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Business Worldwide The business situation of the global chemical in the 2nd quarter 2021

September 2021 Good demand situation on A Global economy: Pre-crisis chemical markets level exceeded A Industrial production: Sup- Overall economy ply chains slow down The global economy continued its recovery in the second quarter of the year. development After the lockdown in the winter months, the progress of vaccination in industri- al nations brought a widespread easing. More and more industrial nations came A Demand situation for chem- close to or reached their pre-crisis levels. In the emerging economies, the ical products remains good pandemic repeatedly caused temporary and regional lockdowns. However, this - production problems slow generally dampened the recovery process only briefly. The global gross domestic (GDP) grew by 1.4 percent over the previous quarter, exceed- down ing not only the previous year’s level but also the pre-crisis level for the first A Outlook: Continuation of time. the recovery Industry The recovery of industry was briefly interrupted in many countries by supply chain problems. Compared with the previous quarter, global production had to be curtailed despite continued good Chemical and Pharma production demand and full order . However, the low level of By regions, seasonally adjusted the previous year was strongly exceeded everywhere. change against previous year and previous quarter in percent

While the major emerging economies were thus above 2019 2020 2. quarter 2021 pre-crisis levels, most industrial nations came just close yoy qoq to them. World + 2.9 + 1.1 + 11.8 + 1.8 Europe EU + 3.8 + 1.4 + 11.0 + 0.7 – 7.3 – 0.1 + 10.9 + 1.3 Developments in the chemical and pharmaceutical Russia + 7.1 + 9.9 + 8.1 – 1.0 industry were divided. The Americas continued to grow without interruption due to continu- USA – 3.2 – 2.5 + 10.1 + 7.8 ing strong demand. By contrast, the chemical industry – 2.1 + 0.6 + 7.2 – 0.5 partly suffered setbacks. Demand continued to develop Asia – 0.7 – 9.5 + 6.5 + 6.1 positively. But similar to industry as a whole, supply – 0.7 – 1.0 + 12.7 + 2.7 chain problems had negative impacts on the chemical + 1.5 – 3.4 + 21.7 + 2.0 industry, too, and slowed development. + 5.6 + 3.2 + 13.2 + 0.5

Sources: Chemdata International, VCI Outlook Further prospects are good, however, they continue to depend on the effectiveness of vaccination programmes, Recovery continues public health policies, and the incidence of infection. Production, seasonally adjusted, Index 2015 = 100 (left axis) Progress in vaccination campaigns and low case rates changes against previous year in percent (bars, right axis) should lead to widespread easing of restrictions to the 160 18 point of normalisation of social life. Growth dynamics of a pharmaceuticals 150 15 countries might continue to differ significantly depend- a chemicals ing on the infection situation. Differences are also likely 140 12 to remain high between the sectors of the economy. 130 9

120 6 Setbacks to recovery cannot be ruled out. Also in future, risks are posed by the development of infections, 110 3 particularly by mutations of the virus. Moreover, 100 0 shortages of inputs do have the potential to slow the 90 -3 pace of recovery in the overall economy. 80 -6 2016 2017 2018 2019 2020 2021

Sources: Chemdata International, VCI Business Worldwide | 02.2021 | Overall Economy and Outlook

