‘The chemical industry is one of the most important sectors of the German economy,’ the German Federal Government said in a statement about the ‘chemical summit’ that took place in Berlin on September 27.
Germany’s chancellor Olaf Scholz (SPD), hosted representatives from the chemical industry, including the heads of Covestro and Evonik, at the Federal Chancellery. Industry associations, the construction, chemical, and energy trade union (IGBCE, from the German), and some German states are not happy with the results, however.
The summit failed to deliver on the chemical industry’s most pressing request, a ‘bridge electricity price’ to aid industry with high energy costs, which have plagued the industry since Russia’s invasion of Ukraine. Much like Germany’s economy, which is predicted to be the only OECD economy to stagnate or even contract in 2023, the German chemical industry is facing substantial challenges due to decreased demand, high energy and raw material prices, and increased international competition.
The sought-after bridge electricity price would see German states subsidise industry’s electricity bill for a limited time period, in a move that would cost billions to the taxpayer. Industry representatives argue that Germany’s chemical companies cannot compete with those in China or the United States, for example, where electricity prices are far cheaper. Those country’s electricity matrix is dominated by cheap domestic coal and gas resources, whereas Germany still heavily relies on expensive gas imports.
IGBCE chairman Michael Vassiliadis said a positive decision on the bridge electricity price must be made quickly to avoid job cuts and plant closures. “We have the first signals that the situation will also cost employment and that there may be plant closures, relocations,” he said in a Deutsche Presse-Agenturs statement. In the second quarter of 2023, the German chemical industry was again forced to reduce production for cost reasons.
Markus Steilemann, president of the VCI German Chemical Industry Association, said that if there were no short-term resolution, there would be no need to worry about future issues. “That’s the dramatic way I'd like to put it,” he said, adding that investment decisions are being made now. “We will wake up very badly in a few years if these investments were not made because this emergency aid was not available for industry today”.
The German government said it was aware of the importance of competitive electricity and energy prices for the chemical industry. The Federal Government “is in talks with parliament on proposals on how the electricity supply can be designed in such a way that electricity prices can be stabilised, and planning security can be improved”, it said in a statement, referring to deliberations by the red-yellow-green coalition factions (SPD, FDP, and Greens).
The summit also included a development that was well received by Plastics Europe Deutschland, the government’s nod to chemical recycling. “Chemical recycling processes are supported by the Federal Government as an important complement to mechanical recycling if they enable raw materials to be used efficiently,” it said in a statement. “Investments and settlements that support this goal are positively supported.”
Plastics Europe Deutschland said the government’s attitude sets an important starting point for more investment in innovation as well as for climate protection and the circular economy. It remains to be seen whether Germany’s position will have enough influence to shift attitudes in Brussels.