German chemicals trade group VCI said the increase in capacity utilization in the industry, a key measure of recovery, has tapered off amid a sluggish upturn in Europe.

"We don't expect a considerable recovery in 2010. That's why we won't see much change in terms of capacity utilization," said the group's managing director Utz Tillmann late on Wednesday.

"Growth rates in Asia and Latin America will not compensate for what is lacking in European demand," he added.

Germany's chemical makers, which represent the country's fourth-largest industrial sector, are currently using about 78% of their equipment and plants, little changed from about 77% in December, and below historic averages of 82-85%.

VCI, which represents businesses in Europe's largest chemical producing country, also reiterated an outlook for sector revenue to gain 6% in 2010 and for output volumes to rise 5%.

German chemical businesses saw sales decline 0.3% year-on-year in the fourth quarter but revenues rise 4.2% compared with the third quarter, VCI said.

The capital-intensive chemical sector was hit hard by the downturn in industries such as electronics companies, carmakers and builders. Higher capacity use is key to return to profit growth. VCI's cautious outlook reflects mixed signals from recent macro-economic surveys and company reports.

Germany's economic recovery stalled in the fourth quarter of 2009, as weak consumption and a liquidation of inventories offset firmer exports, leaving Europe's largest economy on a weak footing going into 2010.

German exports rose by 3% on the month in December, pushing foreign demand above the year-ago level for the first time in 14 months and easing concerns about economic recovery.

German's BASF, the world's largest chemical maker, predicted significant profit gains this year, but said the recovery remained shaky.

Smaller peer Lanxess said it was on track to report higher 2009 core underlying earnings than previously forecast on stronger demand in Asia for tire rubber.