INDUSTRY OVERVIEWThe Chemical
Industry in Germany
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ISSUE 2021

THE CHEMICAL INDUSTRY IN GERMANY

Germany – Global Chemical Industry
Heavyweight“The investment in Germany is an integral part of our global strategy for our adhesives
and sealants. Due to the highly qualified workers and efficient cost structure, on topof Germany’s leading position in the field of automotive expertise, Germany was theclear choice for our new production, European headquarters and R&D activities.”
Yoshihiro Nakata
Managing Director | Sunstar Engineering Europe GmbH

27%

4.8%

14%

EUR 31.6 bn

EUR 4.4 bn

1/7

Germany’s chemical industry is leading in Europe. The industry employs a highly trained workforce of 346 thousand people. Businesses and research institutes involved in the sector
invest substantially in research and development activities.
This makes the industry a driving force for innovation.

Many leading international chemical companies choose to
locate in Germany. They are attracted to Germany becauseof its excellent research landscape, state-of-the-art logistics,
and world-class infrastructure.

of total chemical industry revenue in
EU-28 generated by German companies

reduction in energy consumption between
1990 and 2017 with 69% output increase

R&D spending (excluding pharmaceuticals) by
German chemical companies in 2019

By developing new materials and high-performance chemicals and plastics, the chemical industry sets the benchmarks
for advancing state-of-the art technologies. This creates
benefits for a number of different fields such as energy
efficiency and storage and e-mobility.

average chemical revenue growth rateduring the 60-year period 1960 to 2020

German export surplus in 2019 – 5.7% morethan in the previous yearof chemical patents registered at the European
Patent Office are made by German companies

Germany’s central geographical location at the heart ofEurope provides a further decisive advantage, giving accessto a market of around 450 million customers in the European
Union.

Germany’s Chemical Industry
in Numbers
The Global Chemicals Market
The global chemicals market is in excellent shape.
This is reflected primarily in the huge increase inglobal revenue from EUR 2,551 billion to EUR 3,669
billion during the decade 2009 to 2019 (equivalent
to an average annual growth rate of almost 3.7
percent). Seen from this perspective, the global
chemical industry appears not to have been
adversely affected by the financial crisis of 2008.
Chemical companies worldwide have in fact beenrecording growing revenue and profit levels – aswell as mostly double-digit operating margins –since 2010. This development has been reinforcedby the low-interest rate policies of the mostinfluential central banks globally. Excellent credit
ratings have allowed companies to refinance atlower interest rates and take out new loans moreeasily. This strategy has been used by a numberof chemical companies to sharpen their portfolios
through mergers and acquisitions (M&A) transactions and equity investments.

Global Chemical Industry Revenue 2019
in EUR billion

1,488

4.6
4.9
7

5.8
168

China

Germany: World Number Four
The balance of power in the global industry has
shifted. The chemical industry in China – withrevenue of EUR 1,448 billion and a global shareof about 40 percent – was the biggest market
in 2019, followed by the US (EUR 505 billion),
Japan (EUR 168 billion), and Germany (EUR 157
billion). The Chinese chemical market is bigger
than the EU-28 and North American markets
combined (accounting for almost 16 percent of
the international market each); this being due
to incredible sales growth averaging around 11
percent annually during the period 2009 to 2019.
Europe’s Chemicals Leader
The German Chemical Industry Association (VCI)
reported that Germany accounted for 27 percentof the EUR 578 billion in sales in the total European market in 2019, thereby maintaining thelion’s share of revenue. Europe’s share of the
global chemicals market has dropped from 29
percent to 16 percent over the past two decades.
However, thanks to an increase in the size of the
global market, this 13 percentage point decline
actually describes growth from EUR 402 billion
to EUR 578 billion in the period 1999 to 2019 –equivalent to a compound annual growth rate
(CAGR) of around 1.8 percent.

5.3

505

USA

Japan

157

Germany129

S. Korea

92

77

76

India

FranceTaiwanSource: German Chemical Industry Association (VCI) 2020

European (EU-28) Chemical Industry Revenue
in EUR billion

Germany

Italy

Spain

FranceNetherlands

Rest of EU-28

529

542

535

40

43

43

47

66

63

71

72

78

77

477
37
44
50
67

69
73

160

180

160

157

2016

2017

2018

2019

Source: VCI 2020

3

MARKET OPPORTUNITIES

Growth Market Germany
During the period 1960 to 2019, chemical andpharmaceutical industry revenue in Germany
increased from EUR 12 billion to EUR 198 billion –resulting in an average nominal growth rate of
4.9 percent per year (real growth rate: 3.8 percent
per annum). Over the same period, the number of
employees has fluctuated but today, at 463,000,
it is about the same as it was in 1960 – increasing
productivity sixteenfold as indicated by revenue
per employee levels of around EUR 428,000 in 2019.

