Germany's chemical industry fights for survival amid energy crisis and global rivalry

Germany's chemical industry faces mounting pressure from geopolitical shifts, soaring energy costs, and fierce global competition. A new study by VDI Research and VDI-GVC warns that the sector must now accelerate its sustainable transformation—or risk further decline. Experts argue that small steps are no longer enough; the transition must deliver both environmental progress and economic survival.

Since 2020, Europe's energy crisis has hit Germany particularly hard. Gas and electricity prices skyrocketed by over 300% after the Russia-Ukraine war, peaking at €300 per megawatt-hour in 2022—compared to just €5-10 in the US and stable rates in Asia. The surge has slashed production by 15-20% in 2023, forced plant closures like BASF's Ludwigshafen site, and threatens a 25% market share loss to US and Asian rivals by 2025.

The study, which analysed international roadmaps and German strategy papers, found a global consensus on key priorities: carbon management, defossilisation, circular economy, digitalisation, and hydrogen use. Yet Anette Braun, the report's author, warns that Germany now faces an industrial stress test as the rules of the game have changed. Vivien Manning, Managing Director of VDI-GVC, adds that ecological transformation must also become an economic success—or the sector will struggle to survive. To turn the tide, the report outlines six urgent recommendations. These include securing competitive energy prices, prioritising real climate impact over carbon leakage, speeding up critical technologies, cutting bureaucracy, ensuring supply security, and sharing risks between industry and government. The study insists that Germany's path to climate neutrality must balance effectiveness with affordability—or the chemical sector will lose ground for good.

The findings highlight a stark choice for Germany's chemical industry: adapt rapidly or fall further behind. With production cuts, plant shutdowns, and shrinking market share already underway, the study's recommendations aim to stabilise the sector's future. Success now depends on turning green policies into economic opportunities—before the competitive gap widens even further.