Global economy right on course Spain, with quarter-on-quarter increases of 2.7 and 2.8 per- The global economy continued its recovery course in the cent respectively. Growth was also above average in second quarter 2021. After the lockdown in the winter (+4.9), Greece (+3.4), the (+3.1) and Poland (+2.5). months, the progress of vaccination in industrial nations In and Sweden, by contrast, GDP increased by only brought a widespread easing. More and more industrial 1.1 and 0.9 percent, respectively. The pre-crisis level was not nations came close to or reached their pre-crisis levels. In the yet reached in the EU. emerging economies, the pandemic repeatedly caused A further strong recovery is expected in the course of 2021. temporary and regional lockdowns. However, this generally The Recovery Fund should have an additional stimulating dampened the recovery process only briefly. Most emerging effect. Although the infection situation continues to dampen economies returned to or exceeded their pre-crisis levels. the developments, this should no longer cause any new The global GDP grew by 1.4 percent over the previous quarter, lockdowns. The pre-crisis level could be reached again by the exceeding not only the previous year’s level but also the end of the present year. pre-crisis level (Q4 2019) for the first time. In Germany, the economy recovered after the slump in the Further prospects are good, however, they should continue first quarter and grew by 1.6 percent compared with the to depend on the effectiveness of vaccination programmes, previous three months. More and more easing led to a public health policies, and the incidence of infection. significant rise in private consumption. Public consumption, Progress in vaccination campaigns and low case rates should investment and foreign trade also contributed to growth. lead to widespread easing of restrictions to the point of However, compared with Q4 2019 (the quarter before the normalisation of social life. Growth dynamics of countries start of the corona crisis), economic was still 3.3 per- might continue to differ significantly depending on the cent lower despite the recovery. But the expected develop- infection situation. Differences are also likely to remain high ment in the further course of 2021 should bring the base level between the sectors of the economy. Gastronomy and within reach at the end of the present year. generally will continue to suffer due to the pandemic In the , the normalisation of social life for some time. brought a strong growth thrust, with consumption being the Setbacks to recovery cannot be ruled out. Also in future, risks growth driver. By contrast, investment fell and the contribu- are posed by the development of infections, particularly by tion from foreign trade was negative. Irrespective of the delta mutations of the virus, and the countermeasures. Moreover, variant, the upward process should last in the further course there have been increasing shortages of inputs recently due of 2021. to the sharp rise in global demand. So far, these have had The Russian economy grew at a faster pace in the second negative impacts especially on industry, but they also have quarter compared with early 2021. This means that the the potential to slow the pace of economic recovery overall. pre-crisis level of late 2019 was reached officially. Currently, indicators are pointing to a slowdown in the upswing in the Europe: strong recovery in services further course of the year. The easing measures implemented since the spring led to significant growth in Europe’s economy in the second America: Recovery in the North – setback in the South quarter of 2021. Growth was mainly in the services sectors, In the USA, the recovery continued in the second quarter and while industry suffered from disruptions in global supply the pre-crisis level was exceeded for the first time. Once chains. The development was positive in all European again, growth was driven by private consumption. Invest- countries. Strong rebound effects were recorded in Italy and ment in equipment also contributed to growth. By contrast,

Gross domestic product Germany‘s economy: dampers at the beginning of the year By regions, change against previous year and Germany, seasonally adjusted, previous quarter in percent Index 2015 = 100 change against previous year in percent 2019 2020 2. quarter 2021 112 10 yoy qoq 110 8 World + 2.2 – 3.7 + 12.1 + 1.4 108 6 Europe 106 4 EU + 1.7 – 6.1 + 13.2 + 1.9 104 2 Germany + 1.1 – 4.9 + 9.4 + 1.6 Russia + 2.0 – 3.0 + 10.3 + 2.0 102 0 Americas 100 -2 USA + 2.3 – 3.4 + 12.2 + 1.6 98 -4 Brazil + 1.4 – 4.4 + 12.4 – 0.1 96 -6 Asia 94 -8 Japan + 0.0 – 4.7 + 7.6 + 0.3 South Korea + 2.2 – 0.9 + 6.0 + 0.8 92 -10 India + 4.8 – 7.0 + 20.3 – 7.8 90 -12 2016 2017 2018 2019 2020 2021 China + 5.9 + 2.4 + 7.7 + 1.3

