Germany’s chemical industry faces mounting pressure as order books remain thin and production costs climb, with thousands of jobs now at risk amid warnings of a prolonged stagnation that could erase a decade of growth.
Wolfgang Große Entrup, head of the German Chemical Industry Association (VCI), delivered a stark assessment of the sector’s outlook, stating that the industry had hoped for significantly more from the new federal government under Chancellor Friedrich Merz. Despite initial optimism tied to special funds for infrastructure, climate neutrality, and defense spending, the ongoing conflict in the Middle East has acted as a significant growth dampener, prolonging weak demand and preventing plants from operating at profitable levels.
For many chemical producers, the focus has shifted from expansion to mere survival, as they struggle to keep operations economically viable. The VCI chief warned that without decisive economic policy intervention, Germany risks slipping into a prolonged period of stagnation, citing expert estimates that the country’s growth potential has fallen to just 0.4 percent annually — a level that, combined with geopolitical shocks, could make recovery elusive.
In Hesse, where the chemical and pharmaceutical sector employs around 55,000 people and remains a key industrial pillar, the outlook is equally grim. Industry data shows chemical production in the state has fallen by 31 percent since 2021, with 2025 marking the fourth consecutive year of decline. While pharmaceutical sales edged up slightly to nearly 18.4 billion euros, the chemical segment saw production drop by about four percent and revenue fall by roughly six percent to 12.5 billion euros.
A recent industry survey underscores the depth of the pessimism: 80 percent of companies anticipate stagnant or declining output, 72 percent expect falling revenues, and 92 percent notice no improvement in profitability. Nearly six in ten firms anticipate cutting back on investments in the state, citing the war in the Middle East and soaring energy and raw material costs as primary burdens on operations.
Chemical manufacturers remain especially vulnerable to energy price swings due to their reliance on gas and oil, which serve not only as fuel but also as essential feedstocks for products ranging from plastics and fertilizers to medicines and cosmetics. With global overcapacity and weak demand persisting, the sector continues to operate under structural strain that predates the current geopolitical turmoil.
Industry representatives are calling for urgent policy action, arguing that high social contributions — now at 42.3 percent and rising — undermine Germany’s international competitiveness. They also warn that planned increases in pharmaceutical cost pressures, combined with bureaucratic burdens and high energy prices, could further erode the country’s appeal as a production hub, urging policymakers to consider lowering industrial electricity prices as an initial step toward relief.
How severe is the job risk in Germany’s chemical sector?
Thousands of jobs are described as acutely endangered due to prolonged underutilization of production capacity and the lack of new orders, with companies focused on maintaining profitability rather than growth.
What specific factors are worsening the outlook for chemical producers in Hesse?
The war in the Middle East, elevated energy and raw material costs, and declining investment plans are compounding challenges for chemical firms in Hesse, where production has fallen by nearly a third since 2021.
