Order books are empty, production is as low as it was thirty years ago, many factories have closed and the remaining factories are economically in decline. For Wolfgang Große Entrup, carnival season doesn’t start on Tuesday; for him it was already Ash Wednesday.
The general manager of the chemical association VCI, not one for nuances, painted a gloomy picture of the chemical industry in Germany in an inflammatory speech on the occasion of the interim report. The situation continued to worsen in the third quarter; production, sales, prices – all the relevant data is increasingly lagging behind. With an average utilization of 70 percent, the system is still well below the profitability threshold, so production at this level is “not profitable at all.” The autumn depression has arrived. The industry was shaken towards the end of the year. “The knockout is getting closer and closer.”
In fact, these numbers are truly worrying. Although the electrical industry was able to report significant growth again for the first time on Tuesday, the chemical industry – the third largest industry in the country in terms of sales – continued to decline. On an annual basis, sales outside pharmaceutical companies fell again significantly by 5.2 percent. Including pharmaceutical sales, the year-on-year decline narrowed to 2.3 percent. However, dark clouds are also gathering in the pharmaceutical business, this is said in connection with the possibility of special tariffs in important overseas markets of the United States.
Exports are under pressure
Chemical companies are already struggling with geopolitical turmoil. According to VCI, exports of fine chemicals to Asia fell by twelve percent compared to last year, and exports to America even fell by almost a fifth. In addition to high production costs, Large Entrup blamed US tariffs for weak sales. Because chemicals from China – by far the largest producing country – can no longer be exported to America due to tariffs, they are flooding the European market. Germany is also “the most expensive place for industrial value creation in the Western world.” In America, electricity costs only a quarter of that. But in Germany, companies are really struggling to survive. According to him, employment opportunities which were previously stable are also decreasing. “Thousands of jobs are being burned.”
VCI followed in Philippika’s eloquent footsteps with a broad and unspecific list of demands. An industrial liberation strike is necessary: labor costs, taxes, duties, regulations, bureaucracy, everything must be reduced, “finally take control”. Some political parties understand the situation facing the country and the industry. However, the new government still has not created a spirit of optimism.
Large Enterprises specifically called for electricity price relief. The assistance framework should be adjusted so that energy-intensive companies benefit from both planned industrial electricity prices and existing electricity price compensation. Both are currently exempt under state aid laws. Federal Economy Minister Katherina Reiche (CDU) wants to start subsidizing industrial electricity prices, which has been controversially discussed for years and was announced by her predecessor Robert Habeck (Green Party), next year. Unlike compensation, this compensation is limited to three years.
Criticism is getting louder
Große Entrup vigorously emphasizes one of the most important demands in the chemical industry: a moratorium on European ETS emissions trading. Since the distribution of free pollution rights has gradually decreased and certificates – which are used to emit one ton of CO2 justified – as expected, criticism is increasing. Recently, BASF boss Markus Kamieth called for fundamental reforms – pointing to additional costs of up to one billion euros that his company is expected to incur in the long term. The competitiveness of European industry is at stake. Kamieth followed the request of Evonik CEO Christian Kullmann, who opened the debate on reform with an interview with FAZ.
Emissions trading is considered to be at the heart of market-based European climate policy. Companies that emit a lot of carbon dioxide also have to incur large costs. This makes investing in green technology worthwhile for them – that’s the idea.
Managing Director of VCI Große Entrup said that the chemical industry remains committed to climate goals, but the framework conditions promised when emissions trading was introduced have not been met. There is a lack of sufficient hydrogen and competitive electricity. Moreover, the planned CBAM border adjustments will not be successful. For Große Entrup, this is just a bureaucratic juggernaut. Importers will avoid these regulations and the EU must always follow and make improvements. Border adjustments are currently being introduced gradually in the EU and are actually intended to create level competition between European industry and competition in Asia and the Americas, which do not have CO2.2– Must pay taxes. Companies that import into the EU should also be asked to pay. But recently, Ifo President Clemens Fuest also criticized the procedure and described compensation as a dangerous wishful thinking.
Große Entrup said that the industry is already intrinsically motivated to ensure more climate protection because investments in climate protection also improve energy efficiency in the long term. But currently, “no one is paying additional climate costs just because we produce in Europe”.
