For Germany's chemical producers, 2013 began without the hoped-for improvement in business, but at least there was no further deterioration, the industry association Verband der Chemischen Industry said in its report on the first quarter.  Production decreased by 0.7% year-on-year. Excluding pharmaceuticals, the setback was 1.8%, as drug makers saw a more than 2% rise in output.

Industry-wide sales of German chemical producers rose by 0.5% to €45.8 billion, with selling prices up 1% against the strong Q1 2012 level. As in previous periods, foreign demand was the motor of sales; only detergents and personal care products saw improvement in Germany. Capacity utilization rates averaged 84%. Employment across the industry receded by 0.5%.

Despite the current sluggishness, chemical producers are confident that business overall will remain stable, especially as capacities are being operated at full run. VCI noted that economic research institutes see a positive picture on the whole for the German chemical industry, despite the weakness in some European customer markets. Interest rates are low and access to credit easy. Moreover, German producers are competitive, and the robust labor market should boost consumer spending.

The industry association said exports should profit from the improving economy, primarily in emerging markets of China, India and Brazil. For full year 2013, it is maintaining its earlier forecast of 1.5% growth in chemical production, a 0.5% increase in producer selling prices of 0.5% and a 2% rise in sales to €190 billion.

Plastics Industry Concerned About Competitiveness

The German plastics industry also expects modest growth in 2013 after a challenging 2012 in which polymer production sank by 3.4% to 19.5 million t and the fourth quarter was especially dismal. At a press conference in Frankfurt, PlasticsEurope Deutschland, German arm of the European association of plastics manufacturers, said that despite further stagnation in the first months production could rise by about 1.5% in the full year.

In 2012, sales of all types of plastics made in Germany declined by 0.5% to €25.1 billion on the back of a 2% decline in home sales to €10.9 billion and a 0.8% decrease in foreign sales to €14.2 billion. Selling prices rose by 2.9% as feedstock cost increases could mostly be passed on. Employment in the plastics industry shrank by 1.8%. Capacity utilization rates were described as "acceptable."

Important German customer markets for plastics lost momentum in 2012, led by E&E with a business deterioration of 3.5%. The construction sector weakened by 1.7% and the automotive sector by 0.4%. Nevertheless the German plastics grouping's newly elected president, Josef Ertl (CEO of PVC manufacturer Vinnolit), noted that the German economy fared far better than the EU 27 generally.

German plastics exports in 2012 shrank by 0.5% to 12 million t worth €22.5 billion and import volumes by 0.4% to 8.3 million t worth €14.6 billion.This generated an export surplus of 3.7m t or €7.9 billion. Most of the trade volume was with the EU 27.

In their respective reports, German and chemical and plastics producers alike complained of an adverse political climate in their home market. VCI president Karl-Ludwig Kley (CEO of Merck KGaA) called on the government in Berlin to contribute to improving the competitiveness of industry rather than burdening it with increased regulation or financial responsibility for supporting renewable energy development.

There is growing concern in the German plastics industry about a perceived lack of competitiveness on international markets, Plastics Europe Deutschland said. In particular, producers see themselves at a disadvantage against U.S. companies with access to inexpensive shale gas-based feedstock.

"When cheap energy and raw materials improve business conditions in the U.S., they deteriorate in other economic regions," said Ertl, while hinting that member companies could be forgiven for looking to the U.S. to build new plants. Germany should at least make exploration of domestic shale gas reserves possible, he said, while underlining that plastics producers, too, believe they have contributed enough cash to renewable energy.

Days before the cabinet of Chancellor Angela Merkel was due to vote on creating a legal framework for shale gas exploration on May 15, the vote was shelved when even members of Merkel's own Christian Democratic party indicated they would not support the practice.  (dw)