German Chemical Industry Revenue and Employee Development
155
598

147

568

568

458

463

415

470

163

198
171

Revenue in EUR billion
Number of employees in thousand

135

100
65
30
12
1960

1970

1980

1990

2000

Optimized Efficiency
Improved performance through increased productivity has led to an increase in revenues. It also
serves as a guarantor for the continued existenceof a successful and thriving chemical industry inEurope. Alongside the streamlined workforce, theshape of the production landscape has slowly
altered due to the increased migration of thelow-margin and high-volume petrochemical andparts of the basic chemical sectors out of Europe.
As a result of this consolidation, chemical companies are increasingly focusing their activities
in the high-tech and high-margin specialty andfine chemicals segments. Surprisingly, the German chemical company picture remains largely
unchanged.

2010

2019

Sources: Revenue and Number of employees: VCI; 1995 and 2008 new statistical classification; from1991 on: 16 federal states; 1998 and 2003 new regional classification; Employees: from 2007 on monthof reference September of each year; Rate of Inflation: Federal Statistical Office.

Stable SME Environment
There were about 2,900 chemical companies
in Germany in 2018, of which 96 percent were
small and medium-sized enterprises (SMEs) withless than 500 employees. The country’s globallyrenowned and highly innovative Mittelstandmakes up the backbone of the chemical industry
and generates around 30 percent of revenue withapproximately 40 percent of the workforce.
Major International Players
World-class company performance is imperativein the face of numerous global challenges. German
companies have long been at the forefront in developing innovations and trends and continue toconsolidate their global prominence. The country’s
top producers account for many globally active
chemical companies such as BASF, Bayer, Henkel,
Evonik, Covestro, Merck, Lanxess, Freudenberg,
Wacker, and Altana.

German Chemical Company Structure 2019in percent

companies with 1-49 employees  companies with 50-499 employees  companies with >500 employees
4

5

3

27
Number ofCompanies

69

59

Employee
Distribution

36

Source: VCI 2020 7

4

Industry Overview 2021 | gtai.com

69

Revenues

28

Healthy Growth
Since the economic downturn in 2009, German
chemical companies have continually improved
their financial results. Almost all of the abovelisted companies have growing sales numbers,
double-digit earnings before interest and tax(EBIT) margins and consistently positive net
margins. Their economic strength has also beenreflected in a healthy dividend policy. Shareholders have received dividend payouts despite
significant investments being made in production
facilities, debt repayment and M&A activities.
Dividend distribution rates have risen steadily
since 2010, bearing comparison with the large
stock indexes (e.g. DAX and S&P 500).

Europe’s Manufacturing Hub
With around 10 percent of total manufacturingindustry revenue in 2019, the chemical industry
is the third-largest industrial sector in Germany
after the automotive, mechanical and engineering
sectors. The attractiveness of Germany as a production location for the chemical industry is basedon specific strengths of innovation, productivity
and resource efficiency. In the latter respect, Germany’s chemical companies were able to reduce
their energy needs by 14 percent between 1990
and 2017 – with output over the same period
increasing by almost 70 percent. A 40 percent
growth in output – based on an absolute energy
consumption increase of just eight percent – will
be recorded by 2030 should this development
continue over the next decade.

Basic Chemical Production Volume in Germany
in tons

6,000

4,000

2,000

0

Basic Chemical Production Constant
Production output of basic chemicals – including
benzene, chlorine, and ethylene – has slightly
declined since 2005. However, increased investment activity can be seen since the economic
downturn in 2009. Contrary to popular belief,much of the investment is taking place in basic
chemicals. The main drive for these investments
is ensuring the global competitiveness of therespective facilities – which is why so many of
the investments involve bringing the technology
up to date. Equally, the attractiveness of themarket defies the supposedly high energy costs,
which can be deduced from the not insignificant
amounts invested in chlor-alkali electrolysis,reflected by the almost constant production ofchlorine at around 4,000 tons per year.
Stable Market Segments
As with the chemical industry itself, the sector’sclient industries have consolidated and strengthened the domestic market after the financial
crisis. This can be best observed by the fact thatthe individual segments within the chemicalindustry have remained almost constant since2010. As a result, fine and specialty as well asbasic chemicals continue to constitute the backbone of the German chemical production market.
It can be seen that German chemical companies
in particular have developed their downstream
activities. Downstream products are to be foundat the end of the chemical value chain, generally being branded products sold to industrial
consumers.

