German Chemical Industry Association (VCI) has warned that the ongoing conflict in the Middle East could trigger serious and potentially persistent disruptions for the global chemical supply chain. In particular, the association highlighted the possible closure of the Strait of Hormuz, a critical global shipping route for energy and petrochemical feedstocks. According to VCI, any prolonged disruption in this strategic corridor could drive inflationary pressures, disrupt supply chains, and unsettle global markets, further compounding the challenges already facing the chemical industry.
Industry Outlook Clouded by Geopolitical Tensions
At the same time, the association stated that it cannot provide a clear outlook for the chemical industry in 2026 due to the escalating Israel–Iran conflict involving the United States and Israel. VCI represents around 2,300 companies, making it one of the most influential industry bodies in Europe. The group noted that geopolitical instability, combined with existing economic pressures, is making it increasingly difficult to forecast the sector’s performance.
Germany’s Third-Largest Industry Under Pressure
Germany’s chemical sector remains a cornerstone of the country’s industrial economy. The industry is the third-largest sector in Germany, employing around 500,000 people across the country. However, the sector is currently grappling with multiple structural challenges. These include high energy and production costs, growing bureaucratic requirements, and a stagnating domestic economy. Additionally, trade tensions and tariffs imposed by the United States on imported goods have further increased pressure on German manufacturers. As VCI summarized, the industry is facing weak industrial demand, rising import competition, and intense price pressure, creating a difficult operating environment for chemical producers.
Production Shows Mixed Performance
Despite the challenging environment, the industry recorded a modest increase in production during the fourth quarter of 2025. Output rose by 1.9%, largely driven by stronger activity in the pharmaceutical segment.
However, the broader chemical sector did not experience the same improvement. Chemical production declined by 2.9% compared with the fourth quarter of 2024, highlighting continued weakness in core manufacturing activities.
Meanwhile, industry revenues also declined. Total sales fell by 2.8% year-on-year to €51.8 billion ($59.6 billion) during the fourth quarter of 2025. The decline was mainly due to a 3.0% drop in domestic sales, reflecting subdued demand within Germany.
Industry Leaders Paint a Grim Picture
Commenting on the sector’s performance, Wolfgang Große Entrup described the annual results as deeply concerning. He stated that production, sales, and prices have all declined, signaling the severity of the downturn facing the chemical industry. Looking ahead, Entrup cautioned that the situation may not improve soon. “The annual results for the chemical industry are abysmal – production, sales and prices are all in the red,” he said, adding that 2026 is unlikely to be any easier for the sector.
Uncertain Road Ahead for the Chemical Sector
Overall, the German chemical industry now faces a combination of geopolitical risks, economic headwinds, and structural challenges. With energy prices remaining volatile and global trade tensions rising, companies are preparing for continued uncertainty in the year ahead. As reported by reuters.com, if supply disruptions in key maritime routes such as the Strait of Hormuz materialize, the ripple effects could extend far beyond Europe—impacting global chemical supply chains, energy markets, and industrial production worldwide.
