Germany’s chemical and pharmaceutical industry faced a weak begin to 2026, with manufacturing declining significantly and industry leaders warning that a valuable recovery stays out of reach amid growing geopolitical tensions and increasing costs.
As per the current quarterly report from the German Chemical Industry Association (VCI), periodically altered manufacturing throughout the sector decline 2.8% in the first quarter in compared with the previous quarter and was around 6% lower than a year earlier.
The fall was driven mostly by a of a steep decline in pharmaceutical manufacturing after companies improved output in 2025 to get ahead of threatened U.S. Tariffs. Chemical manufacturing posted a slight rise but stayed below year-earlier levels.
Capacity utilization increased up slightly up to 75.1%, still well below worthwhile levels, at the same time as job cuts persisted across the industry.
The sector is also going through growing pressure from higher energy, raw material and transportation costs connected to the warfare in the Middle East. The closure of the Strait of Hormuz has amplified supply chain disruptions and pushed up prices for oil, gas and naphtha, main inputs for chemical producers.
While some companies have advantage from a temporary growth in orders as customers construct inventories and protect against supply risks, the VCI stated it does not anticipate a sustained recovery in 2026.
VCI Managing Director Wolfgang Große Entrup comments: “The chemical industry is struggling, at the same time as the pharmaceutical sector is getting ready for even greater demanding situations. A few stable figures do not represent a trend reversal. We aren’t seeing a sense of optimism, but rather geopolitical hoarding.
“This is a nervous interim peak, from which parts of the chemical industry are also advantaging in the short term. The stark fact is: the chemical industry stays under consistent stress – burdened by rampant bureaucracy, high costs, and global turbulence.
“Germany will persist to lose competitiveness if Berlin and Brussels do not take countermeasures. We have little influence over geopolitical crises – however we do over our business environment.”
He added: “A policy of small steps is no longer sufficient. What is important now is robust leadership, reliability, and a clear industrial policy. This also applies with regard to China. The huge capacity expansion and state-subsidized manufacturing are progressively putting European industry under pressure and hitting many sectors hard.
“But it’s also clean: blanket protectionism and new trade barriers aren’t a very good solution. The vital things is: first and foremost, current trade protection instruments ought to be used effectively– only then will the situation improve. It support fast. Europe require a confident and fair approach to China – with instruments that effectively restrict distortions of competition without jeopardizing global value chains.”
Sales increased by 2.1% from the previous quarter to €50.9 billion, however stayed 5.4% below the level recorded a year earlier. Industry officials stated additional orders acquired early in the year likely showed precautionary stockpiling as tensions in the Persian Gulf increased.
Producer prices extended slightly by 0.2% from the previous quarter, ending a extended downward trend. Moreover, prices stayed about 1% below year-earlier levels, whilst input expenses increased sharply, especially for crude oil and petroleum-derived products.
Given the developing geopolitical uncertainty, the VCI stated forecasting stays tough. Nevertheless, it anticipates industry manufacturing to fell again over the whole year. Higher costs might also help revenues, however profit margins are anticipated to stay under vast pressure.