2005

2010

Ethylene

Chlorine

Methanol

Ethylene Oxide

2015

Benzene2019

Chlorethene

Source: VCI 2001-2020

Chemical Industry Market Segmentation by Revenues
in EUR billion

48

2015

50 51

2017
40

42

45

2019

29 30

27

7
12

Petrochemicals

Fine & Specialty
Chemicals

Polymers

11

12

Anorganic Basic
Chemicals

13

13 13

Detergents &Care Products

Source: VCI 2014-2020

5

MARKET OPPORTUNITIESEuropean Export and Business Hub
Trading chemicals around the world promotes
competition, develops new markets and stimulates production efficiency. The EU chemicalindustry in particular benefits from its historicalexport strength; registered by a solid recovery
after the 2008 economic crisis and a record net
trade surplus of around EUR 45 billion in 2018 –down by around 3 billion compared to 2017. A
number of European countries belong to theworld’s leading export nations. They, like Germany, have maintained their strong position inrecent years, whereby Germany accounts foraround 70 percent of the EU export market.

Germany is theworld number
three for chemical
product exports.

Germany – Strong Export Market
In 2019, Germany was the world’s third largest
exporter of chemical products – with a valueof EUR 111 billion and global market share of 9.1
percent (being surpassed only by the US andChina). While export levels have remained constant amongst most exporting countries, Chinaalone records growth, albeit at a level significantly
behind sales growth. This is a clear indicator that
China is still a net chemical importer. Emerging
countries such as China and India have benefited
more than industrial countries. Export values haveincreased substantially in China (2.8 times bigger
in value in 2017 compared to 10 years ago), andIndia (2.2 times higher during the same period).

Top 6 Worldwide Chemical Industry Exports
by Country
in EUR billion
USA

Netherlands

China

Japan

Germany

52

57
7

55
99

66
107

60

62

70

68

110

111

114

122

86

94

109

115

119

122

2016

2017

2018

2019

in percent

EU-28
Europe (non-EU)
Asia

NAFTA
Rest of World

5
7

6
7

5
8

17

17

16

10

10

15

61

60

56

2015

2017

2019

Source: VCI 2016-2020

Europe – Germany’s Main Chemicals Customer
Germany’s chemical industry exports around theglobe. In 2019, more than 70 percent of German
exports remained within Europe, while 16 percent
and 8 percent were exported to Asia and North
America (NAFTA) respectively. The four largest
export countries were EU-28 countries: France(EUR 9.5 billion), the Netherlands (EUR 8.9 billion),
Italy (EUR 7.6 billion), and Belgium (EUR 7.0 billion).
By far the most important export countries outside Europe are the US (EUR 7.6 billion) and China(EUR 5.9 billion).
International Chemicals Business Hub
Germany is home to a number of the world’s mostprestigious chemicals, plastics and rubber industry
trade fairs, making Germany an internationallyleading chemicals business hub. As well as providing excellent business opportunities, visitors also
have the chance to learn more about the lateststate-of-the-art innovations and developments inthe sector. Important shows include:• European Coatings Show, Nuremberg (biennial)• Analytica, Munich (biennial)