Sources: Feri, VCI Sources: Feri, VCI

2 Business Worldwide | 02.2021 | Overall Economy and Outlook

investment in was negative. There was no with the previous quarter. Personal services and construction impetus from foreign trade. Growth will continue in the were particularly affected. However, the economy is expected further course of the year. Possible employment gains and to recover from the sharp downturn in the further course of higher wages as well as infrastructure programmes could the year – while shortcomings in infrastructure, further boost the economy. However, the sentiment was and public administration are slowing growth in the medium clouded most recently by rising infection and hospitalisation term. rates. In Japan, the persistent pandemic and low vaccination rates Brazil’s economy contracted slightly in the second quarter. slowed the pace of recovery in the second quarter. The Another corona wave made regional lockdowns necessary pre-crisis level is still a long way off. Increasing vaccination and slowed the economy which, however, no longer fell progress and fiscal policy stimulus should support the below the pre-crisis level. Prospects for further development economic recovery in the further course of 2021 and in 2022. are improving again. Recently, there was greater progress in Stronger recovery is hampered by weak wage development vaccination, unemployment rates dropped, and strong and, in the long term, demographic trends and high public consumption boosted . Overall, however, the pace debt. of recovery is still slow in many Latin American countries. So far, South Korea has been successful overall in dealing Beside the persistently difficult infection situation and low with the corona pandemic. The economy continued to grow vaccination rates, the countries will also have to contend with strongly in the second quarter 2021. Private consumption and more restrictive monetary and fiscal policies and high exports were once more the drivers. The country should inflation rates in the coming quarters. continue to benefit from the global recovery from the corona pandemic and its close ties with China in the further course of Asia: Pre-crisis levels were frequently exceeded the year. In much of Asia, corona infection rates remain high and vaccination progress is mostly low. Outbreaks are kept under control with harsh containment measures, which slows economic development. However, the economy is already above pre-crisis level in many countries. The recovery is likely to continue at a slower pace in the further course of 2021. In China, the economy was already running at full speed last year. Since early 2021, however, it has lost momentum. For the remainder of 2021 and for 2022, there are signs of growth returning to normal. Economic policy support measures to overcome the corona shock have already been scaled back. The focus is again on limiting debt and climate goals. This tends to have a dampening effect on economic growth. In India, the massive increase in corona infections and the measures to contain the pandemic caused another contrac- tion of the economy in the second quarter 2021, as compared

National economic indicators: GDP, industrial and chemical production, changes against previous year in percent, forecasts for 2021/2021

GDP Chemicals (excl. Pharma) 2020 2021 2022 2020 2021 2022 2020 2021 2022 World -3.7 5.8 4.0 -2.8 9.3 3.0 -0.1 7.0 2.7 Europe EU -6.1 4.8 3.8 -8.2 8.5 2.5 -1.9 5.0 1.5 Germany -4.9 3.2 4.5 -10.4 5.5 3.0 -1.3 5.0 1.0 Russia -3.0 4.6 2.8 1.3 4.0 2.0 7.2 5.5 2.5 Americas US -3.4 6.0 3.9 -6.6 6.0 2.5 -3.5 2.0 5.0 Brazil -4.4 5.1 2.3 -4.9 6.0 2.0 0.0 6.0 2.0 Asia Japan -4.7 2.3 2.0 -10.6 8.0 2.0 -12.5 5.0 4.0 South Korea -0.9 4.1 3.0 -0.2 7.0 2.0 -2.9 9.0 3.5 India -7.0 6.7 7.0 -12.7 12.0 3.5 -5.4 8.0 3.5 China 2.4 8.5 5.7 1.6 12.5 4.0 2.9 10.0 4.0

Sources: Feri, Chemdata International, VCI

3 Business Worldwide | 02.2021 | Facts and figures industry – chemicals

Industrial production China’s industry accelerates at the beginning of the year By regions, seasonally adjusted, change against previous Industrial production in China, seasonally adjusted, Index year and previous quarter in percent 2015 = 100, change against previous year in percent 2019 2020 2. quarter 2021 yoy qoq 150 40 World + 2.2 – 2.8 + 14.9 – 0.8 Europe 140 30 EU – 0.7 – 8.2 + 24.3 + 0.2 Germany – 4.1 – 10.4 + 19.7 – 1.2 130 20 Russia + 3.5 + 1.3 + 10.8 + 0.8 Americas 120 10 USA – 2.0 – 6.6 + 16.9 + 1.2 Brazil + 0.1 – 4.9 + 25.9 – 3.9 110 0 Asia Japan – 2.7 – 10.6 + 19.9 + 1.2 South Korea + 0.4 – 0.2 + 13.1 + 0.6 100 -10 India + 0.6 – 12.7 + 53.5 – 3.6 China + 5.8 + 1.6 + 8.7 + 0.3 90 -20 2016 2017 2018 2019 2020 2021

Catch-up process suspended: The recovery of industry was briefly Industry in China: China’s industry took a break from April to June, interrupted in many countries due to supply chain problems. following the strong pace of expansion in previous quarters. Steps to Compared with the previous quarter, global production had to be tighten regulation of sectors caused uncertainty among curtailed despite continued good demand and full order books. . In the long term, China aims to improve its industrial However, the low level of the previous year was clearly exceeded base, modernise industrial chains and thus achieve qualitative everywhere. While the major emerging economies were thus above growth. Investments in of the future are intended to pre-crisis levels, most industrial nations came just close to them. underpin the country’s claim to leadership in the global technology race.

