FRANKFURT (dpa-AFX) - The conflict in Iran is providing a temporary boost to the struggling German chemical industry. The sector is benefiting from panic buying as industrial customers fear supply bottlenecks resulting from the conflict and the closure of the Strait of Hormuz. In the first quarter, chemical production and revenue each rose by 2 percent compared to the final quarter of 2025, according to the industry association VCI in Frankfurt.
Revenues grew across all segments, including basic and specialty chemicals, petrochemicals, and personal care products. 'Additional orders at the beginning of the year point in part to precautionary purchasing and inventory building in light of the escalation in the Gulf,' the association stated. Furthermore, the downward trend in producer prices has been halted. Overall, seasonally adjusted revenue in the chemical and pharmaceutical industry climbed by 2.1 percent to nearly 51 billion euros compared to the previous quarter, while capacity utilization rose from a low base.
Industry Sees Only a Temporary Peak
However, Wolfgang Grosse Entrup, Managing Director of the VCI, does not see a structural turnaround for Germany's third-largest industrial sector after automotive and mechanical engineering. Revenue and production in the chemical sector remain significantly below previous-year levels, and the pharmaceutical segment is weakening after experiencing pull-forward effects in 2025 during the trade dispute with the US. 'We are not seeing a mood of renewal, but rather geopolitical hoarding,' said Grosse Entrup. 'This is a panic-driven interim peak from which parts of the chemical industry are benefiting in the short term.' Production is expected to decline for the full year.
Reduced Pressure from China
The chemical industry has been struggling for years with high energy costs, fierce competition from Asia, an economic slowdown, and overcapacity in basic chemicals. However, Chinese competitors, who exert pressure with low prices, are more heavily affected by the Iran conflict and are more dependent on raw materials from the Middle East than Europe's chemical industry. Consequently, the flood of imports from Asia has subsided. Industry giant BASF was recently able to implement significant price increases, while specialty chemicals group Evonik expects a strong second quarter.
As some Asian competitors are unable to deliver, the oversupply of basic chemicals—used as precursors for medicines and plastics—is decreasing. 'Overall, a good quarter of companies are feeling positive effects on demand,' the VCI wrote. Large companies in the basic materials sector have been the primary beneficiaries. Once the conflict ends, however, pressure is expected to mount again. Simultaneously, solvents and resins are becoming scarce.
The Ifo Institute also sees no permanent improvement for the chemical sector. According to a survey, the industry assessed its current situation more favorably in May, but business expectations fell to their lowest level since October 2022. Companies view the current uptick in business as merely temporary./als/DP/jha
