German chemicals federation slashes 2016 forecast

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FRANKFURT: Germany’s vital chemicals sector is struggling with slow growth in emerging economies and political uncertainty in Europe, prompting the VCI industry federation to slash its forecast for 2016.

For the whole year, the federation predicts revenues will sink by 3.0 percent compared with 2015, to 183 billion euros.

In July, it had predicted revenues would shrink less, at 1.5 percent.

“Unfortunately we’re not getting much tailwind at the moment from the political or economic environment,” federation president Kurt Bock said in a statement.


“We don’t see many indications of a sustainable pick-up in the chemicals business.”

Chemical firms make up Germany’s third-biggest industrial sector by revenue after the car industry and machine-tool makers, and employ some 444,000 people.

The sector cut production in the third quarter, with the VCI blaming uncertainty among customers at home for lower orders despite “first positive impulses” from foreign customers.

Weak demand meant the sector was only able to raise prices slightly in response to increased input costs for raw materials like crude oil.

Prices gained 0.5 percent between July and September compared with the previous three months, the first increase after three quarters of decline, but remained 2.7 percent lower than the same period in 2015.

That translated into revenues of 43.5 billion euros ($48.2 billion) over the quarter, a drop of 2.5 percent compared with the third quarter last year.

Sales fell slightly in Germany compared with the previous quarter, while exports to Europe remained constant and those to other regions grew.

“Excluding Asia, all regions recorded significantly lower sales than in the previous year,” the federation said.
Companies in the sector, which range in size from small firms to global giants like BASF and Bayer, “were not unhappy in the third quarter overall,” the VCI noted.

And the picture looking to the future is less bright.

“Uncertainty given the continuing weak growth in emerging economies can be felt just as much as concern for stability in Europe,” the federation said.

The VCI pointed to the impact of the Brexit vote on investment and consumption in Britain, concerns over the Greek and Italian economies and political difficulties in Spain as the most important sources of uncertainty.

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