Compendium of Industrial Parks Chemie/Pharma/Biotec 2015

„In 2015 the profit margins of German chemical companies increased by 0.5 percent to 12.6 percent“, said Ludovic Subran, Chief Economist of the Euler Hermes Group. „In 2009 this figure was seven percent. This development shows that German chemical companies have backed the right horse with investment in research and development. They have improved their energy efficiency to compensate for the competitive disadvantage of comparatively high energy costs. At the same time, they have also invested in greater specialisation and increased the proportion of less price-sensitive specialty chemicals in their product range. In this way, the Germans have successfully defended their position as the world‘s number one exporting nation in the area of chemicals. But the competition never sleeps and the German chemical companies should not be content to rest on their laurels because if they do they will soon get left behind. Instead they should take advantage of the additional wiggle room offered by the currently favourable general conditions and increasing profit margins to make investments“, Subran suggests.

Chemical Production in the USA is Four Times Cheaper than in Europe
Low oil prices make the production of chemicals in the USA four times cheaper than in Europe. Moreover, depending on the subsector, gas as energy source and oil as feedstock account for up to 85 % of total operating costs in petrochemicals. This clearly illustrates the natural competitive advantage enjoyed by US companies. The US chemical companies have taken full advantage of this by investing around $150bn in ethylene production facilities, creating jobs for the first time since 1999 and steadily increasing their exports. Chemical exports already account for 12 % of all US exports. Euler Hermes is predicting a $15bn increase for 2015. This places the chemicals sector in number one position, ahead of machinery and food exports.

The German Chemical Industry
Has Distinct Advantages

Exports by German chemical companies are also growing, by around €8bn, albeit at a slower pace than those of their US competitors. The German firms benefit from a good market position in the premium segment. German chemicals companies also benefit from a highly developed and well established export network. According to Olaf Lipinski, Head of the Information & Grading division at Euler Hermes: „They are the global leaders, since no other country delivers to as many international markets.“ In his opinion, this is because the German companies focus on research and development and on after-sales services to remain competitive, despite significantly higher energy prices. „The production facilities are highly integrated, enabling them to recycle by-products and thereby contribute to profits, instead of generating additional costs“, he continued. „In addition to making productivity enhancements at their domestic facilities, many German chemicals companies have already built up a second pillar by investing in foreign plants. In the past three years, German companies have invested €8bn in new facilities in the United States alone.“ [su]

Facts for Decision Makers – For Managers

  • In 2015, foreign investment by German chemical companies has grown by 17 %, six times faster than investment spending in the domestic market.
  • Thanks to low oil prices, chemical production is currently four times cheaper in the USA than in Europe.
  • German firms still have a good market position in the premium segment.

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