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German chemical association VCI said on Monday it expected the country’s total chemicals production to decline in the final quarter of the year, as soaring raw material and energy costs weigh on domestic and international industry alike.
Production in the German chemical and pharmaceutical industry fell 10.3% in the third quarter, compared to the same period last year, the trade body said.
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Industry revenue in the three months to Sept. 30 increased by 14.7% year-on-year, but declined 1.6% from the previous quarter due to production cutbacks, lower price increases and weakening demand, VCI said.
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It warned industries were facing considerable challenges with ongoing energy supply contracts as well as closing new ones.
Medium-sized companies in particular were having problems renegotiating and concluding new supply contracts, VCI president Markus Steilemann said, adding that swift measures on energy price caps were needed as gas storage levels fall ahead of the approaching winter.
VCI also said it would be harder for chemical companies to pass on rising energy and raw material costs as consumer spending weakens.
The association confirmed its forecast for a 5.5% drop in annual chemicals production including pharmaceuticals, with a 16% growth in sales thanks to price increases.
Germany will spend 83.3 billion euros ($86.0 billion), or 42% of a major protection scheme launched last month, to finance a cap on gas and power prices in 2023 in a bid to protect Europe’s top economy, according to a draft proposal seen by Reuters. ($1 = 0.9688 euros) (Reporting by Tristan Chabba and Linda Pasquini; Editing by Milla Nissi)
