Frankfurt, Germany – The German chemical industry is facing a deepening crisis, with companies operating in what industry association VCI (Verband der Chemischen Industrie) describes as “absolute crisis mode” due to the escalating conflict in the Middle East. Disruptions to vital supply lines, particularly through the Strait of Hormus, are triggering fears of significant shortages and price increases for key raw materials, threatening an already struggling sector.
The situation is particularly concerning as the German chemical industry has been grappling with challenges for years, including high energy costs and a sluggish overall economy. Now, the war in Iran is exacerbating these existing pressures, pushing many businesses to the brink. Wolfgang Große Entrup, CEO of the VCI, warned that strategic planning is becoming increasingly difficult, forcing companies to operate on a short-term, reactive basis.
Supply Chain Bottlenecks and Rising Costs
The primary concern centers around the Strait of Hormus, a critical waterway for global trade. The near-impassability of the strait is causing bottlenecks and substantial price hikes for essential chemicals. The impact isn’t limited to oil and gas; a wide range of raw materials are affected, including ammonia, phosphate, helium, and sulfur. These materials are crucial not only for the chemical industry itself but also for numerous downstream sectors.
According to Große Entrup, approximately 20 percent of the world’s ammonia trade, vital for fertilizer production, passes through the Strait of Hormus. Similarly, 50 percent of global sulfur shipments – a key component in fertilizers and various other chemicals – transit the same route. The chip industry is also sounding alarms, as 40 percent of the world’s helium supply originates in Qatar, and its transport is increasingly uncertain. These disruptions are already causing issues with international supply chains, with initial reports of delays and shortages emerging.
The ripple effect extends to China, where companies are reportedly prioritizing domestic needs and reducing exports due to the scarcity of raw materials. In other words that European customers are finding it increasingly difficult to secure the necessary precursors for their own production processes. Suppliers are increasingly invoking “Force Majeure” clauses, citing unforeseen circumstances beyond their control, further tightening the supply squeeze and driving up prices.
Deindustrialization Concerns and Political Criticism
The VCI warns that Germany may already be experiencing a phase of deindustrialization, losing valuable industrial capacity. The European chemical industry, according to a 2022-2025 report by Roland Berger, has already shuttered nine percent of its production capacity. Within Germany, 135 chemical companies have filed for insolvency since 2021. The industry’s performance in 2025 is being described as “underground,” with production, sales, and prices all in negative territory, with the pharmaceutical sector being a notable exception.
The gap between the chemical and pharmaceutical industries is widening. Chemical production fell by 3.3 percent, and revenue by 3.8 percent. Demand is declining across key customer sectors like the automotive, construction, and furniture industries. Even the production of battery cells, a sector touted for growth, remains dominated by Asian manufacturers. In contrast, pharmaceutical production increased by 4.5 percent, with revenue up 5.5 percent. The combined revenue of Germany’s chemical and pharmaceutical companies decreased by 1.4 percent to nearly 220 billion euros, while employment remained relatively stable at 478,000.
Große Entrup leveled sharp criticism at political leaders, particularly within the European Union, accusing them of a lack of planning and a disconnect from reality. He expressed skepticism about initiatives like “buy European” and the French-led alliance to preserve critical chemicals, suggesting they offer little practical improvement. He stated that recent draft declarations from EU states ahead of the March 19-20 summit were “speechless,” representing the lowest common denominator. He urged the German government to take a firm stance at the summit, arguing that the meeting would be pointless otherwise.
While the global order is being reshaped, Große Entrup contends that Europe is struggling to identify direction and Germany is reforming at a snail’s pace. He expressed disappointment with the pace of change following the recent change in government in Berlin. While measures to alleviate costs – such as the industrial electricity price, electricity price compensation, and the abolition of the gas storage levy – are “likely to be supportive,” he noted that these measures have yet to be felt by companies on the ground.
The VCI is calling for a range of measures to address the crisis, including an energy price cap, a moratorium on new regulations (such as the revision of the REACH chemicals regulation), and a reform of the European emissions trading system, specifically a longer allocation of free emissions certificates and a reduction in bureaucracy.
Große Entrup emphasized that his criticism is not alarmist but a “clear-eyed” assessment of the situation. The VCI and other industry representatives plan to stage public demonstrations in Berlin next week to raise awareness of the challenges facing the sector, though specific details of these actions remain undisclosed.
The situation remains fluid, and the long-term consequences of the conflict in the Middle East on the German chemical industry are still unfolding. The next key event will be the EU summit on March 19-20, where the German government will have an opportunity to advocate for policies that support the sector. Readers can stay updated on developments through official VCI announcements and reports from reputable news sources.