Source: VCI 2017-2020

6

German Chemical Industry Exports by
Destination

Industry Overview 2021 | gtai.com• ACHEMA, Frankfurt (triennial)• K, Düsseldorf (triennial)• Composites Europe (annual)Reliable Workforce
According to the IMD World Competitiveness
Yearbook 2018, German employee motivationlevels are greater than those of their counterparts
in China, Russia, Poland, France, and the US. Thiscan be derived from the fact that Germans work
more than their international peers (40.3 hours perweek) and lose less days per annum to industrial
action than other market-determining European
nations. There were a total of 15 strike days per
thousand employees in the period between
2000 and 2018. This small number of days lostmeans that Germany experienced just one third
and around one eighth of outages in Finland andFrance respectively during the same period. The
high level of workforce satisfaction is also borneout by the fact that the last strike action in theGerman chemical industry took place in 1971. This
also reflects the good cooperation between the
IGBCE trade union and com-panies in the sector.
Stable Labor Costs
The labor cost gap between Germany and its
eastern European neighbors has been significantly
reduced. Since 2010, wages have risen in most
European countries (EU-28) with a growth rate
averaging 2.3 percent. While some countries –particularly those in Eastern Europe – experienced
a rise of up to five percent, Germany recorded
one of the lowest labor cost growth rates at justabout two percent.
Academic Excellence
The chemicals industry has responded to thegrowing pressure to be innovative by significantly
increasing the number of academics in the overall
workforce over the past few decades. Today,
nearly every seventh employee has an academic
background – compared to less than one in 10 in
the 1980s and around one in eight employees in
the 1990s.
Germany’s excellent university training provides
the basis for the development of future-proof andinnovative new products in the chemicals industry. A decline in the general population notwithstanding, the number of students embarking on
chemistry studies has steadily increased. Germany
has the highest share of university students in thesciences, mathematics, computer sciences, andengineering in the EU (36 percent of all students),
where the number of new chemistry students has
increased from around 5,000 in 2009 to 5,700 in
2019. The number of doctoral students has risen

from 6,400 to 9,400 during the same period. Similarly, the number of doctoral graduates available
to the industry each year swings around the 2,000
mark since 2006.

Days not Worked due to Industrial Action per
1,000 Employees 2001-2018

Poland2Germany

15

Netherlands

18

UK

19

Finland

46

Spain

49

120

FranceSource: ETUI 2020

Labor Cost Growth in Manufacturing
2007–2017

Spain

1.4

France1.8

Netherlands

1.9

UK

2.0

Germany

2.2

EU-28

2.2

Czechia
PolandSlovak Rep.
Hungary

4.0
4.6
4.8
5.0

Note: Annual average growth in percent
Source: Eurostat 20197

RESEARCH & DEVELOPMENT

Germany’s Research Strategy
Germany is Europe’s biggest research investor,
with total research and development (R&D)
expenditure of around EUR 105 billion in 2018.
During the 20-year period 1998 to 2018, R&D
spending rose from around EUR 45 billion to
EUR 105 billion – equivalent to an average annual
growth rate of around four percent. Growth in
the period 2017 to 2018 was about EUR 6 billion;
taking R&D spending up to the EUR 105 billion
mark. This is equivalent to about three percent ofgross domestic product and meets the EU goal as
set out in the Europe 2020 strategy. The industry
sector is responsible for the largest share of
R&D spending, with companies responsible for69 percent (EUR 62 billion) of R&D expenditure.
The federal government accounts for about 25
percent (EUR 26 billion) of spending, most ofwhich is allocated to universities and non-university research institutions like the Leibniz Association. Approximately 780 thousand people were
employed in R&D in 2018 – equivalent to around
25 percent or 180 thousand more people thanten years before.

Applied Chemical Research
Germany is home to four globally renowned
non-university research organizations active indealing with the challenges posed by future chemical issues. These are the Max Planck Society (14institutes), Fraunhofer-Gesellschaft (6 institutes),Helmholtz Association (4 institutes), and the Leibniz Association (5 institutes). They are autonomousand able to respond to the dynamic changes anddemands of the industry thanks to their financing structure. Quality assurance through peer
review and patent marketing units ensure basic
research at the highest international level. They all
undertake applied research that drives economic
development and creates benefits for society. The
majority of their respective workforces are scientists and engineers, with most of their budgets
being generated by contract research for industry.
Thanks to international collaborations with excellent research partners combined with a focus on
the key chemical technologies of the future, German applied research institutes play a prominentrole in the European innovation process.

R&D Expenditure and Type of Research by Actor 2018

Applied Researchin EUR billion

Intensive exchange between non-university
R&D institutions and companies ensuresa constant source of new patents andcommercial development and revenue.

WGL

BFE

1.5

1.4
MPG

1.9

Basic Research

Other

2.2

PrivateEnterprises
FhG

2.5
HGF

4.3

2.2
FHG

72.1

Private Enterprises
Universities
Federal, State and Communal
R&D Institutions (BFE)
Government-funded R&D Institutions
Helmholtz-Zentren (HGF)

Universities

Max-Planck-Gesellschaft (MPG)
Fraunhofer-Gesellschaft (FhG)

18.4

Leibniz-Gemeinschaft (WGL)
Other Publicly Funded R&D Institutions,
Scientific Libraries and Museums (Other)
Source: Statistisches Bundesamt 2020

