Germany's crisis-hit chemical industry seeks revival
Hit by high energy costs and regulation, Germany's chemical companies are scaling back production at home while expanding abroad. Can the trend be reversed? Germany's
Hit by high energy costs and regulation, Germany's chemical companies are scaling back production at home while expanding abroad. Can the trend be reversed? Germany's chemical sector stands as a core pillar of the nation's economy, ranking third after automotive and mechanical engineering. It generates hundreds of billions in annual revenue and directly employs about half a million people. The industry, however, has been beset by crisis in recent years, weighed down by high energy costs, growing regulatory burdens, a persistently weak economy, and intense competition from abroad. Chemical production requires large amounts of energy, not just electricity but also heat, steam and pressure. So, when energy prices rise, it erodes firms' global competitiveness and profitability. Since Russia's full-scale invasion of Ukraine in February 2022, and the resulting loss of cheap Russian gas, German chemical companies have faced some of the highest energy prices globally. The US‑Israel war against Iran this year has compounded these challenges. It triggered another spike in energy prices while disrupting supply chains and causing shortages of key raw materials. "Energy prices, especially natural gas prices, have doubled since the war in Ukraine started," said Christof Günther, managing director of InfraLeuna, a German infrastructure and services company that operates the Leuna Chemical Park, the nation's largest integrated chemical site. "And they [energy prices] have just doubled again temporarily due to the war in Iran. So, we are dealing with extremely high energy costs," he told DW. Germany's chemical industry hit by high energy prices To view this video please enable JavaScript, and consider upgrading to a web browser that supports HTML5 video No sign of turnaround this year for Germany's chemical industry Overall revenue generated by German chemical firms has dropped by around 22% since 2022, to €220 billion ($256 billion) in 2025, according to the German chemical industry association VCI.
The trade group, which represents around 2,300 companies, said there is no sign of a turnaround, with stagnation or further declines in production likely this year. It stressed that reducing natural gas costs is essential to strengthening Germany as an industrial location. VCI pointed out that natural gas is not just an energy source for the chemicals sector. It's also a critical feedstock that cannot be replaced overnight, leaving companies highly exposed to sustained price pressures. "Alternatives such as biomethane can support the transformation, but they are still in the ramp-up phase and are currently available only to a limited extent,” the association said in a statement to DW. How to restore Germany's competitiveness? Anna Wolf, chemicals industry expert at the Munich-based ifo Institute, an economic think tank, said the industry has done most of what it can to overcome the energy challenges, pointing to investments in energy-efficient production and recycling. The burden is now on policymakers, she stressed, to ensure that energy is available "in sufficient quantities, at internationally competitive prices, and through infrastructure that the chemical industry can actually rely on for its long investment horizons." Without reliable, affordable energy and the infrastructure to deliver it, "no other measure — whether on regulation, trade or innovation — will be sufficient to restore competitiveness," the expert told DW. German economy under pressure To view this video please enable JavaScript, and consider upgrading to a web browser that supports HTML5 video Compounding the crisis is a prolonged economic stagnation in Germany and tepid growth across Europe, resulting in subdued demand for chemical products in the region.
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