Why does the German chemical lobby VCI see no recovery in 2026, and what specific factors are driving its pessimistic outlook?

The VCI sees no recovery in 2026 because the ongoing Middle East conflict—particularly its Iran war-linked escalation—is severely raising costs for energy, raw materials, and transport, which directly weigh on the chemical sector. In the first quarter, production fell by 6%, producer prices dropped by 1%, and sales declined by 5.4% year-on-year. The VCI explicitly attributes this downturn to conflict-driven supply chain disruptions and heightened uncertainty, stating that reliable full-year forecasts are impossible and that a sustained recovery in 2024 is unlikely. It also warns that any temporary competitive advantage European chemical firms gained over Asian rivals—due to disrupted Middle Eastern feedstock supplies and Europe’s proximity to end markets and greater use of local inputs—will be short-lived, especially once the Strait of Hormuz reopens and Asian producers regain access to previous supply volumes.

What role does the German chemical industry play in the broader European economy, and why is its performance considered a bellwether?

The German chemical industry—including pharmaceuticals—is the third-largest industry in Germany, Europe’s economic powerhouse, and serves as a bellwether for the broader regional economy because it produces essential material components used across numerous downstream sectors such as automotive, construction, agriculture, and textiles. Its health reflects demand trends and supply chain stability far beyond its own value chain, making its quarterly performance indicators—like the reported 6% drop in production, 1% fall in producer prices, and 5.4% decline in sales—significant signals of wider industrial stress. The VCI’s refusal to issue a full-year outlook further underscores how deeply geopolitical instability in the Middle East is undermining predictability not just for chemicals, but for interconnected European industries reliant on its inputs.

German Chemical Lobby VCI Sees No Recovery in 2026 as Middle East Conflict Weighs

May 28, 2026

Germany's chemical lobby VCI reported 6% Q1 production drop and warned against 2026 recovery due to soaring energy and raw material costs linked to Middle East conflict. Geopolitical uncertainty continues to weigh on the sector despite supply chain advantages.

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