Chemical industry became an important sector for the world economy and one of the fastest growing industries. According to Chefic Chemdata International, world chemicals turnover was valued at €3,360 billion in 2016. In chemical production, Asia outpaces other regions, especially China, that became an important player and is still dominating the world ranking. China sales levels are higher than the next nine countries together.
The European chemical industry is of major importance for economic development and wealth. Since it is generating 1,1% of EU GDP. It represents around 7% of EU industrial production and has the second highest share of added value per employee (after only pharmaceuticals). The EU chemical sector is highly successful, with 1,14 million workers and sales of € 507 billion (2016), is one of the largest industry in a leading source of direct and indirect employment in different regions of European Union and it supplies two-thirds of its production to other segments within the manufacturing industry.
In Europe, the 83% of EU chemical sales are generated by seven EU member states.Germany is the largest chemical producer in Europe, followed by France and Italy. In Germany, the chemical and pharmaceutical industry is the third largest industry. In France the industry added value was estimated at more than 8% of the country’s manufacturing added value, meanwhile in Italy this value achieved 6%.
The German chemical industry is solid and resilient through all important segments: basic inorganics, petrochemicals, polymers, specialties, detergents and pharmaceuticals. In 2016 the value added from the production of chemicals was € 145 billion.
The German chemicals industry recovered rapidly from the world economic crisis of 2008-2009, outstanding its pre-crisis production peak in 2011. In 2016 almost 2,000 companies employed ca 450 000 people. A VCI Prognos study The German Chemical Industry in 2030, predicts a growth of 1,5% per year until 2030. One of the major reasons for Germany’s growth is the advent in technology. At least 70% of German Chemical companies have research activities and R&D spending surpasses €10 billion each year. To maintain the competitiveness, the German Chemical industry will enhance its research by 2030, investing more.
What is making Germany so strong and bold in the Chemical Industry?
The key success of the German chemical industry mainly is driven by the innovation that the country is undertaking, but also other factors are influencing it, like the R&D spending that was mentioned before, the excellent infrastructure, Germany’s Chemical parks, etc. Obviously German Chemicals also are facing difficulties like high energy prices, strong reliance on imported raw materials, scarcity in some raw materials, demographic change, a skeptical view of change and new technologies in some parts of society, etc.
The German chemical industry is also leading in export. In 2015 Germany was the world’s second largest exporter of chemicals, with value of €100 billion and global market share of 9,3% (being surpassed only by the US), as reported by Chefic Chemdata International.
One of the biggest difficulties in the chemical industry across the globe, including Germany is digitalization. As mentioned in our previous article, there are many advantages in digitalization, but the structure of the chemical industry is not making it easy to benefit from them yet. Digitalization promotes progress and thus it can transform the chemical industry, reducing the costs and faster the processes.
Through digitally enabled chemical plants the manufactures can upscale their operations and gain end-to-end financial improvement and visibility. With digitization, companies could access easily to the sources of chemical supply and other intermediaries. It could be also positive for the suppliers to reach new customers in new markets or regions. Through digitization, companies are able to increase their efficiency and productivity throughout the industry’s value chain. Digitization facilitates faster innovation, boosting R&D productivity and design new services, new way to reach new costumers and new way to find the solutions.
There is a constantly growing understanding of the potential of the digitization of this sector and chemical suppliers and buyers will have to adapt to this reality. Digitization is the future and the key factor of Industry 4.0 and it has to be adopted by all the chemical companies across the globe, including the German chemical companies as it could bring a huge opportunity to gain positions in newly forming ecosystems.