VCI withdraws 2022 outlook, calls for ‘reprioritisation’ of political projects

Frankfurt, Germany – The German chemicals industry association (VCI) has withdrawn its 2022 outlook on the back of the ongoing war in Ukraine, which it says has led to an “explosion in energy prices”.

The industry reported an 18% year-on-year increase in sales to €225 billion over the course of 2021, helped by continuous increases in producer prices, said VCI in a statement 17 March.

Production increased by 5.3% compared to the previous year. Excluding pharmaceuticals, volume growth was up 5% year-on-year, with the polymers product group posting an increase of 16.3% in sales volumes.

However, as a result of the war in Ukraine, VCI said it was withdrawing its outlook forecasts for this year, without being able to give an update at the moment.

Citing a recent survey of chemical and pharmaceutical companies, the association said 54% of member companies expect production and sales to decline in the current year.

“The economic and political situation for energy- and raw material-intensive chemistry has changed dramatically as a result of the Ukraine war,” it said.

“Oil and natural gas prices have exploded. The financial scope of companies is shrinking more and more,” it added.

According to VCI, 70% of companies participating in the survey reported “serious problems” for their business due to high energy prices.

Some 85% said they could not entirely or partially pass on increasing production and procurement costs.

Commenting on the survey results, VCI managing director Wolfgang Große Entrup warned of “the massive consequences" of an import ban on Russian natural gas for the industry.

"Deep cuts in the production level of the industry would not only be expected in large energy-intensive companies, but would also be unavoidable in medium-sized companies,” he stated.

According to Große Entrup, a ban would interrupt supply-chains in "almost all sectors", including agriculture, food, automotive, construction and packaging.

“A severe and multi-year recession with massive job losses must be expected.

“And unlike in the financial and corona crises, Germany would not recover relatively quickly in the event of an industrial crisis.”

According to VCI, the German chemical-pharmaceutical industry consumes 2.8 million tonnes of natural gas as a raw material (23%) and 99.3 terawatt hours of natural gas (73%) for the generation of steam and electricity during a year.

In view of the new geopolitical conditions, VCI said it was necessary for Berlin and Brussels to carry out “an urgency analysis” of their current legislative projects and reprioritise them.

"Simply 'continue as planned' is irresponsible and extremely dangerous in terms of industrial policy," said Große Entrup.

Among other measures, he called for 'a reduction to minimum' in energy tax to the EU or a temporary suspension of the phase-out of coal-fired power generation.

The association also called for the postponement of projects such as extensive amendments to the REACH regulation and national and European supply-chain law.

Accelerating planning and approval procedures is another key issue, which VCI said will better position Germany in terms of resilience of raw material and energy supply.