Germany's crisis-hit chemical industry seeks revival

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.

Key points

• 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.