German chemical lobby VCI trims 2024 outlook amid political turmoil

Symrise AG

13/11/2024 09:00

By Anastasiia Kozlova and Ozan  Ergenay
       Nov 13 (Reuters) - Germany's chemicals industry
association VCI on Wednesday lowered its annual forecasts for
the sector, citing economic stagnation and political turmoil in
Germany.
    The association, which represents around 1,900 companies in
Germany's third-largest industrial sector, expects production
volumes including pharmaceuticals to grow by only 2% this year,
compared to the 3.5% growth forecast it had maintained for
almost six months.
    It expects industrial sales to drop by 2%, versus previously
projected rise of 1.5%.
    The downbeat outlook reflects a difficult backdrop where the
German economy continues to stagnate, the federal political
landscape is largely occupied with itself, and the mood in the
companies could hardly be worse, VCI said.
    "Let us be clear about this - the crisis is largely
home-grown," VCI's director-general Wolfgang Grosse Entrup said
in the press release.
    Europe's largest economy was thrown into disarray with the
collapse of Olaf Scholz's coaliton and disagreements over
economic and industrial policy between the FDP, Greens and
Scholz's Social Democrats.
    The package of energy price subsidies, which the German
government agreed to implement last year to support its
struggling industry, had been one of the major sticking points
for the coalition.
    "We hope that an agreement can still in the legislative
period be reached so that industry will only have to pay the
European minimum rate of electricity tax in future," Sebastian
Bolay, the head of energy, environment and industry at the
German Chamber of Commerce and Industry, said about the
electricity price package.
    "Low electricity prices are an important leverage for
companies to decarbonize their processes," he added in the
emailed statement.
    VCI said the chemicals sector, including pharmaceuticals,
recorded a 0.1% rise in industrial production and a 1.8% decline
in sales in the third quarter, while producer prices fell 0.3%.
    The industry had suffered from high production costs and
weak demand through 2023. Some companies flagged tentative signs
of recovery in early 2024, but that optimism has since faded as
high costs and labour shortages continued to weigh on them.

 (Reporting by Anastasiia Kozlova and Ozan Ergenay in Gdansk;
editing by Milla Nissi)
 ((Anastasiia.Kozlova@thomsonreuters.com;
Ozan.Ergenay@thomsonreuters.com))