German chemical sector mood worsens, with war-driven edge set to fade, Ifo says
Business Confidence and Market Dynamics in Germany's Chemical Industry
By Anastasiia Kozlova and Amir Orusov
May 28 (Reuters) - Business confidence in Germany's chemical industry worsened in May, as the Iran war-related upturn in demand and edge over rivals offer only a short-lived relief for the embattled sector, an Ifo survey showed on Thursday.
Ifo Survey Results and Industry Sentiment
The Ifo Institute's index for sector confidence dropped to -30.2 points from a seasonally adjusted -28.6 points in April, while industry expectations continued to decline, sliding to -42.0 points from -31.3.
Short-Term Optimism and Long-Term Concerns
"Companies view the current uptick in business as temporary," Ifo industry expert Anna Wolf said, adding that chemical companies' optimism for the next six months was near a three‑year low.
Supply Chain Strains and Price Developments
Demand for chemical products has risen amid global supply chain concerns, but shortages of intermediate goods continue to strain supply, driving a sharp increase in prices.
The indicator for monthly price development climbed to 47.5 points from 32.5 points in April.
Production Plans and Structural Challenges
Even as prices rise and demand improves, chemical makers are planning to scale back production and implement further job cuts, as the core structural problems remain unresolved, Wolf said in the statement.
She told Reuters that a sustained improvement in European chemicals would require either stronger industrial demand or structurally lower energy and input costs—neither currently in sight.
The most probable scenario is that headline order figures will soften through the third quarter as the switching effect fades, with underlying weakness re-emerging, she added.
Temporary Edge Over Asian Producers
European chemical producers have gained a short-term advantage over Asian rivals due to their more diversified raw material supply chains across Europe, the U.S. and South America. By contrast, Asian supply chains are more heavily exposed to disruptions around the Strait of Hormuz.
Beneficiaries of the Current Market Situation
The main beneficiaries of this are producers of intermediates and basic chemicals that compete directly with Asian suppliers, particularly those from China and the Middle East, as customers shift to domestic sources, Wolf said.
Speciality Chemicals and Local Supply Chains
Speciality chemicals producers with local feedstock chains are also benefiting, as they are less exposed to disruptions in global intermediate flows.
Fading Boost and Future Outlook
However, as stockpiling effects ease and Asian supply chains stabilise, this boost is expected to fade, Wolf said.
(Reporting by Anastasiia Kozlova and Amir Orusov in Gdansk, editing by Milla Nissi-Prussak)