Public Funds

8

Private Funds

Industry Overview 2021 | gtai.com

Chemical Industry R&D Spending
Commercial innovation is becoming increasingly
important for the competitiveness of individual
regions. However, the ratio of R&D spending tosales (R&D intensity) within the chemical industry has remained almost unchanged since 2008.
Japan’s R&D intensity (2008 – 3.9 percent; 2018 –3.9 percent) level is more than double that of
the EU (2008 – 1.5 percent; 2018 – 1.8 percent)and the US (2008 – 1.7 percent; 2018 – 1.8 percent)over the same period.
Europe’s Chemical Innovation Hub
As the largest chemicals market in Europe, Germany has one of the highest R&D intensity levels
in Europe, with 2.6 percent spending in 2019 making it the continent's innovation hub. Chemicalindustry R&D expenditure for developing new
products is traditionally very high. In 2019, industry R&D expenditure was EUR 4.8 billion, making
the sector the fifth strongest R&D industry after
renowned industries like the automotive, electrical engineering, mechanical engineering, andpharmaceuticals sectors.
Innovation Meets the Market
The combined efforts of Germany’s researchstrategy and the applied research conducted byboth research institutions and companies alikehas allowed the country to consolidate its number
two spot for European chemical patent registrations behind the US. Within Europe, Germany
is the leading innovation hub, maintaining highproductivity with the newest technologies at
its production facilities in a stable market.
Global Megatrends
Although chemical companies do not expect as
many breakthroughs and radical innovations in
products, it nevertheless remains the top innovation priority. In a product-driven environment
this makes sense, but the priority accorded toindividual products has been changing in recent
years. Many industry actors are seeking to growtheir business in the area of global megatrends(e.g. energy transition, intelligent mobility, andagriculture and nutrition). Chemical companies
are spending large sums of their R&D budgets
in future-driven projects in areas as diverse aslithium-ion battery materials, high-purity silicium
for solar panels, and biotechnological processes
for the post-oil economy.

R&D Expenditure in Germany by Industry
in EUR billion

Chemical Industry
Pharmaceutical Industry
Mechanical Engineering
Electrical Engineering
Automotive Industry

4.8
4.6

4.3
5.8
6.3
10.8

4.2

4.3

4.2

6.2

6.5

6.2

6.0

6.2

6.3

11.0

11.3

11.2

7.8

6.9

7.8

7.8

12.3

11.6

42.7
40.3

34.8

34.5

2016

2017

34.4
32.0

2014

2015

2018

2019

Source: VCI 2015-2020

Chemical Patents Granted by the European
Patent Office by Source Country
in percent

USA

Japan

Germany

Rest of World

16

17

15

17

18

16

14

27

27

27

2015

2017

2019

18

17

Source: European Patent Office 2016-2020

9

INVESTMENT CLIMATE

Chemical Parks
Germany is globally recognized as a profitableproduction location for the chemical industry
and ranks first in Europe. Many global chemicalcompanies already have production facilities inGermany and continue to invest here. The traditional chemical production sites have, throughstrategic investment and production optimization, been integrated into a network of production sites: Germany’s unique „Chemical Parks”.
The country’s chemical complexes are served byexcellent logistics networks – from road and rail
to waterways and pipelines. With their “plugand-play” concept, the German chemical parks
offer cost-efficient conditions for investors. Sites
commonly offer a comprehensive range of services tailored to the needs of potential investors.
Optional services such as warehousing, logistics,
and analytics can also be requested as needed.
The comprehensive service portfolio also ensuresthat investors can continue to produce profitably
if their business model changes over time. Furthermore, German chemical parks increase costeffectiveness by splitting costs and overheads
such as the fire brigade – a benefit to both thesite operator and investor.

Plug and Play Production Concept· Site management· Site security· Emergency management services

Production· Supply and disposal networks· Road and railway infrastructure· Warehousing· Energy and utilities· Permitting and approvalassistance· Engineering services· Logistics· Hazardous goods handling· Basic and advanced training· Maintenance/workshops· Purchasing· Analytics

