Germany's Chemical Sector Optimistic Amid Electricity Tax Cuts

(Reuters) -Expectations in Germany's chemical industry improved significantly in June as companies pin their hopes on a planned reduction in electricity tax for industry, according to a survey published on Tuesday.

The Ifo economic expectations indicator for the sector entered positive territory in June, reaching 9.5 points, its highest in two-and-a-half years, from -5.4 points in May.

The German government plans to cut electricity tax for selected sectors, limiting its planned relief to industry, agriculture and forestry.

The plans have prompted criticism from representatives from the retail, industrial, and energy sectors, who warn it could distort competition and have limited impact.

Electricity prices in Germany are among the highest in the world, ranking fifth globally in the first quarter of the year with an average of 38 euro cents per kilowatt-hour.

"However, the increased confidence is hardly reflected so far in the current business situation of many companies," Ifo said, adding that the order backlog remains extremely low.

Some companies are benefiting from lower raw material costs and the first signs of an upturn in demand on international markets, Ifo said, while also flagging the United States' protectionist tariff policy, high location costs and geopolitical uncertainty as weighing on the sector's recovery.

"In this situation, the state investments decided by the German government are providing urgently needed impetus," Ifo industry analyst Anna Wolf said.

(Reporting by Tristan Veyet in Gdansk, editing by Miranda Murray)