VERBAND DER CHEMISCHEN INDUSTRIE e.v.

Transcription

1 VERBAND DER CHEMISCHEN INDUSTRIE e.v. Statement to the press by Kurt Bock, President of Verband der Chemischen Industrie (VCI), 6 December 2017 at the VCI s annual press conference in Frankfurt (The spoken word takes precedence) I. Business situation of the industry In 2017 the chemical-pharmaceutical industry can look back on positive developments. The domestic business situation of German industry gained momentum in the course of the year. The same applied for the European neighbouring countries. In trading with overseas customers, our companies profited from the robust demand from China, the brisker US economy, and the economic stabilisation in Brazil, Russia and other emerging markets. The upturn accelerated in the second half of the year. At present, the companies are assessing their business situation roughly as positively as they last did in 2010 when the global economic crisis was followed by a rapid recovery. After the rather mixed outcomes in the years 2014 to 2016, we can return to the rating good for the current business year overall. The figures for 2017 in detail: Production in the chemical-pharmaceutical industry in Germany grew by 2.5 percent. When excluding the strong pharma business, chemical production still improved by 2 percent. Capacity utilisation of the industry was aboveaverage at ca. 87 percent. The livelier economy benefitted all segments of our industry. This shows a glance at the developments in the various sectors: After the setbacks of the past years, companies once again clearly expanded their production of basic chemicals. Throughout the year 2017, the total production of inorganic basic chemicals rose by 4 percent. The production of polymers, which includes plastics and man-made fibres, Mainzer Landstraße Frankfurt presse@vci.de Internet: Telefon Telefax

2 strongly improved by 3 percent. In 2017 as a whole, only the output of petrochemical feedstocks still recorded a drop by 1.5 percent. But in this sector, too, a trend reversal seems to have come about. In the 2nd half 2017, production was 1 percent higher than one year earlier. The good situation of German and European industry was also reflected in the stronger business with fine and specialty chemicals where production went up by 2.5 percent in Consumers were in a buying mood. This was also to the advantage of the manufacturers of soaps, detergents and cleaning products or cosmetics. Manufacturers of consumer-related products expanded volumes by 4 percent. The demand for pharmaceuticals rose vigorously at home and abroad. Production climbed by 4.5 percent. With good capacity utilisation and growing demand, chemical companies were able to pass on rising raw material prices to their customers and to realise price increases. In 2017 as a whole, producer prices went up by 3 percent. The price of naphtha the most important input for our industry rose significantly in 2017 ( percent) to 425 euros/tonne. That was triggered by higher crude oil prices. In the present year the price per barrel averaged 54 US dollars, i.e. there was a price increase by ca. 20 percent compared with one year ago. Sales: Positive volume business and rising producer prices saw to a major sales increase for German chemical and pharma companies. In total, sales of the industry improved by 5.5 percent to just under 195 billion euros. Domestic sales climbed by 4.5 percent. Foreign sales even increased by 6.5 percent. Beside business in Europe (+5.5 percent) also sales to North America (+ 3 percent) and Asia (+ 8 percent) developed positively. By contrast, the persistently difficult situation in Brazil had a dampening effect on exports to Latin America (- 2.5 percent). Employment in our industry went up by 1 percent to 451,500 staff, i.e. the highest employment level for 13 years. The lowest point was in 2010 with staff. Job prospects in the industry are good. Many employees are going to retire for age reasons in the coming years. The demographic development makes it 2

3 ever more demanding to fill the vacancies with suitable staff. In 2016 the average age of chemical industry staff was 42.9 years. To allow a comparison: At the turn of the millennium the average age was still 40.1 years. Outlook: Business expectations of chemical companies are cautiously optimistic at the end of In the light of numerous political risk factors, one should get ready for persistently turbulent times. These factors include, for example, the uncertainty about how and when a new federal government will become functional and what characteristic features its economic and energy policy will have. They also comprise the forthcoming possibly hard Brexit or geopolitical tensions in the Arabic and East Asian regions. But most companies are confident that the upward trend in German chemical business will last next year, irrespective of these turbulences. The uptrend in Europe seems robust, which should further encourage the export business. In German industrial production, too, the signs continue to point to growth. Against this backdrop, we assume that the demand for chemicals and pharmaceuticals will continue to rise. But we are expecting the situation to become somewhat less dynamic. After the good year 2017 and with high capacity utilisation, the growth speed will slow down slightly. This means in figures for the forecast 2018: Next year we are expecting for our industry a production increase by 2.0 percent; with rising prices (+ 1.0 percent) sales should improve by 3.0 percent and could reach for the first time a threshold of 200 billion euros. In Germany, we are anticipating an increase by 2.5 percent; foreign sales should go up by 3.5 percent. II. Assessment Uncertainty factor: Failure of the exploratory talks The chemical industry and the whole German export business are in good shape. This has a major role for the finance ministry in the ministry s estimate of tax revenue developments for the federal administration, the German federal states and the municipalities until the end of this legislative period. In the next four years, the public corporations can include over 40 billion euros of extra revenue in their budget planning. 3

