Germany’s chemical and pharmaceutical industry anticipates another setback in 2026. The German Chemical Industry Association (VCI) estimates that production will fall by 1.5% over the next year due to weak demand in Europe, rising costs, and the gradual shift of industrial growth toward Asian markets.
Germany’s chemical industry continues to lose momentum
In the first half of 2026, production in Germany’s chemical and pharmaceutical sector fell by 3%, while sales declined by 1% to €106 billion. At the same time, producer prices rose by 2%, reflecting the continued pressure that costs are exerting on the industry.
VCI President Markus Steilemann described these results as disappointing and noted that the expected recovery has yet to take hold due to a limited investment environment and virtually stagnant European demand.
Asia gains weight in global chemical production
For decades, European manufacturers benefited from Asia’s economic growth through chemical exports. However, that dynamic has gradually changed.
More and more companies have shifted part of their production capacity to China and other Asian markets to be closer to their customers. As a result, the increase in local production has reduced the need to import products made in Germany and other European countries.
This transformation is changing the balance of international trade in chemicals and poses an additional challenge for European manufacturers, which are facing lower export volumes.
The conflict in the Middle East provided temporary relief
Likewise, the VCI explained that disruptions caused by the conflict in the Middle East created occasional advantages for some European producers by affecting more strongly Asian manufacturers dependent on certain raw materials.
However, the organization considers that this effect was insufficient to offset the market’s structural weakness, characterized by restrained investment and industrial demand that continues to show little dynamism.
Some companies maintain more favorable outlooks
Despite the scenario described by the industry association, some companies in the sector have shown signs of greater optimism. Evonik Industries and Brenntag recently revised their profit forecasts upward for the full year, reflecting that performance can vary between companies depending on their product portfolio and their exposure to different markets.
A strategic sector for the German economy
The chemical and pharmaceutical industry is Germany’s third-largest industrial sector and supplies activities such as automotive, construction, agriculture, and the textile sector.
For this reason, the evolution of its production is often considered a leading indicator of the country’s manufacturing activity. VCI forecasts suggest that the sector’s recovery will still face significant challenges as long as weak European demand and the shift of industrial growth toward Asia persist. This copy integrates the content and approach of the analyzed HTML without reproducing its text.
Source: Reuters
Photo: Shutterstock
