Russian gas price rise hits chemical sector hardest

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The well-known German think tank Iver Institute for Economics released a report on the 9th local time, stating that in the past 12 months, the business environment of the German chemical industry has deteriorated significantly. The latest figures from the institute show that business expectations for the German chemical industry fell to minus 44.4 points in July 2022, compared with plus 11.8 points in the same period last year.

Anna Wolff, an expert at the Ifo Institute of Economics, believes that since about 50% of natural gas imports come from Russia, the Russian-Ukrainian conflict is exacerbating the tension in the German chemical industry: "Natural gas accounts for 44% of the energy consumption of the chemical industry. Moreover, the products Manufacturing is also inseparable from natural gas, and about 30% of chemical products require natural gas.” At the same time, more than half of chemical companies are plagued by material shortages. They expect this worrying situation to persist until at least the first half of 2023.

It is worth noting that the import prices of chemical primary products also rose sharply. Wolf pointed out that as early as May 2022, the import prices of other inorganic basic materials and chemicals increased by more than 65% year-on-year, while the import prices of fertilizers and nitrogen compounds even soared by nearly 170% year-on-year in that month.

In addition, in May 2022, Germany's chemical product exports to Russia and Ukraine fell by 49% and 40% year-on-year, respectively. In Wolff's words: "The trade with Russia is basically hopeless to improve in the short term." She said that according to the survey by the Ifo Institute of Economics, 40% of the chemical companies surveyed have completely suspended their exports to Russia. And for 29% of the companies, there is currently no possibility of continuing to maintain export relations with Russia.

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