Germany's VCI expects chemical industry to stagnate in 2026

By Ozan Ergenay and Anastasiia Kozlova

Dec 10 (Reuters) - German chemicals lobby group VCI expects orders and sales to stagnate next year, hampered by uncompetitive production costs, high regulatory uncertainty and a slow approval process.

The association, which represents around 2,300 companies, said revenues in the chemical-pharmaceutical industry fell 1% to 220 billion euros ($256.26 billion) in 2025.

The chemicals sector, the country's third-largest industry employing around half a million people, also faces mounting pressure from bureaucratic burdens and a stagnating economy, compounded by U.S. tariffs on imported goods.

"I don't believe that certain measures will have a significant effect in the short term but if we don't start today, we'll be right back here at the end of 2026 and asking in 2027 if we would see any impact," Markus Steilemann, VCI president and CEO of Covestro 1COV.DE, said on a call with journalists in response to a question about government efforts to stimulate the economy.

Germany has introduced a series of fiscal measures, including a 500-billion-euro infrastructure fund and a 46-billion-euro tax relief package to support businesses through 2029.

Competition from China has intensified with Europe becoming a more attractive export market after the U.S. tariff turmoil.

"You can consider protective measures in the short term, but at the end of the day...our need is a framework in Europe and Germany where companies can operate competitively," Steilemann said when asked about Chinese competition.

INDUSTRY FACING PERFECT STORM

The crisis in the chemicals sector is also reflected in employment figures, with 2,400, or 0.5%, fewer people working in the chemical and pharmaceutical industry this year, according to a VCI statement.

"Industry is sending out an S.O.S. and 2025 was once again very difficult for our sector, and the outlook isn't getting any brighter," Steilemann said in the statement.

"We must face uncomfortable truths and look ahead. Transforming our economy into a competitive and prosperous future will demand a great deal from us. It will be a difficult path but we must take it, with the combined efforts of politics, business and society," he added.

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