Chemical industry under constant stress
The chemical and pharmaceutical industry got off to a weak start in 2026. Seasonally adjusted production fell by 2.8% in the first quarter. This was almost 6% lower than in the previous year.
The main reason for this was the significant decline in pharmaceutical production after companies used pull-forward effects in 2025 due to the threat of US tariffs. Chemical production, on the other hand, increased slightly. However, it remained below the previous year's level. At 75.1%, capacity utilization remained unprofitable. Job cuts continued.
A Sustainable Recovery is Not in Sight
High energy, raw material, and transportation costs are weighing on the industry as a result of the conflict in the Middle East. The closure of the Strait of Hormuz is exacerbating supply chain problems and driving up oil, gas and naphtha prices. In parts of the chemical business, demand temporarily picks up due to precautionary orders. The German Chemical Industry Association (VCI) Managing Director Wolfgang Große Entrup said, "The Middle East conflict is cutting a deep swathe through the global economy. We are not seeing a mood of optimism, but are instead experiencing geopolitical hoarding, which is giving our industry a brief respite, not a trend reversal. This is a panicked interim peak from which parts of the chemical industry are also benefiting in the short term. We firmly believe that the hardest part is still ahead of us."
However, the VCI does not expect a sustainable recovery this year. Once the situation in the Strait of Hormuz returns to normal, competitive pressure will increase again. VCI Managing Director Wolfgang Große Entrup commented, "The chemical industry is struggling, pharma is preparing for even greater challenges. A few stable figures are not a turnaround. The plain truth is that the chemical industry is still under constant stress - burdened by untamed bureaucracy, high costs and global turbulence. Germany will continue to lose competitiveness if Berlin and Brussels do not take countermeasures. We have little influence on geopolitical crises - but we do have influence on the conditions in which we operate. The policy of small steps is no longer enough. Strong leadership, reliability and a clear industrial policy course are now crucial. This also applies to China. The massive increase in capacity and state-subsidized production are putting Europe's industry under increasing pressure and hitting many sectors hard. However, it is also clear that comprehensive isolation and new trade barriers are not a good solution. What is important is that the existing trade protection instruments must first be used effectively - this is the only way to help quickly. Europe needs a self-confident and fair approach to China - with instruments that effectively limit distortions of competition without jeopardizing international value chains."
The figures at a glance
In view of the geopolitical risks, a reliable forecast is currently only possible to a limited extent. The VCI still expects 2026 to be a difficult year: production is likely to fall again for the year as a whole. Although rising prices could support sales, margins will remain under pressure.
Seasonally adjusted, chemical-pharmaceutical production fell by 2.8% in the first quarter of 2026 compared to the previous quarter and was almost 6% down on the previous year. Pharmaceuticals significantly dampened earnings, while chemicals grew slightly. Capacity utilization rose slightly to 75.1% - but remains below a profitable level.
The downward trend in producer prices was halted: compared to the previous quarter, there was a slight increase of 0.2%. Compared to the previous year, however, prices were still around 1% lower. At the same time, cost pressure intensified significantly: prices for crude oil and crude oil-related products in particular rose sharply.
Seasonally adjusted sales rose by 2.1% to €50.9 billion. However, it was 5.4% below the previous year's figure. Additional orders at the beginning of the year partly indicate precautionary orders and stockpiling in view of the escalation in the Persian Gulf.
