VCI Sees Chemical and Pharmaceutical Industry in Crisis – Production Falls by Three Percent

Within the sector, the subsegments developed unevenly. The pharmaceutical industry recorded a production decline of 1.5 percent, after having limited its full-year decline to 0.5 percent in 2025 with strong figures. Employment in the chemical and pharmaceutical industry fell by one percent to 471,500 workers, according to the VCI.

Breathing Pause Due to the Middle East Conflict

VCI President Markus Steilemann spoke of a "disappointing" first half and warned against premature relief: "Wir erleben nur eine Atempause, keine Trendwende." A slight revival is no reason for relief, but rather is mainly attributable to special effects, the association said. "Dafür sind vor allem Sondereffekte aufgrund der kriegerischen Auseinandersetzungen in Nahost verantwortlich."

The backdrop is the partial blockade of the Strait of Hormuz, which temporarily eased Asian competition. Because China obtains a large portion of its oil from the Middle East and this is currently scarce, Chinese companies are producing and exporting fewer chemical products. The reduced Chinese export volumes have temporarily given European and German companies higher market shares in basic chemicals, industry experts explained.

At the same time, the closure of the strait led, according to VCI data, "in einigen Bereichen zu Hamsterkäufen und sorgte für steigende Preise". "Laut VCI füllen Unternehmen wegen des Kriegs am Golf ihre Lager auf, um Versorgungsengpässen vorzubeugen." These inventory buildups explain the short-term upturn, but are not sustainable.

Structural Problems and Investment Weakness

The structural problems in the sector remain serious. "Viele Anlagen seien nach wie vor nicht ausgelastet, so der VCI." Exports are weak, and earnings are under pressure due to high costs and intense international competition. 83 percent of the companies surveyed by the VCI complain that the risks of deindustrialization are not being taken seriously enough.

Eighty-six percent of firms cited high costs as the biggest investment obstacle, followed by energy and climate policy in second place. Net investment in Germany stands at 0.2 percent of economic output according to the VCI – the lowest value in international comparison. Investment in the sector has fallen for the third consecutive year.

In addition, there is pronounced consumer reluctance: because the chemical industry supplies many components for automobiles, weak car sales are directly reflected in order books. BASF recently published good preliminary figures for the second quarter of 2026, but the VCI did not wish to comment on individual companies such as BASF or Boehringer Ingelheim.

Demands on Policymakers

Steilemann called for competitive corporate taxes, lower labor costs, and a consistent reduction of bureaucracy. The association described the recent reform package from the black-red federal government as an "erster Schritt". In principle, the VCI sees "großes Potenzial" for Germany as a business location.

In view of the geopolitical uncertainties, the association did not venture any further forecasts. "Weitere Prognosen traut sich der Verband wegen der geopolitischen Unsicherheiten nicht zu." Unlike at the end of May, the VCI is now nevertheless issuing a concrete annual forecast: instead of stagnation, a decline of 1.5 percent is expected. The association's figures were published on July 16, 2026 at 04:30 ET (08:30 GMT) by Dow Jones Newswires.

Overall, the figures make clear that the German chemical and pharmaceutical industry is stuck in an ongoing crisis in 2026: declines in revenue, production, and employment characterize the picture, while investment continues to fall and international competitive pressure remains high.