Customer industries worldwide Another damper on the global Industrial production by industries, seasonally adjusted, Industrial production, seasonally adjusted, Index 2015 = 100 change against previous year and quarter in % change against previous year in percent

2019 2020 2. quarter 2021 140 40 yoy qoq manufacturing industry + 2.2 – 2.8 + 14.9 – 0.8 130 30 basic + 5.7 + 0.2 + 14.7 + 0.2 120 20 fabricated metals + 0.9 – 5.0 + 22.5 + 1.7 110 10 chemicals + 1.4 – 0.1 + 10.0 + 0.5 pharmaceuticals + 6.6 + 4.4 + 16.4 + 4.5 100 0 processors + 0.6 – 3.8 + 17.9 – 1.6 90 -10 automotive industry – 2.6 – 10.6 + 32.1 – 5.4 mechanical engeneering + 0.2 – 4.4 + 19.6 + 1.0 80 -20 electrical appliances + 5.3 + 1.8 + 21.2 + 0.9 70 -30 electrical equipment + 4.3 + 4.4 + 16.5 + 1.0 60 -40 food and beverages + 2.1 – 1.4 + 5.9 + 0.8 2016 2017 2018 2019 2020 2021 industry + 0.2 – 4.7 + 10.1 – 1.3 industry – 0.5 – 5.7 + 26.1 + 2.0 Automotive industry slowed: The automotive industry was hit hardest by the corona crisis. There were production shutdowns industry + 0.1 – 2.8 + 7.7 – 0.3 worldwide. In the second half of 2020, however, the declines were industry – 1.8 – 10.1 + 13.5 + 2.3 already fully recovered. The corona crisis was followed by the semi- / industry + 4.9 – 1.8 + 14.7 – 0.9 conductor crisis in 2021. Meanwhile, control chips are in short supply in the automotive industry, because – due to the change in demand during the corona pandemic – chip manufacturers are primarily Customer industries with mixed performance: Developments in supplying producers of smartphones, computers or game consoles. customer industries were highly diverse in the second quarter 2021. Production was curbed in the major automotive markets of the USA Production in the automotive industry was under massive pressure and Europe. In China, production was only constant compared to the due to problems connected with semiconductors. Plastics proces- previous quarter. sors, too, were seriously affected by a shortage of inputs and had to cut back production. The continued to suffer from Overall, the industry is undergoing a transformation process. In the lockdowns and curtailed production worldwide. In many other addition to cyclical influences, the trade conflicts between the USA, industries, the supply chain problems had a slowing effect while Europe and China and structural factors – such as stricter CO2 fleet growth remained positive. Despite the supply chain issues, all indus- standards, the development of alternative drive technologies and tries visibly exceeded their performance of the previous year. With changing consumer habits – are burdens on the industry. the exception of the automotive and printing industries, all sectors were above their pre-crisis levels in the global picture, i.e. the fourth quarter 2019 was exceeded significantly.

