Ukraine conflict adds to concerns for German rubber industry

Frankfurt, Germany – While German rubber industry sales are expected to grow 7% in 2022, risk factors, including the ongoing Russia invasion of Ukraine, could heavily impact the market, according to the WDK.

Conflict in Ukraine is currently causing risk premiums to “rise dramatically.” in addition to the challenges posed by already high commodity prices, the German rubber industry association said 24 Feb.

This would further compound the “already extremely sensitive issue of exorbitant energy prices,” Frankfurt-based WDK added in a statement, which was primarily a review of 2021. .

Describing it as a “very unusual year” for the German rubber industry, WDK said that despite a strong start, 2021 was characterised by 'bottlenecks and obstacles' in the way of procuring materials. 

“In 2021, commodity prices rose massively across the board (for almost all raw materials) – and continuously. 

“In the fourth quarter, prices were up to 80% higher than in the same quarter of the previous year and up to 65% higher compared to the annual average,” said WDK.

At the beginning of 2022, the association added, “prices made another strong jump upwards.” 

Explaning the challenges of 2021, WDK chief economist Michael Berthel said supply chain stalled due to logistics congestion in both shipping and road freight transport during the year. 

The industry was further impacted by an unprecedented number and frequency of force majeure notifications for precursors of rubber processing.

“In addition, there were natural disasters, industrial accidents and machine damage,” Berthel added. 

According to Berthel, these factors all led to longer delivery times and, in particular, “enormous price increases of the required raw materials.” 

Another key factor that negatively impacted the industry, WDK said, was the shortage of semiconductors, which reduced global car production volumes by 10% during 2021. 

“This has enormously reduced the demand for components from the rubber industry – for technical elastomer products (general rubber goods) and tires,” the association added. 

In terms of performance, WDK said the business development of companies differed significantly in 2021 depending on their specialisation.

In the non-automotive segment, the industry recovered with a 13.6% growth in sales to €3.5 billion.

Without the disruptions to the value chain, WDK said the growth ‘could have been much higher as there was a corresponding demand.’

According to Berthel, there was an increase in sales and unit sales in the tire replacement business compared to 2020, but the volumes were significantly below the 2019 levels. The segment reported a 3.3% increase in sales to €3.8 billion.

Despite a promising start to the year with double-digit growth, automotive suppliers eventually generated “a marginal increase” compared to the weak year 2020, reporting sales of €2.7 billion. 

From August/September, according to WDK, automotive sales figures turned negative as domestic businesses declined.

All in all, the German rubber industry's turnover in 2021 came in just under €10 billion, up 6.2% compared to 2020 but still below the €11 billion posted in 2019.

“At the turn of the year 2021/2022, the economic situation is still paradoxical,” said WDK regarding this year’s outlook.

“High political and economic uncertainties are weighing on a sustainable recovery… Companies in the German rubber industry continue to operate in a still severely disrupted business environment,” it added.

Citing the results of its latest survey, WDK said compared to the end of last year, the “unrest and high volatility” on the procurement side “has by no means eased and the demand situation has changed little.”