The head of Germany's Merck KGaA, the world's largest supplier of liquid crystals for flat panel displays, warned that this year's massive upswing in key chemical markets could prove transient.

"I don't assume that growth in the chemical sector will continue in this fashion next year," after this year's "sensational" performance, CEO Karl-Ludwig Kley said in a speech in Stuttgart.

The slowdown would be particularly evident in industrialized countries next year, he added.

In the medium term, expansion at Merck's key liquid crystal unit was not in danger, Kley said.

Merck and its chemicals peers saw a marked upswing in the first half, triggering a more upbeat full-year outlook, but there have since been signs of a slowdown in the second half.

Merck in July lifted its 2010 outlook as a product upgrade catering mainly to 3D-screen makers coincided with a recovery in demand for consumer electronics.

German chemicals trade group VCI last month raised its 2010 sector sales growth outlook to 18 percent above the prior-year level, boosted by robust export markets.

But Samsung, the world's top TV maker and one of Merck's key clients, warned this month that global demand and pricing for liquid crystal display (LCD) flat screens would be weak in the fourth quarter.

Taiwan's AU Optronics, the world's No.4 LCD maker, said this month it expected to see weaker third-quarter results as falling panel prices hurt its margins.

Merck's Kley also said the company would continue to run both drugs and chemicals businesses, despite recent setbacks at its pharmaceuticals unit.

"I continue to firmly believe in the success of our pharmaceuticals business," he said.

EU regulators on Sept. 24 dealt Merck a body blow by advising against multiple sclerosis pill cladribine in its potentially largest market.