10

Industry Overview 2021 | gtai.com

Supporting Different Business Models
Chemical parks offer a wide range of businessmodels. Subject to the investor’s individual
requirements, land can be leased or purchasedin order to establish a production unit. At theother end of the scale, a site operator invests inand operates the new plant for the investor on acustom or toll manufacturing basis.
+ Cost-competitive production through flexible
site operators
Planning Support Services
Investors are supported by a number of investment planning and construction services. The
most sought-after service is for permit applications. Licensing procedures are completed quickly
and efficiently with the competent public authorities assisting in the process from a very early stage.
+ Fast implementation of the new business
Provision of Utilities and Services
Services such as wastewater treatment, thermal
treatment of production residue, emergency
services, industrial safety, fire protection, environmental services, analysis and testing services, rail
dispatching, and product storage are all widely
available at chemical parks.
+ All chemical services available on-site
Powering Chemical Parks
Secure power supply is imperative for profitableindustrial plant operation. Chemical parks are
made secure through the provision of a numberof redundant supply lines. Most chemical parks
operate their own on-site power plants in order
to secure supply. An undisrupted supply of steam
and overall energy cost are also key success factors. By generating both heat and power fromvarious primary energy sources, chemical parks
are well placed to utilize the high efficiencies
found with combined cycle heat and power (CHP)
generation. Plants within any one chemical park
are linked to duplicate transmission networks that
ensure stable supply in the case of disruption of
one line. Supply by two independent systems
ensures continuity even in the event of random
acts of nature. This power supply set-up makes
chemical parks ideal sites for investors in theprocess industries.
+ Secure power supply

Chemical Infrastructure
The country’s chemical complexes are served byexcellent logistics networks – from road and rail
to waterway and pipeline. Investment is being
made all the time to improve provision acrossthe existing logistics infrastructure.
Pipelines
Around one third of chemicals are transported bypipeline. Major chemical sites are interconnected
through an advanced network of pipelines transporting raw materials such as propylene, ethylene
and crude oil. Thirteen refineries and eight steam
crackers supply Germany’s chemical industry withall of the necessary building blocks for organic
chemistry.

Germany's Chemical
Industry Pipeline
Network* HeideNorth Sea

Road and RailThe country’s highway system has one of thehighest highway kilometer-density levels in
Europe. Germany’s high-speed railway networkis the eighth largest in the world – its 43,470 kmof railway track being almost enough to circle
the globe – and connects Germany with its
nine neighboring countries.
Waterways
Among the highlights of the country’s network
infrastructure are Europe’s second largest port
measured in container port traffic (Hamburg) andEurope’s largest port container terminal (Bremerhaven) and over 250 inland ports.

SchleswigHolsteinBrunsbüttel

Rostock

Stade

Mecklenburg WesternPommerania

Hamburg

Wilhelmshaven

Schwedt

BremenSaxonyAnhalt

Netherlands

to Rot
via A terdam
n t we
rp

Marl
Venlo

Moers

*

GeleenWesseling*

Berlin

North RhineWestphalia

Wesel

Drushba NOrthfrom Russia

Niedersachsen

LingenRRP from
Rotterdam

Baltic Sea* Gelsenkirchen
Dormagen* Godorf

HessenPolandBrandenburg
Schkopau
Leuna* Böhlen

SaxonyThuringia

Czechia

Rhineland
Palatinate
SaarlandFrance

SP SE

from

L avera

Kralupy*

Bavaria

Karlsruhe

Neustadt

BadenWürttemberg

Source: Germany Trade & Invest 2018

Litvínov *HöchstRefinery* Refinery + Steam Cracker* Steam Cracker

Münchmünster *Vohburg

Drushba South
from Russia

Burghausen*

Major Crude Oil Pipeline
Ethylene Pipeline
Propylene Pipeline
End of Pipeline

TAL from Triest

11

INVESTMENT CLIMATE

Energy Security
Security of energy supply is a crucial factor in
the energy-intensive chemical industry; particularly when choosing an investment locationand determining the market prospects of any
planned facility.

Germany's secure
power supply
ensures chemicalindustry success.

Low Power Outages
The security of Germany’s electricity supply
is very high by international standards. Unlike
some countries in Europe where major blackouts
are recurrent, power outages are definitely the
exception in Germany. In 2016, the amount of time
lost due to unplanned interruptions in Poland
was three hours, around one hour in Czechia andapproximately one hour in Spain. Both Italy andthe UK suffer from outages of around 40 minutes
per year. These all exceed the most stable grids in
Denmark and Germany with losses of just five andthree minutes per year in 2016 respectively. The
situation for unplanned interruptions is similar.
Countries with outages longer than an hour also
have at least one unforeseen failure. Conversely,
the level of unplanned interruptions in thosecountries with stable networks – where outages
are usually planned – is significantly below 0.5
times a year.