4 This means that the financial scope of the future federal government is larger than ever before. All prerequisites are fulfilled for launching measures of sustainable effect to safeguard the future of the industry location Germany and to modernise society. All the same, in their exploratory talks the political parties failed to agree on a common plan for Germany. This is deplorable and unsatisfactory. Because: We need a government that is able to act no matter whether it is about shaping a competitive energy landscape, the urgently necessary expansion of the digital infrastructure or actively dealing with the EU reform plans of the French president. But there is at least one topic were I count on cross-party consensus: Education, research and innovation need to be strengthened. We support the goal of increasing Germany s spending on research and development to 3.5 percent of the gross national product by And last year alone, the chemical industry contributed 10.5 billion euros to this. But we need stronger efforts. Fiscal incentives for research are among the instruments that should be used for this purpose and they should be granted to companies regardless of size. This builds directly on the strength of the German research structure: close cooperation between companies of all sizes, which activates the maximum innovation potential in industry. I can assure you that the chemical-pharmaceutical industry will invest every euro that the companies gain from an introduction of fiscal R&D incentives into additional research activities in Germany, at least to the same amount. Climate protection and energy policy are two further topics that are inseparably linked with each other and have vital importance for the chemical industry. All political parties are committed to fulfilling the Paris Agreement by This holds true for the chemical industry, too. But there is hardly any other topic that is so complex, and hardly anywhere else are there so many interactions and impacts on the economy and society that need to be taken into account. For us, a smart industrial and innovation policy is the best climate policy. This is because innovations from German industry make essential contributions to reducing CO 2 emissions globally. Progress in energy-efficient housing, environmentally sound mobility and climate-friendly energy generation could be barely imagined without our products. Studies indicate that a CO 2 reduction of 80 percent by 2050 is technologically possible in Germany. But three essential elements are needed to bring this about: 4

5 broad societal acceptance of the necessary measures in many fields of life, consensus about the allocation of the costs to be incurred, and an industrial policy that allows us to perform what we can: innovations for climate protection. Therefore, the following should be observed: All decisions that bring further increases in electricity prices and put at risk supply security negatively impact the ability to innovate and the altogether over 830,000 jobs in energy-intensive industries. These include the chemical, steel, metal, building material, glass and paper industries. For this reason, we are warning against energy policy plans with adverse effects on the industry location Germany. Competitive production of base materials must remain possible in these industries. The political concept of making energy ever more expensive intentionally or as a side effect worsens the competitive conditions and the investment climate in Germany. This is because other regions, mainly the USA, are going in the opposite direction. They are trying to attract investment through low energy prices and they are successful. Therefore, we think that considerations about a national CO 2 tax or an overly hasty phase-out of coal energy are the wrong steps. Both would result in higher electricity prices. According to a study on the coal phase-out by Frontier Economics, the increase could amount to 10 euros per megawatt hour or roughly 30 percent of today s exchange rate. That would mostly affect those energyintensive companies which currently benefit from burden easing, mainly for competitiveness reasons. That cost surge would be bound to have consequences for our international competitiveness. Already now, 90 percent of our member companies without burden-easing are paying an average electricity price above the EU average. Moreover, grid operators consider such a drastic measure as a danger to supply security. They see the huge challenges for the stability of the transport grid and the prevention of blackouts. There are good reasons why the German Federal Network Agency so far prohibits the shutdown of power plants that are central to the functioning of our energy system. Instead, a national climate policy should focus on sectors outside EU emission trading because EU-ETS already comprehensively regulates industry and the energy sector where the climate policy is concerned. This is emphasised by the reform of the relevant EU directive which was adopted a few weeks ago: It prescribes even more stringent emission reductions by industry from 2021 than this is the case today. At the same time, the EU decided for measures to raise the 5

6 CO 2 allowance price and thus the costs for companies. National regulation additionally to EU-ETS would mean duplicate regulation with no extra benefit for climate protection. For a level playing field in competition, we need an expansion of EU-ETS at least in the direction of the G20 countries. That would also be a major step towards better global climate protection. Any contribution to this strategy helps to reach the goals of the Paris Agreement. First talks between the EU and California are encouraging; they want to work on the conditions for a common carbon market. In this field, also the introduction of emission trading from 2018 in China on a test basis could open up new perspectives for reducing greenhouse gases. But a global CO 2 price is still a long way away. Until then, the EU and the next German federal government need to safeguard the competitiveness of their industries by not taking any new cost-driving measures and by keeping up existing burdeneasing rules. III. Assessment Uncertainty factor: Brexit Among the political uncertainty factors, Brexit has special weight for the German chemical-pharmaceutical industry. Therefore, we are closely monitoring the Brexit negotiations in Brussels. The United Kingdom is a major trading partner and one of the largest markets in the EU for our companies. In 2016, the industry sold products worth nearly 12 billion euros to the UK (6.7 percent of German chemical exports). Specialty chemicals and pharmaceuticals made up the largest share. During the same period, German chemical companies imported goods for more than 6.4 billion euros (5.2 percent). These mainly included pharmaceuticals and petrochemicals. The German-British foreign trade balance in chemical products is highly positive. Over the past five years, exports to the UK rose considerably while imports dropped somewhat. The topics important to us will be negotiated only in the second phase which will be about the future relations between the EU and the UK. The condition for opening the second negotiating phase is a unanimous decision of the European Council at the summit on 14/15 December. How far our companies will be impacted by Brexit mainly depends on the result of these negotiations. Beside the possibility of tariff payments of 200 million euros annually, even higher burdens for our industry can be expected if specific 6

7 regulation e.g. the chemicals legislation REACH or the authorisation of plant protectants and biocides was to develop in different directions in the future. The EU and its Member States have the most exacting legal provisions worldwide where occupational health and safety and environmental protection are concerned. Here, different requirements would cause huge bureaucratic obstacles and costs in trading. That would also impact other sectors that process chemical products. We need the largest possible degree of mutual recognition and the same standards. For this, the United Kingdom should be linked as closely as possible to the EU by way of a comprehensive agreement. Politicians in this country are facing a test. Germany needs as soon as possible a political leadership that is able to act, in order to tackle the challenges in Germany and also to shape the EU s future after Brexit. No matter who will form the new government in the end: Its political programme needs to outline a clear strategy for growth and innovation. Action is called for in digitalisation, infrastructure, education, research or energy policy. Contact: VCI Press Dept., Phone: , presse@vci.de and 7