Germany's chemical industry, including pharmaceuticals, is projected to see a 1.5% decrease in production in 2026, according to its main lobby group VCI. This forecast indicates another year of declining output, attributed to weak sales volumes, increasing costs, and reduced investment. Despite some recent improvements, VCI President Markus Steilemann described the half-year results as "disappointing" and noted that any upturn is unlikely to signal a broader recovery.
In the first half of 2026, production in the German chemical and pharmaceutical sector fell 3%, with sales decreasing 1% to 106 billion euros. Producer prices, however, rose 2%. The industry, which directly employs about half a million people, has seen its overall revenue drop by roughly 22% since 2022, reaching 220 billion euros in 2025. Over 13,000 jobs have been lost since 2022 due to the weak business climate, prompting many companies to delay investments and scale back production.
Temporary benefits for some European chemical producers arose from disruptions linked to the conflict in Iran, which impacted feedstock-dependent Asian competitors. This led to a short-term boost, with chemical production and revenue increasing 2% in the first quarter compared to the final quarter of 2025. However, this was largely due to "panic buying" and "geopolitical hoarding" driven by fears of supply bottlenecks, not a structural turnaround. This temporary relief, which saw large basic materials companies benefit from reduced pressure from China, is expected to subside once the conflict ends.
The VCI emphasizes that high energy costs, growing regulatory burdens, and persistent economic weakness continue to weigh heavily on the sector. Natural gas, a crucial feedstock, cannot be easily replaced, leaving companies vulnerable to price pressures. The lobby group called for policymakers to ensure competitive energy prices, reliable infrastructure, tax incentives, and guaranteed long-term gas supply, in addition to addressing lengthy permitting procedures, to restore the industry's competitiveness. While individual companies like Evonik Industries and Brenntag have raised full-year profit forecasts, the overall outlook remains bleak, contrasting with their optimism.
