Germany

With a 2016 turnover of €184.7 billion, chemicals and pharmaceuticals are the third-largest industry in Germany, behind only automotive and machinery and equipment.

The German chemical industry is strong across all segments: basic inorganics, petrochemicals, polymers, agrochemicals, specialties, cosmetics and pharmaceuticals. It is also well spread across the country, although some regions are more specialised in basic chemicals, while others focus more on specialties or pharmaceuticals.

As an enabler of all other industrial sectors, the chemical industry has its role in all economic regions or clusters. To highlight just a few specific segments, technologies or regions would not be a suitable way to describe the strength of the German chemical industry.

The German chemical industry recovered quickly from the setbacks of the world economic crisis of 2008-2009, surpassing its pre-crisis production peak in 2011. In 2016 nearly 2,000 companies partly organized in 40 Chemical Parks employed 447,064 people. With weak growth in Europe and emerging countries, output growth was low from 2012 to 2016. However, recovery started in 2017.

Development until 2030: A VCI Prognos study update The German Chemical Industry in 2030, predicts growth of 1.5% a year until 2030 for the German chemical industry. The most important trends affecting chemical and pharmaceutical industry are sustainability, digitalisation and circular economy as identified in the study Chemistry 4.0 by VCI and Deloitte.

Areas of growth for the chemical industry lie in the topics addressed in the “High Tech-Strategy” of the Federal government. Due to digitalisation, process and organizational innovations are gaining in relative importance.

More than 70% of German chemical companies have research activities, and R&D spending exceeds €10 billion each year. While German chemical companies get less than 1% of their R&D expenditures through government funding, collaboration between industry and academia is well established: one third of chemical companies collaborate with academia in research projects.

To maintain its competitive edge, the German chemical industry will enhance its research effort by 2030.

Three states on the Rhine have the largest chemical industries: North Rhine Westphalia, followed by Rhineland-Palatinate and Hesse, with its strong pharmaceutical industry. Good access to transport infrastructure is one important locational factor for a successful chemical industry. In Eastern Germany, Saxony-Anhalt is the top chemical producer.

Germany does not have an explicit sectoral industrial policy. Government sets overall horizontal framework conditions (research, energy, education, and infrastructure) and companies and other players adapt to customer needs.

In 2015, government R&D spending, including funding of industrial R&D, was 0.92% of GDP while corporate R&D was 2.01% of GDP, making 2.93% of GNP in total.

The Federal government’s High Tech Strategy focuses on innovation in climate and energy, health and nutrition, mobility, security, communication, digitalisation and labour, and on key enabling technologies, such as bio, nano, materials and production. Complementary regional programmes of the states focus on the academic and industrial strengths of their regions.

There are some sectoral initiatives on technology development in Germany, which encompass value chains and go beyond the chemical industry. To name three:

Whether these initiatives will prove to be ultimately successful remains to be seen. For example, costs for renewable energy production threaten to curb production of energy-intensive products, while new jobs in renewable energy technologies have been lost in recent years.

Closely related to the field of chemicals is the national “BioEconomy 2030” strategy, which has been jointly developed by government and industry. There are several regional initiatives, such as a Hesse health industry project involving the pharmaceutical industry.

Both at the Federal and the Länder level, Germany strives to strengthen the role of Science, Technology, Engineering and Maths (STEM) teaching in schools, vocational training institutions and universities and keep teaching up to date.

Strong and effective links with industry and services as well as research institutions are a strategic advantage for the German chemical industry. Collaboration between industry and academia is well established: one third of chemical companies collaborate with academia in research projects.

Germany’s world-leading industrial sectors, such as automotive, chemistry, electrical/electronic equipment, and machinery collaborate in R&D. Its chemical parks are efficient local platforms for collaboration between chemical producers and suppliers of infrastructure, services and other inputs.

In 2015, the German Ministry of Economics, together with industrial sectors (including the chemical industry) and trade unions, started the “Bündnis Zukunft der Industrie” – a joint effort to identify measures to secure or enhance the competitive position of German industry.

Funding in the context of “smart specialisation” via the EU structural funds is of lower importance as Germany is doing very well economically, and state R&D funding of German industry is mostly from national, not EU sources.