German chemical producers are sticking by forecasts of 1.5% production growth in 2015. Thanks in particular to the euro’s weakness, sales are expected to rise by 0.5% to €191.8 billion, rather than declining by the same margin as predicted earlier.

Despite the progress made from January to June, Marijn Dekkers, president of the chemical industry association Verband der Chemischen Industrie (VCI) said that there is little business momentum at present. However, foreign exchange movements and the impetus provided by lower oil prices will benefit the industry, in particular the base chemicals segment.

The latest industry survey by German economic research institute Ifo shows that the mood among chemical producers is positive on the whole, despite the weak growth prospects. This in part reflects geopolitical risks to trade – such as the conflict between Russian and Ukraine, the cooling of the Chinese economy and the protracted crisis in Greece.

Figures for the first half year show production up 1% and sales up 0.5% to €96.5 billion. Excluding pharmaceuticals, the output rise was only 0.5%, Dekkers said. German sales fell by 1.5% to €37.4 billion, reflecting a 3% decline in selling prices. By the reverse token, export sales increased by 2.5% to €59.1 billion – an effect of the weaker euro clearly reflected in the 12% expansion of sales to the NAFTA region.

VCI’s economists do not believe, however, that Greece’s woes will “infect” the chemical industry in general. Only 0.8% of German producers’ trade is with the Hellenic region. The country is in 14^th place, behind Ireland and ahead of Portugal.

Looking at production segments separately, the association’s H1 figures show petrochemical output down 2% (including a 1.5% decline in polymer production), while output of inorganic base products such as industrial gases or fertilizer rose by 1%. Production in pharmaceuticals segments picked up by 2.5%, while fine and specialty chemicals saw a 4% rise.

German manufacturers of consumer chemicals were clearly in a bind in the first three quarters, seeing their output shrink by 2.5%. The respectable domestic demand for these products was met largely by imports.

The German chemical industry’s tendency to invest in new production facilities outside the country continued firm in the first half of 2015. Over the past 25 years, funds spent on investment abroad have doubled and currently total €8.6 billion, VCI said. By contrast, capital spending in Germany has sunk to around €6.4 billion on the annual average.

In the industry’s assessment, reasons for the increased spending abroad are lower production costs, in particular as regards energy. The US competitive advantage is increasing, due to producers’ access to cheap shale gas-derived ethane feedstock, as VCI notes.