Column by Yuri Barsukov about the problems of the German chemical industry

On Monday, the Russian media happily reprinted an article by the German Bild that German fertilizer producers are experiencing problems due to rising gas prices and an influx of imported fertilizers from Russia. The article cited, among other things, the words of the Minister of Economy of Saxony-Anhalt, Sven Schulze, that “German and European production sites are forced to close or at least reduce production, since Russia can freely fill the market with cheap fertilizers.” The data provided by Bild, to put it mildly, are not fundamentally new – for example, the largest German chemical concern BASF closed its nitrogen fertilizer plant in Ludwigshafen back in February. Moreover, the decline in gas prices has led to the fact that its consumption in the chemical sector of Europe has been growing since the second quarter, although it still lags behind pre-crisis levels. The fact that the question of the “suicide” of German chemistry is being raised right now is apparently caused by a change in the political situation.

However, the thesis according to which all the problems of the German chemical industry are provoked by the disappearance of Russian gas is apparently incorrect.

Thus, BASF, presenting dismal financial results for the second quarter at the end of July (profit fell by 76%, to €499 million), primarily explained this by a decrease in demand from all consumers, except for the automotive industry. OIES, analyzing the impact of the gas price hike on industrial output in the EU, also noted that the reduction in output was far from being as significant as the decrease in gas consumption, that is, plants found replacements for it as long as consumers were ready to buy their products. However, in the first half of the year, sales of the chemical sector in Germany fell by 11.5%, and by the end of the year a fall of 14% is expected. The industry suffers primarily from the stagnation of the German economy and the inability to compete on the world market with suppliers from China and the United States, and rising costs are only part of the problem.

In essence, the German chemical industry suffers the same fate as the European oil refining and metallurgy in the crisis of 2008-2009: general lack of competitiveness and the lack of clear efforts on the part of the authorities to protect local industries leads to import substitution.

Then the main beneficiaries of this were Russian companies, which occupied significant shares in the European fuel and steel market. Now, unfortunately, Russian fertilizers that have not been directly sanctioned are rather an exception, since most of the market for chemical raw materials in Europe is already occupied by suppliers from the United States and the Middle East.