German chemistry warns of the risk of relocations

Markus Steilemann doesn’t mince his words. The situation is “dramatic” for the German chemical industry, with 475,000 employees. “The future of the country’s third largest industrial sector is at stake”, warns the president of the German Chemistry Federation (VCI), who was holding his annual press conference on Thursday, December 15. Blame the rises “vertiginous” energy costs and raw material price increases.

The figures speak for themselves: production in this sector – excluding pharmaceuticals – is expected to fall by 10% this year compared to 2021. The situation is particularly difficult for ammonia producers, a very energy-intensive industry. This production has collapsed by 75%.

According to a survey of the 1,900 members of this federation, 80% saw their profits decline and a quarter recorded losses, especially among small and medium-sized enterprises. And 39% admit to having reduced their production to cope with rising costs, while a quarter admit to having already moved part of their production abroad or considered doing so.

German industry fears the effect of US subsidies

“The fears of a deindustrialization of our country are completely justified”, launched Markus Steilemann, also CEO of the chemical group Covestro. Among the regions that should benefit from these production shifts are Asia, but also the United States where the government has launched a vast subsidy program, called the Inflation Reduction Act. Large groups such as Lanxess, BASF and Evonik have already announced that they want to reduce their investments in Germany and are tempted by an increase in their production in the United States.

“The energy crisis is pushing German and European economies towards recession” notes Markus Steilemann. “We do not believe in a beautiful and happy new year 2023”, he says, scathingly.

The future of the sector looks all the more negative since, according to the VCI, the German government is not “not up to the situation”. Worse, “he would accept the death of part of German industry”. So the “energy shield”adopted this Thursday, December 15 by the Bundestag and which is one of the flagship measures of the 200 billion euro plan to help households and businesses, “Won’t help those who need it most”Judge Markus Steilemann.

Liquefied gas more expensive than Russian gas

This support plan provides for a gas price cap of €0.12 per kWh for individuals and SMEs-SMIs, and €0.07 for the most energy-intensive activities, within the respective limits of 80% and 70% of the last year’s consumption. As for the price of electricity, it will be capped at €0.40 per kilowatt hour for households and SMEs and SMIs and at €0.13 for the most energy-hungry companies. Too high for the VCI, which advocates a tariff of €0.04 per kilowatt hour for electricity, for “to be able to survive”.

The inauguration this Saturday, in Wilhelmshaven, of the country’s first floating liquefied natural gas terminal only half reassures the business manager. Much more expensive than the now inaccessible Russian gas, LNG should contribute, according to the VCI, to maintaining high energy prices in the country in the medium and long term. To the detriment of the competitiveness of German chemicals.


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