Cefic remains cautious despite EU chemicals production grows slightly

Brussels – After a 20-month spell in negative territory, European chemicals production increased for the third month in a row in April, latest data from the European Chemicals Industry Council (Cefic) shows.

Production over the first three months of the year grew 0.6% year-on-year and 1.2% quarter-on-quarter, a development described by Cefic as “a weak start” to the year.

“Considering current levels, EU27 chemicals production would need to grow by 18% to reach the pre-Covid levels,” said the Cefic report published 4 June.

The industry body went on to warn that the slight increase in volumes “must be analysed with a lot of caution.”

The uptick, it argued, could be linked to a short-term restocking and “must not be perceived as good start of stabilised demand and ongoing recovery.”

According to Cefic, there are “still no solid signs of a sustained recovery in demand for chemical products.”

In addition, structural problems, such as a lack of orders and high costs, continue to weigh on the expected recovery.

Gas prices, for instance, are “at least 50% above” the pre-Covid levels (2014-2019), while feedstock costs and trade dependency levels remain high, Cefic added.

On a slightly more positive note, the association noted the German chemical industry started 2024 “better than expected,” reaching its highest output level since July 2022.

The ‘long-awaited’ recovery has brought about ‘improved order situation’, helped by “empty inventories at customer industries and an increase in demand from outside Europe.”

German production and sales increased compared to the previous quarter, although ‘structural problems’ in the country are slowing down development.

According to data provided by Cefic, production in Germany rose 5.4% year-on-year during the first quarter, reversing two years of negative trend.

“A lack of orders and cost problems continue to depress the mood among companies,” said the Cefic, noting the need for a boost in exports to other markets such as Asia and the US.

Elsewhere in Europe, Cefic said the industry was “still suffering” from a lack of orders and uncompetitive energy costs.

Export-order of books, said the association, showed some encouraging signs until March, but saw a downturn in April.

“It is too early to say that demand is gradually back to the normal level,” said Cefic pointing to orders remaining below expectations.

Meanwhile, Russia and China reported year-on-year growths of 7.5% and 9.5% respectively, while the UK posted the strongest decline of 5.7% compared to the first quarter of 2023.