30/04/26
German chemical industry power demand could resume fall
London, 30 April (Argus) — Power consumption in the German chemical
manufacturing sector has fallen sharply over the past decade and could continue
to decline in the coming years unless structural reforms are implemented
quickly, chemical industry association VCI executive director for
sustainability, energy and climate policy Matthias Belitz told Argus . Power
consumption in the manufacturing of chemical products totalled 42.79TWh in 2024,
according to the latest data from statistical office Destatis, making up more
than 9pc of total electricity consumption. But consumption in the sector has
dropped by nearly 20pc on 2014-18 levels, and in 2024 was the second lowest for
any year since at least 2008, only behind 2023 ( see consumption chart ). A fall
in overall chemical production has been a key driver in the power consumption
decline, Belitz said. Chemical production fell by 3.3pc on the year in 2025 and
was down by about 21pc on 2021, VCI figures show ( see production chart ).
Chemical plants totalling 9pc of European production capacity have closed since
2022, with 25pc in Germany, a report commissioned by European chemical industry
body Cefic earlier this year showed. Belitz attributed the recent woes in the
German chemical industry to global overcapacity, overly complex bureaucracy and
high energy costs. Global chemical production capacity has risen sharply in
recent years, with particularly strong growth in China and the Middle East,
while demand for basic chemicals has largely stagnated. This shift in
supply-demand balance has weakened the German industry, and the Middle East
conflict will "undoubtedly" have "negative consequences", Belitz said. The
business climate in the German chemical industry "deteriorated significantly" in
March, according to the latest survey conducted by German economic research
institute Ifo. Share of power consumption stagnant Power's share of total energy
consumption in the chemical industry fell narrowly on the year in 2024 to 25.1pc
and was slightly below the 2008-23 average, the latest Destatis data show. An
electrification investment incentive is currently "lacking", Belitz said.
Electricity is too expensive, making large-scale electrification unviable
without significant policy changes. And in a highly uncertain environment, it is
difficult for firms to make long-term investment decisions, he added.
Energy-intensive industry association VIK's index for average industrial power
prices — tracking wholesale developments — stood at 309 points in March, against
a January 2002 baseline of 100 points, with the rise well outpacing inflation.
By contrast, the index was consistently below 200 in 2009-20. Belitz also
pointed to the lack of physical availability of grid connections. Obtaining grid
connections can take 5-10 years, further complicating the electrifying process.
‘Structural reforms' required to boost power demand To prevent further plant
closures and enable electrification, "structural reforms" are urgently needed,
Belitz said, including lowering overall power system costs, synchronising
renewables expansion with grid expansion and ensuring consistently lower all-in
electricity costs. "We need the physical pre-requisites regarding the grid and
we need solutions for times when renewables are not producing," Belitz said,
arguing that "expanding renewables capacity alone is not enough" but that "it is
important that the availability of renewable energy is perpetuated". German
chemical company BASF echoed this sentiment. "Politically induced costs must be
reduced," a BASF spokesperson told Argus , urging a "faster, co-ordinated
expansion of renewable electricity and grids", while also demanding a
"fundamental ETS [emissions trading system] reform". The EU ETS puts Europe at
an "enormous" disadvantage, Belitz said. Other regions have followed Europe's
emissions pricing at "a significantly slower pace than expected and also with a
much lower magnitude". Chinese firms, for example, pay roughly one tenth of
Europe's CO2 emissions costs, and not all sites are liable, Belitz said. BASF
last month opened its Zhanjiang Verbund chemical production site in China, into
which it invested €8.7bn. The site's construction aligns with BASF's strategy of
"investing where we see opportunities for growth", a spokesperson told Argus .
China recorded 45.7pc of global turnover in the chemical industry in 2024,
according to VCI data. China's 2024 chemical production was up by 26.6pc on
2021, while German production was down by nearly 19pc ( see international
production chart ). And the carbon border adjustment mechanism (CBAM), intended
to safeguard European industry and prevent carbon leakage, is "unsuitable for
protecting our companies in international competition", Belitz said. The
complexity in the industry is too high, meaning CBAM will "constantly lag behind
the reality" and generate massive bureaucracy. CBAM currently does not apply to
the vast majority of chemicals, although they are likely to be included in the
future. Government subsidies only a ‘temporary fix' Government measures to
subsidise industry, including the industry power price and an expansion of the
power price compensation, are "merely a temporary fix", Belitz said. The
industry power price will relieve beneficiaries of 50pc of the yearly average
wholesale price in 2026-28, although only down to €50/MWh, while the power price
compensation expansion aims to slightly boost aid for firms' incurred indirect
emissions costs as part of their electricity costs. These measures provide some
short-term relief, but more structural solutions are required to keep industry
afloat. "The government cannot subsidise permanently, it will not work," Belitz
said. These instruments alone are "insufficient to sustainably restore
competitiveness", BASF said. Power consumption is expected to rise significantly
in the long term, despite stagnation in recent years, Belitz said, citing the
Chemistry4Climate study last updated in 2024. Power consumption across chemicals
and pharmaceuticals, with the former making up the vast majority, could reach
160-440TWh by 2045, according to the study, assuming climate neutrality and
strongly depending on how much hydrogen will be imported, although Belitz said
we "must acknowledge that we will not end up in an all-electric world". In the
near term, power consumption in the chemical industrial sector is likely to
continue dropping, owing to further falls in production, unless structural
reforms in the energy and regulatory sectors take effect promptly. By John
Horstmann German chemical industry consumption by year German chemical industry,
production, electricity, gas consumption index 2014=100 International chemical
production index 2014=100 German chemical industry 2008-24 average energy
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