Diversity of Supply
Germany has to rely on imports for around 40
percent of its energy supply – a situation similar to that of many other industrial countries.
However, in marked contrast to its counterparts,
Germany’s energy mix is very broadly diversified,resulting in secure energy supply. Lignite and hardcoal account for around 40 percent of electricity
generation, followed by nuclear power (13 percent)and natural gas (9 percent). Renewable energy
already accounts for 38 percent of Germany’s
energy mix.

Minutes Lost to Power Outages 2016

Interruptions per Year 2016

without exceptional events

including exceptional events

Germany

3

Switzerland

0.20

Denmark

5

Netherlands

0.29

Denmark

0.38

Germany

0.51

Netherlands

21

Austria24

Belgium

26

Italy

37

UK

38

UK

0.53

France0.08

Austria
Spain

France

49

Spain

53

Czechia

Finland73

PolandSource: Council of European Energy Regulators (CEER) 201812

Nord-Stream-Pipeline
The Baltic pipeline from Wyborg in Russia to
Lubmin in northeast Germany – with a length of
more than 1,200 km – has helped establish Germany as the hub for Russian gas in Europe since2011. Germany will also become Europe’s preeminent trading market for natural gas, with an additional capacity of 55 billion m³ per year. With thesecond gas pipeline, Nord Stream 2, Europe will
have access to an additional capacity of 55 billion
m³ per year, providing further security of supply.

Industry Overview 2021 | gtai.com

180

0.73
1.09
1.42

Czechia

1.71

Italy

1.76

PolandSource: Council of European Energy Regulators (CEER) 2018

3.00

Attractive Investment Location
Germany’s greatest appeal for chemical companies is its market size within Europe. This is largely
due to the presence of strong client industries
including the automotive sector. The country’s
historical export strength and research environment are also attractive factors. Specific strengths
in innovation, productivity and resource efficiency
all help establish Germany as an attractive chemical industry production location. These factors,
together with sensible labor market reforms, have
led to the German chemical industry consolidating
its market-leading position in Europe since theeconomic crisis of 2008. This is best evidenced in
the strong increase in foreign direct investment
and M&A activity.
Europe’s FDI Leader
In line with the seemingly limitless growth of
China’s chemical market, investment in China
continues apace. The investment volume in China
increased threefold to almost EUR 90 billion
during the period 2008 to 2018 thus surpassing
the entire chemical investment from the “rest of
the world” in 2018.
However, since the economic downturn in 2008
increasing investment activities can also be seenin the mature European market. The main driver
for these investments, in contrast to the investments in new plants in China, is ensuring the
global competitiveness of the respective facilities,
which is why so many of the investments involve
bringing the technology up to date. Investment
levels within Europe were comparable to thesize of the respective markets. As such, mostinvestment for the period 2015 to 2019 occurredin Germany, followed by the UK, France and Spain(who account for less than half of total investment levels).
Profitable M&A Activity
Since the drop in sales in 2009, German chemicalcompanies have been financially well positioned
and seeking investment activity in growth segments with the lowest level of cyclical behavior.
The dazzling level of capital available today,
particularly for those German chemical companies
with investment grade status, has led them toaggressively seek out new growth segments. As
such, the last decade has seen several multibillion
dollar deals in the chemical and pharmaceuticalsector. Germany-based Merck KGaA acquired

US-based research chemicals company SigmaAldrich for USD 17 billion. Germany’s Bayer has
stood out, especially for pharmaceutical andagricultural acquisitions, in the past years. The
company integrated US-based Merck & Co’s overthe-counter (OTC) business for USD 14 billion in2014 and acquired Monsanto for USD 66 billion
in 2017.
Beyond the pharmaceutical segment, specialty
chemicals are playing a major role. Germany’s
BASF in particular has made a number of major
investments. In the past 15 years these haveincluded over USD 5.2 billion in US-based Engelhard (well-known for its expertise in catalysts);
EUR 2.7 billion in the construction chemicals business of Degussa (now Evonik); more than CHF 6.1
billion in Ciba Specialty; EUR 3.1 billion for Cognis
in 2010; USD 3.2 billion for Chemetall in 2016 and,most recently, EUR 1.3 billion for the polyamidebusiness from Solvay in 2020.
On the other hand, a number of chemical companies have offloaded products and business units
whose margins have declined in recent years.
These were often large-volume products such as
styrene (BASF divesting Styrolution JV to INEOS)or titanium dioxide (Rockwood selling to Huntsman).

