Nov 12 (Reuters) - German chemicals lobby VCI on Thursday raised its 2026 industry sales forecast on the back of higher prices, but warned the temporary boost from supply disruptions tied to the Iran war had faded.
The Middle East crisis provided an unexpected boon for European chemical makers, as supply chain disruptions weighed more heavily on their Asian rivals, while passing on higher energy costs to customers boosted prices of some chemicals.
"We anticipated that these windfall gains stemming from specific geopolitical circumstances would eventually come to an end, and that is precisely what has happened," VCI Managing Director Wolfgang Grosse Entrup told journalists.
The industry association, which represents around 2,000 chemical and pharmaceutical companies, most of them small to mid-sized, expects sector turnover to grow 3.5% this year, up from its September forecast of 2.5%.
However, that increase will be driven entirely by higher producer prices, not stronger production volumes, it said.
"The economic situation of the German chemical and pharmaceutical industry is, at best, stabilising at a low level. A sustainable recovery is not in sight," VCI said in the quarterly statement.
The outlook for 2027 also remains bleak due to persistent political and structural challenges, Grosse Entrup added in the press call.
VCI's assessment echoes recent Ifo surveys, which showed industry sentiment weakening in October as structural challenges outweighed support from Middle East-related supply disruptions.
GERMANY 'FIRMLY IN THE RED'
Grosse Entrup also cautioned against reading stronger earnings from large chemical companies as evidence of a domestic recovery.
"These companies are generating their profits elsewhere, outside of Germany. For many of them, Germany remains firmly in the red," he said.
Behind the headline numbers, companies are delaying investment, cutting capacity and shedding jobs, Grosse Entrup said. He urged Berlin to use the narrow reform window before state elections next spring to tackle energy costs, bureaucracy and competitiveness.
Third-quarter industry revenue rose 5.8% from a year ago to €53 billion ($59 billion), but fell 2.7% from the second quarter. Without higher prices, it would have also been below last year's level, VCI said.
Production volumes for the chemical and pharmaceutical industry fell 3.5% on the year. Capacity utilisation edged up to 76.6%, compared with 73.4% in the second quarter, mainly reflecting plant closures and capacity cuts rather than stronger output.
($1 = 0.9027 euros)
Reporting by Anastasiia Kozlova in Gdansk and Patricia Weiss in Frankfurt, editing by Milla Nissi-Prussak
Source: Reuters