Energy crisis pushes down VCI chemicals output forecast

FRANKFURT, Germany—The German chemical industry association VCI has lowered its production outlook for 2022 for a second time this year as the sector faces challenges such as "astronomical energy prices, sharply increased raw material costs and ongoing supply bottlenecks."

In its second quarter report, published Sept. 14, the VCI said it expected total chemicals output, including pharmaceuticals, to decrease by 5.5 percent compared to last year.

Chemical production, excluding pharmaceuticals, is set to decline 8.5 percent, down from an earlier forecast of a 4-percent decline announced in July and a 1.5-percent growth estimation at the beginning of the year.

Over the three months to end of June, industry production recorded a significant 6.4-percent year-on-year decline, as challenges forced companies to cut production sharply.

At 81.4 percent, capacity utilization in the industry was "below normal," VCI said.

"The chemical-pharmaceutical industry felt the consequences of the war in Ukraine very clearly in the second quarter of the year," said the association in a statement.

While production collapsed across all sectors, sales increased slightly due to high producer prices.

Overall, chemical product prices rose by nearly 8 percent sequentially and 24 percent year-on-year to leading to a 3.4-percent increase in second quarter sales to about $6.4 billion (€6.5 billion).

VCI noted, however, that many companies saw their revenues decline as they found it increasingly difficult to pass on the high energy and raw material costs to their customers.

"Added to this is the uncertainty as to whether gas rationing will be necessary in winter," said the association, adding that preparations for a gas shortage are "in full swing."

"We have to dress warmly in the truest sense of the word in order to get through this winter and the coming year," VCI President Christian Kullmann said.

"The immense challenges pose a serious threat to the competitiveness of our companies and thus also to the future of Germany as an industrial location," he added.

Kullmann warned that cutting back production was only the beginning of the challenge. "If certain processes have to shut down completely, they may never start again," he said.