Chempark in Leverkusen am Rhein, one of Germany's most important locations
Rupert Oberhäuser / imago images
Sentiment in the export-strong German chemical industry deteriorated significantly in May, although the supply problems to date have eased sharply. The corresponding barometer fell to minus 11.1 points, down from minus 3.9 points in April, according to a company survey conducted by the Munich-based Ifo Institute. "The deterioration in the business climate is also affecting all major customer industries in the chemical industry," said Ifo industry expert Anna Wolf. In industry and construction, the respective business climate index fell.
Above all, business expectations for the coming months experienced a significant dampening and are now being assessed negatively again: This barometer fell to minus 4.1 points, after it had been plus 11.4 points in April. Most companies continue to assess their current situation as bad.
However, there were also a few rays of hope in May: According to the institute, the supply of intermediate products improved. Only 16.9 percent of companies reported bottlenecks. This is the lowest value since 2021. In addition, significantly more chemical companies have lowered their prices. As recently as January, the majority of companies intended to raise their prices.
In the first quarter, production in the chemical industry slumped by almost 15 percent compared to the previous year's level, according to the industry association VCI. For 2023, the VCI continues to expect a decline in chemical-pharmaceutical production of five percent.
He repeatedly criticized Germany as an industrial location. This is becoming less and less competitive internationally. "There is a great danger that investments and jobs in the energy-intensive chemical industry will increasingly migrate abroad," VCI President Markus Steilemann, who is also CEO of the plastics group Covestro, recently warned.
Exporters are worried about rising protectionism
Overall, supply bottlenecks remain one of the biggest business risks for German exporters. In addition, around 15 months after the Russian attack on Ukraine, concerns about protectionism, for example due to rising import duties, have increased significantly. According to the latest export survey conducted by credit insurer Allianz Trade, almost three-quarters (73 percent) of German companies surveyed are now worried about this. Before the Ukraine war in 2022, trade barriers worried only about 20 percent of exporters, compared to around 35 percent after the start of the war.
Supply bottlenecks had recently been exacerbated mainly by the persistent congestion in global container shipping. It is true that the situation for transports by sea has eased in the meantime; however, missing or missing supplier parts remain a problem. "Supply chain difficulties and logistical hurdles are particularly the stomach of companies in Germany and once again represent the top risk of the survey," says Allianz Trade.
In addition to the analysis of the company's own supply chain and the close monitoring of the financial development of suppliers, "hoarding" is also mentioned as a popular measure for risk prevention. However, a complete reorganization of supply chains or the relocation of production sites is actually on the agenda for only 28 percent of the German companies surveyed.
"World trade continues to be a roller coaster ride"
"Global trade continues to be a roller coaster ride," says Milo Bogaerts, head of Allianz Trade for the German-speaking region. Local companies, most of which are strong exporters, "currently have to keep a lot of balls in the air."
One of the problem areas is a growing concern that buyers will not be able to pay for the goods they have ordered. Almost half of German exporters (46 percent) expect payment defaults to increase in 2023 – in the first wave of the survey before the Ukraine war, this figure was 2022 percent at the beginning of 30. Corporate profitability is coming under increasing pressure from weak demand combined with rising interest rates and more restrictive lending.