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Finance

Another bad quarter for Germany’s chemical sector

But natural gas demand has eased, thanks to record warm temperatures

by Alex Scott
November 16, 2022 | A version of this story appeared in Volume 100, Issue 41

 

Evonik's heaquarters building.
Credit: Evonik Industries
Evonik Industries is one of several large German chemical firms that is growing despite tough market conditions in Germany.

The tough market conditions experienced by the German chemical industry carried into the third quarter, the result of high energy prices and weakening demand for chemicals across most markets, according to VCI, Germany’s largest chemical industry association.

German chemical sales in the quarter fell 1.6% to $62.3 billion from the year-ago period, while production was down 4.2%. At 79.3%, average plant capacity utilization in the third quarter was well below normal, VCI states.

“The chemical industry faces more dark months,” VCI President Markus Steilemann warned in a recent report on the state of the German industry. “Many companies are already in an extremely dramatic situation with their production in Germany, mainly because of the massive increase in energy costs.”

VCI expects chemical production in Germany for the whole of 2022 to be down 5.5%. Medium-size chemical companies have been struggling the most, it says.

In contrast, some of Germany’s largest chemical makers, including Evonik Industries and Lanxess, seem to be weathering the storm. Evonik recorded a 26% increase in third-quarter sales, though sales volumes declined. Pretax profits dipped 5%. The firm, which did not disclose its financial performance in Germany, said it is steadily reducing its dependence on natural gas in Germany. At Evonik’s largest site, in Marl, Germany, for example, its natural gas-fired power plant can now also be fueled with liquified petroleum gas.

Lanxess posted a 38% jump in third-quarter sales and a 4.8% increase in pretax profits. The company’s sales in Germany—now far smaller than those in North America and Asia—grew 16.3%.

Although VCI is full of pessimism, Germany’s warmest October on record could be the lucky break the chemical industry need. It resulted in a 30% drop in demand for natural gas in the country during the month. By the end of October, Germany’s gas storage tanks were 98.5% full, the highest on record, according to the German newspaper Tagesspiegel. Because Russia cut all gas supplies to Germany in September, the stores could be crucial for Germany’s chemical industry, which faces gas rationing if there is a shortage this winter.

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