The German Chemical Industry Association (VCI) has warned that production, sales, and prices all declined in the first quarter of 2026, with no recovery expected for the rest of the year due to the ongoing Middle East conflict. For overseas chemical buyers, this signals persistent supply-chain disruptions, elevated input costs, and potential price volatility in European-sourced chemicals and intermediates.
Production and sales decline
Germany's chemical and pharmaceutical sector saw a 6% drop in quarterly production, while producer prices fell 1% and sales declined 5.4% year-on-year, according to VCI data. As Europe's third-largest industry, German chemicals serve as a bellwether for the broader regional economy, supplying components to automotive, construction, agriculture, and textile sectors.
No full-year forecast due to uncertainty
The VCI has again declined to issue a full-year forecast, citing the unpredictability of the Middle East conflict. The association stated that a sustainable recovery in 2026 is unlikely. This echoes the pessimistic outlook from the Ifo Institute, which warned that any demand boost or competitive advantage from the Iran war would be short-lived.
Temporary advantage for European producers
The conflict has unexpectedly benefited some European chemical companies, helping them outperform Asian rivals as supply-chain disruptions hit producers more reliant on Middle Eastern raw materials. Europe's proximity to end markets and greater use of local inputs have provided a temporary edge. However, VCI Managing Director Wolfgang Grosse Entrup cautioned that this advantage will fade once the Strait of Hormuz reopens.
What buyers should watch
"When the Strait of Hormuz reopens, any return to normal, especially in energy supply, is likely to be extremely delayed, because not only has shipping been disrupted, but some production capacity has also been effectively removed from the market," Grosse Entrup said. He added that once Asian producers regain market access and pre-conflict volumes return, a period of turbulence is expected. Importers should monitor shipping routes, energy costs, and potential price corrections.
China sourcing context
For Chinese chemical buyers and traders, the VCI's warning highlights the ongoing fragility of European supply chains. While European producers currently enjoy a competitive edge, the anticipated return of Asian volumes could lead to oversupply and price drops. Chinese importers of German specialty chemicals, intermediates, and fine chemicals should prepare for possible price swings and consider diversifying sourcing strategies.
Source: Read the original report | Published: May 29, 2026