The extent of the fourth-quarter rally is not likely to be sufficient to hold off a full-year decline in production, VCI said, but pricing and production for 2021 are likely to grow 2% and 3% respectively.

“[Total, including pharma] industry’s sales should improve by 5% to just under €200bn,” said VCI.

In 2020, total sales fell 6% to €186.4bn.