WDK calls for ‘rapid solution’ to high energy costs

Frankfurt, Germany – The German rubber industry association WDK has called for a quick solution to the current gas and electricity price crisis.

In a statement 13 Sept, the trade association urged German officials to provide “a rapid and noticeable relief” for all industrial companies which have affected by the sudden increase in production costs.

"Overall, the rubber industry in Germany is shrinking,” warned Michael Berthel, chief economist at wdk, noting that both domestic production and the number of employees declined in the first half of 2022.

“The political aid and framework conditions must enable German industry to be preserved at its home location – and now," he said in a 13 Sept statement.

The German rubber industry’s turnover during the first six months of the year increased to a total of €5.25 billion in the first half of 2022.

This reflected a 1.1% year-on-year growth in the domestic business turnover at €3.34 billion, and a 0.8% increase in exports at just under €2 billion.

In its latest statement, WDK said it was sounding the alarm as the significant increase in the price of energy, raw materials and logistics is “eating away at the liquidity of companies in the industry,” and putting pressure on margins.

The trade association, therefore, warned of “impending insolvencies, concerted relocation plans and reduction of jobs,” within the industry.

"The economic recession, with declining demand for rubber products and simultaneous further increase in the price of energy are putting the German rubber industry in dire straits," Berthel said.

Citing WDK calculations, the economist said production costs across the key product groups had increased by more than 60% since 2019.

Meanwhile, sales growth in the first half of 2022 reached 1% year-on-year.

“This discrepancy makes it clear that the companies in the industry have to cope with the additional costs for the most part themselves,” he added.

According to Berthel, deliveries from automotive suppliers – in particular tires and technical products – continue to be “well below the planned volumes”, as demand from German car makers remains low.

"In addition to the supply bottlenecks with semiconductors that limit vehicle production and the Ukraine war, the inflation-related sharp increase in the price of cars is reducing demand,” Berthel added.

Furthermore, the replacement tire segment is impacted by low new registrations, reduced mileage and consumers’ reluctance to buy due to inflation.

As a result, the segment’s sales volume is “well below” the volumes of the years before 2020.

In the non-automotive sector, including industrial deliveries, construction components and consumer products, WDK noted “fewer impacts” on demand in the first half of the year.

This, it said, has led to increased sales and revenues in the segment.

However, the trade association warned that business expectations in the segment are “deteriorating significantly” while “the order situation is weakening.”

Citing the overlapping crises of Covid, supply chain problems and the war on Ukraine, Berthel said WDK could not provide “a concrete forecast” for the industry.

“What is certain, however, is that the German rubber industry is facing an existential final quarter of 2022 and an extremely difficult financial year 2023,” he concluded.