German Chemicals Outlook Deteriorates in Second Quarter – VCI Trade Group


LONDON (ICIS) – German chemicals producer trade group VCI continues to hold back its outlook for 2022, but one thing is clear: the current Q2 will be worse than Q1 – that is, things will get worse before they get better, economists said in a VCI webinar.

Shortly after Russia began its attack on Ukraine on February 24, VCI withdrew its outlook for the year 2022. This outlook called for a 2% increase in production and a 5% increase in sales.

With current “maximum uncertainty” and fears that Russian natural gas supply could end overnight, VCI will not be reinstating a full-year outlook at this time, the agency said. the group’s chief economist, Henrik Meincke, during VCI’s Q1 webinar on Tuesday.

In the short term, however, it is clear that with the fall in industrial production, underlying chemical production (chemicals excluding pharma) in Q2 will continue to decline compared to Q1 – when it had already fallen by 1, 1% quarter-on-quarter and 1.6% year-on-year, he said.

German chemical production, Q1 2022:

Change from Q4 2021 Change from Q1 2021

Inorganic base chemicals



Petrochemicals and derivatives






Fine and specialty chemicals



Detergents and soap






Non-pharmaceutical chemicals



(source: VCI)

Ongoing raw material shortages and high prices, along with skyrocketing energy costs, continue to squeeze margins for chemical producers, he said.

As chemical producers try to pass on higher energy and material costs to customers, it is often not possible to pass on the entire increase, he said.

China’s strict coronavirus lockdowns are also weighing on industry, affecting global supply chains and slowing that country’s economic performance.

Nonetheless, Meincke expressed hope that the expected decline from the first to second quarter will still be “within an acceptable range” – unless there is a sudden halt in Russian gas supplies.

Axel Angermann, chief economist at investment firm FERI Trust GmbH, added that the biggest near-term challenge facing the industry was an embargo on Russian energy, particularly natural gas.

The resulting spike in energy prices would “with certainty” trigger a recession, not only in Germany, but also in many other European countries, he said.

Even before the war, Germany’s energy-intensive sectors, such as chemicals, were undergoing structural change and struggling to stay competitive, he said.

A sudden shutdown of Russian gas would mean these changes are compressed to a single point in time, forcing customers to quickly turn to lower-cost suppliers in the United States or elsewhere to buy chemicals.

“The big worry” is that once customers make the switch they won’t be coming back, even if the gas supply were to resume later, he said.

As a potential positive, Meincke noted that the combined impacts of the war in Ukraine, the coronavirus pandemic and supply chain issues have underscored the importance of the chemical industry to the German economy.

This, in turn, has created support for industrial policies that enable the investments needed to transform industry towards decarbonization – a transformation that was previously predicted but now expected to accelerate, he said. .

Please also visit the topic page of ICIS Ukraine

Front page image: German flags outside the Reichstag building, seat of the German parliament, in Berlin. Source: Shutterstock


About Author

Comments are closed.