Business confidence within Germany's chemical industry registered a noticeable improvement in June, the Ifo institute reported on Wednesday, citing lower energy prices and a transient lift in demand related to supply disruptions in the Middle East.
The institute's confidence index for the chemical sector rose to minus 17.8 points in June from a seasonally adjusted minus 29.0 in May. Firms surveyed by Ifo assessed both their current situation and expectations more positively month-on-month. The component measuring current business conditions saw the largest move, climbing to minus 2.9 from minus 16.5.
While the headline improvement points to an easing of pressures, Ifo industry expert Anna Wolf urged caution in interpreting the shift as a broad recovery. Wolf said the rebound was driven mainly by higher orders for basic chemicals tied to disruptions around the Strait of Hormuz rather than by stronger activity across the entire sector.
Supply interruptions originating in the Middle East affected Asian manufacturers particularly severely. That disruption prompted some customers to redirect purchases to German suppliers, which in turn helped to stabilise production in Germany and bolstered expectations for exports.
The combination of firmer demand and improved margins has prompted a number of companies, including Evonik and Brenntag, to raise their full-year guidance. Despite those revisions, companies continue to experience tension in supply chains for intermediate goods, with the majority of chemical firms surveyed expecting prices to rise again in the coming months, according to Wolf.
In sum, the June data indicate an easing of downside pressures for Germany's chemical industry, but the Ifo institute's assessment underscores that the improvement rests on temporary factors and persistent supply-chain constraints rather than on a widespread recovery across the sector.
Key facts:
- Ifo chemical confidence index: minus 17.8 in June, up from seasonally adjusted minus 29.0 in May.
- Gauge for current business conditions: minus 2.9 in June, up from minus 16.5 in May.
- Drivers of the rebound: lower energy prices and a temporary demand increase linked to Middle East supply disruptions.