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German chemical industry warns of global political risks

2018-05-17 11:06

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German chemicals producers are increasingly concerned about risks stemming from swelling trade conflicts, Brexit as well as tensions in the Middle East despite a strong performance during the first quarter (Q1) of 2018, a report published on Wednesday by the Association of the Chemicals Industry (VCI) warned.

The VCI report highlighted that gross revenue in the companies it represents grew by 5.7 percent compared to the same period last year, reaching a total of 51.1 billion euros (43.3 billion U.S. dollars) in Q1. At the same time, output increased by 6.7 percent on an annual basis.

While the outlook remained positive for the current year, however, the VCI also drew attention to growing risks which could undermine future growth.

"Most firms are still confident that the upward trend for chemical business will continue throughout this year. Nevertheless, the economic risks have increased," a statement by VCI president Kurt Bock read.

The protectionist policies of the United States, potential political conflicts in the Middle East due to the U.S. withdrawal from the Iran nuclear accord, and the uncertain outcome of Brexit negotiations in particular posed serious threats.

The VCI noted among others that an escalating confrontation between Washington and Teheran would place pressure on crude oil prices, making stabilization efforts on behalf of countries represented in the Organization of Petroleum Exporting Countries (OPEC) more likely. Crude oil is a crucial raw ingredient for the German chemicals industry.

Output and chemical prices were also up on a quarterly basis during the first months of 2018, a development which was mainly attributed to strong demand in the chemicals industry's European home market in particular. Looking forward, Germany's third largest industrial sector now expects to achieve annual gross revenue of 204 billion euros (plus 4.5 percent) and witness rise in chemical production by 3.5 percent.

Additionally, early signs of growing headwinds in the German and world economy had already led companies to slow the pace of their new recruiting. German chemicals producer employed 455,000 staff in Q1 according to VCI, marking a slight increase of 0.5 percent compared to the same period last year.
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