4 Business Worldwide | 02.2021 | Facts and figures industry – chemicals

EU: Customer industries EU: pharma on the rise - dampener in chemicals production, seasonally adjusted, changes in percent chemical and pharmaceutical production, seasonally adjusted, Index 2015 = 100, change against previous year in percent 2019 2020 2. quarter 2021 yoy qoq 150 manufacturing industry – 0.7 – 8.2 + 24.3 + 0.2 basic metals – 4.4 – 11.7 + 34.0 + 2.7 140 a Chemicals fabricated metals – 1.9 – 10.4 + 32.2 + 1.4 a Pharmaceuticals 130 chemicals – 1.2 – 1.9 + 12.9 + 0.5 pharmaceuticals + 10.3 + 5.7 + 12.7 + 3.6 120 plastics processors – 1.1 – 7.4 + 32.9 + 0.8 automotive industry – 6.4 – 21.4 + 70.0 – 9.3 110 mechanical engeneering – 0.9 – 12.2 + 24.6 + 2.0 electrical appliances – 2.4 – 5.5 + 30.3 + 3.1 100 electrical equipment – 1.1 + 0.1 + 26.9 – 0.4 90 food and beverages + 1.3 – 2.9 + 10.1 + 3.1 textile industry – 3.6 – 10.9 + 32.0 + 4.5 80 furniture industry – 0.6 – 7.5 + 43.1 + 2.7 2016 2017 2018 2019 2020 2021 paper industry – 1.5 – 4.0 + 10.9 + 2.4 EU chemical and pharmaceutical industry: The industry came printing industry – 3.1 – 13.7 + 19.1 + 3.6 through the crisis better than many others. The pharmaceutical glass/ceramic industry – 0.0 – 5.0 + 26.4 + 1.5 industry saw partly strong demand – mainly due to stockpiling in construction + 2.5 – 4.7 + 14.7 + 1.3 the spring and strong demand for medicines connected with the fight against the pandemic. There were also sectors in the chemical industry which had a special boom, so the slumps were much less Slower recovery process: In Europe, the recovery process of industry severe than in other industries. In 2021, the pharmaceutical industry was slowed. Momentum declined once again. While easing of continued its positive development. Good overall demand and vac- restrictions provided stronger dynamics in the textile and furniture cine production brought rising volumes. By contrast, the chemical industries and in the food sector, supply chain problems slowed industry was unable to expand production compared with late 2020. down other sectors. In particular, input producers and the automo- Shortages in inputs and materials slowed development. However, tive industry were adversely affected. the previous year’s level was exceeded significantly.

USA: Customer industries USA: pharma on course - slump in chemicals production, seasonally adjusted, changes in percent chemical and pharmaceutical production, seasonally adjusted, Index 2015 = 100, change against previous year in percent 2019 2020 2. quarter 2021

yoy qoq 110 manufacturing industry – 2.0 – 6.6 + 16.9 + 1.2 basic metals – 3.8 – 12.0 + 26.1 + 3.9 105 fabricated metals – 2.6 – 9.1 + 12.8 + 0.6 chemicals – 5.6 – 3.5 + 7.4 + 7.8 100 pharmaceuticals + 0.6 – 1.1 + 14.3 + 5.8 plastics processors – 3.0 – 8.4 + 20.6 – 0.4 95 automotive industry – 3.0 – 15.7 + 85.5 – 6.1 mechanical engeneering – 2.8 – 7.2 + 26.1 – 0.3 90 a pharmaceuticals electrical appliances – 0.9 – 5.9 + 12.7 + 1.6 85 a chemicals electrical equipment + 14.5 + 11.2 + 19.1 + 2.8 food and beverages – 0.8 – 1.3 + 5.2 – 1.4 80 textile industry – 1.5 – 9.9 + 26.3 + 1.8 2013 2014 2015 2016 2017 2018 2019 2020 2021 furniture industry – 6.0 – 1.8 + 10.8 – 3.1 paper industry – 2.1 – 6.0 + 7.4 + 1.7 US chemical and pharmaceutical industry: Developments in the printing industry – 4.6 – 13.9 + 13.6 + 0.2 industry were highly heterogeneous in the first half of 2021. The glass/ceramic industry – 2.3 – 5.3 + 14.0 – 0.7 pharmaceutical industry continued its positive development. Stable construction + 1.9 + 4.0 + 4.3 – 0.9 demand for medicines led to a steady increase in volumes. By contrast, the trend was much less stable in the chemical industry. Heterogeneous US industry: In the USA, too, developments varied In fact, the slump caused by the winter storms in February 2021 was between the industries. The semiconductor crisis and supply chain followed by a recovery of a similar magnitude in the second quarter. problems caused a cut in production in the automotive industry and But at the start of the hurricane season, hurricane Ida already leads among plastics processors. The shortage of materials had a negative to expect other drops in production in the summer months. Thus, impact on construction too. Mechanical was unable the ups and downs in production should continue. to repeat its – very high – performance of the previous quarter. The Further data on the business situation of the chemical industry chemical industry recovered from the winter storms. worldwide is available on a monthly basis in the World Chemistry Report: http://bit.ly/World_CR

5 Business Worldwide | 02.2021 | Related Information

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