Top 5 Chemical Industry FDI Destinations in Europe 2015-2019
number of projects

Rubber

30

Plastics
Chemicals
111

15

88

5

20

60
50
154

60
70

Germany

10

UK

68

56

FranceSpain

29
PolandSource: fDi markets 2020

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OUR SERVICES

Germany Trade & Invest Helps You
Germany Trade & Invest’s (GTAI) teams of industry
experts will assist you in setting up your operations in Germany. We support your project management activities from the earliest stages of yourexpansion strategy.
We provide you with all of the industry information you need – covering everything from key
markets and related supply and application sectors to the R&D landscape. Foreign companies
profit from our rich experience in identifying thebusiness locations which best meet their specificinvestment criteria. We help turn your requirements into concrete investment site proposals;
providing consulting services to ensure you makethe right location decision. We coordinate site
visits, meetings with potential partners, universi-

ties, and other institutes active in the industry.
Our team of consultants is at hand to provide youwith the relevant background information on Germany’s tax and legal system, industry regulations,and the domestic labor market. Germany Trade &Invest’s experts help you create the appropriate
financial package for your investment and put you
in contact with suitable financial partners. Our
incentives specialists provide you with detailed
information about available incentives, support
you with the application process, and arrange
contacts with local economic development corporations.
All of our investor-related services are treatedwith the utmost confidentiality and provided
free of charge.

Our support services for your investment project

Strategy

Evaluation

Decision & Investment

Project management assistanceBusiness opportunity
analysis and market
research

Project partner
identification andcontact

Joint project management with regional
development agency

Coordination and support of negotiations
with local authorities

Cost factor
analysis

Sitepreselection

Site visit
organization

Final site
decision support

Project-related
financing andin­centives consultancy

Organization of
meetings withlegal advisors andfinancial partners

Administrative
affairs support

Accompanying
incentives applicationand establishment
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Market entry
strategy support

Location consulting/Site evaluation
Identification ofproject-specificlocation factors

Support services
Identification of
relevant tax andlegal issues

14

Industry Overview 2021 | gtai.com

CONTACT

Investor Consulting

Imprint

Dr. Thorsten Bug is the senior manager responsible
for the chemical industry in Germany Trade &Invest’s Chemicals & Healthcare team within theagency’s Investor Consulting division. An acknowledged industry expert, he has advised numerous
international chemical companies seeking to set
up operations in Germany since joining the agency
in 2008. Dr. Bug, who completed his doctoral
thesis on the “Nucleophilic reactivity of diazo
compounds and stabilized carbanions” in Munich
in 2003, was also active as a senior asset management consultant for five years prior to taking up
his current position.

Publisher
Germany Trade and Invest
Gesellschaft für Außenwirtschaft
und Standortmarketing mbH
Friedrichstraße 60
10117 Berlin
Germany

Projects successfully supported to date cover
the complete chemical industry value chain andinclude the establishment of sales office operations, production and R&D facilities as well as
pilot plant investments across Germany. The list ofinternational investment project clients who havebenefited from Dr. Bug’s advisory and consultancy
services to date includes Brazilian petrochemical,
Japanese chemicals and plastics, and North American adhesives companies.

Executive Board
Dr. Jürgen Friedrich, Chairman/CEO
Dr. Robert Hermann, CEO
EditorWilliam MacDougall, GTAI
LayoutDanielle Röbbenack, GTAI
Print
Kern GmbH, 66450 Bexbach
www.kerndruck.de
Picture Credits
Cover: iStockphoto/pedrosala

For questions on how to establish your chemicals
business in Germany, please contact Thorsten Bug
at thorsten.bug@gtai.com

Notes
All rights reserved ©Germany Trade & Invest,
December 2020

For more information about the chemicals
industry in Germany, please visit our website
www.gtai.com/chemicals

Reproduction, in whole or in part, only permissible
with express prior authorization. All market data
provided is based on the most current market
information available at the time of publication.
Germany Trade & Invest accepts no liability forthe actuality, accuracy, or completeness of theinformation provided.

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About Us
Germany Trade & Invest (GTAI) is the economic development agencyof the Federal Republic of Germany. The company helps create andsecure extra employment opportunities, strengthening Germany as
a business location. With more than 50 offices in Germany and abroad
and its network of partners throughout the world, GTAI supports ­German companies setting up in foreign markets, promotes Germany as a­business location and assists foreign companies setting up in ­Germany.
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