German Chemicals Economy Flat in H1 but European Sales Improve
After the first six months of 2013, a clear business trend for Germany's chemical producers has not yet materialized, Karl-Ludwig Kley, president of the industry association Verband der chemischen Industrie (VCI) said at a press conference in Frankfurt. In comparison with its counterparts in other European countries, the chemicals sector performed relatively well, he said. However, the picture on the whole was one of stagnation.
For full year 2013, the industry association is sticking to its earlier forecast of a 1.5% rise in chemical production and a sales increase of the same dimension to €190 billion. Kley - who is CEO of Merck KGaA, said producers assume that the second half year will see slight gains in Germany and the rest of Europe, while export growth will be slightly less dynamic than expected at the beginning of the year. The Chinese economy will see a "soft landing."
With capacities operated at a strong 84%, both production and sales from January to June were flat at last year's level and thus below producers' expectations. Business with foreign customers was slightly better than at home. Along with pharmaceuticals, which are usually resilient in periods of economic weakness, polymers, consumer chemicals were the only segments to see any growth.
While output of consumer chemicals rose 3.5% in the first half, pharmaceuticals by 3% and polymers by 2.5%, production of petrochemicals sank by 2.5%, that of fine and specialty chemicals by 2%. Volumes of inorganic base materials were 1.5% lower. Industry-wide turnover remained flat at € 91 million. Producers' home sales were down 1% to €35 billion foreign sales up by a cautious 0.5% to €56 billion. However, combining figures for exports, foreign sales of German chemical companies, re-exports and exports of chemicals by other business sectors, the rise was 4% to €82 billion in the association's calculation.
A bright spot in the otherwise dull picture, said Kley, was the 6% increase in sales to other European countries, adding that "it remains to be seen whether this is sustainable." Export sales to overseas markets receded by 1%, reflecting the economic weakness in key markets of Asia and Latin America. While exports to North America fell by 2%, the VCI president said this was due exclusively to "special factors" concerning the pharmaceutical sector. Excluding pharmaceuticals, North American sales rose 4%.
Kley said German chemical producers' evaluation of the North American market's potential continues positive, "despite the fiscal cliff." The country's chemical producers, like its EU compatriots are keeping a close eye on developments in shale gas exploration, which they acknowledge is the current driver of the U.S. economy. Whether this growth powerhouse is sustainable will depend largely on the U.S. Federal Reserve's control of the monetary situation, he noted. However, the industry assumes that fiscal policy "will continue to be leveraged to stimulate economic growth."
With Germany's parliamentary election looming ahead in September, Kley took the country's political parties to task over what the industry sees as a lack of conceptual thinking. None of the parties has a plan for managing the energy turnaround after the phase-out of nuclear power and no concept for the health sector, he said, adding that the political class also exhibits no courage or creativity in its support for innovation, and its plans to impose for tax increases are driven "ideologically-fuelled activism."
Chemical producers are particularly critical of the current Christian Democrat-led government's macro-management of Germany's energy sector calling it a "planned economy approach without a plan." They are especially unhappy with playing field rules that give preference to renewable energy sources at what they see as exorbitant cost. The chemical industry bears the brunt of this cost, Kley said. "With every increase in cost, the industry's position in international competition deteriorates."
The industry association is appealing to the next government to "develop a new concept for the energy turnaround" that will keep costs under control and also keeps Germany in line with the rest of Europe. The turnaround can neither be achieved without industry nor if it is directed against industry," the VCI president concluded. (dw)