Chemicals industry: innovation driver with global influence

A gigantic structure of steel, pipes and chimneys towers over the banks of the Rhine: the BASF plant in Ludwigshafen. It is the world's biggest chemical site and covers an area of over ten square kilometres. Established in 1865, the plant now features 2,850 kilometres of piping – a pulsating network that interconnects raw materials, intermediates and finished products. Just under 39,000 people are working around the clock on over 200 systems, producing the building blocks of modern life, from plastics for cars and smartphones through to plant protection agents.  

Alongside the industry giant BASF, the German chemicals industry is made up of over 2,000 other companies. Most of these are medium-sized enterprises, including some hidden champions that are global leaders in their respective niche. With a global turnover of over 220 billion euros and close to 480,000 direct employees in Germany alone, the chemicals industry is the country's third biggest industrial branch, after mechanical engineering and the automotive industry. 

Global networking  

The German chemicals industry is a major player on the international stage, too, holding the top position in Europe and rank three globally, after China and the USA. Around 60 percent of the chemical products are exported, in particular to other countries in the European Union, the USA and Asia as the most important sales markets. In 2023 German chemicals companies invested some twelve billion euros in fixed assets abroad, such as in machinery and production plants, and the trend is rising. 

This global network is also reflected in the many foreign plants operated by German companies. As one of the world's biggest chemicals groups, BASF operates production, distribution and research facilities in over 80 countries. Other large German enterprises such as Bayer, Evonik, Wacker, Lanxess, Henkel and Altana also have a broad international profile, and they cooperate closely with local enterprises and institutions around the world.  

Innovation as a driver of growth 

The innovative strength of Germany's chemicals industry is a decisive competitive factor. This is why the industry invests billions in research and development: around 5.6 billion euros in 2023 alone (excluding the pharmaceuticals industry). The result: 9.4 percent of chemical patents filed around the world are from Germany – 24,800 in 2022.  

Sustainability is a key issue in this context. Many patents are of elementary importance to meeting the United Nations' Sustainable Development Goals, as well as to transforming the entire economy to achieve climate-neutrality. "If we compare all patents that are relevant to meeting the sustainability goals, the chemicals industry holds the first place due to its role as a technology supplier," says Christian Rammer from the Leibniz Centre for European Economic Research in Mannheim.  

Focusing on sustainability and digitisation 

Solutions range from crackers, which are large industrial plants for breaking down carbon chains (e.g. from crude oil) into small molecules, using green electricity rather than natural gas, via the use of algae or beetles from infested wood as natural resources for bio-based plastics, through to chemical recycling, where previously non-recyclable plastic waste is fed back into the circular economy rather than incinerated. Innovations such as these are aimed not only at reducing plastic waste, but they can also open up new commercial opportunities, for example in the area of sustainable packaging. 

Another focus area is to increase efficiency by means of digitisation. In production, for example, virtual copies of production plants, known as digital twins, can be used for real-time process monitoring and optimisation. Artificial intelligence helps with proactive maintenance work on the facilities, for example. This allows for a more efficient use of resources, as well as reducing downtime. 

Challenges: energy prices, regulation and lack of skilled workers 

Germany's chemicals industry is faced with considerable challenges, despite its strong position. High energy prices in particular are a stress factor with regard to high-energy production processes. "It is essential that the chemical industry is transformed to be more energy-efficient," said chemicals industry expert Anna Wolf from the ifo Institute in an interview. The industry has been able to reduce its energy consumption by 22 percent and its greenhouse gas emissions by 54 percent since 1990. However, continuous adjustments, investments and, in some cases, job cuts are necessary to handle high costs, bureaucracy, strict environmental guidelines and regulations, such as the EU chemicals regulation "REACH". The situation is further exacerbated by the lack of skilled workers, in particular in the areas of natural sciences and engineering. 

Seizing opportunities 

The mood oscillates between pessimism and optimism. The industry has great hopes for the new Federal Government. "Policy-makers have to deliver pragmatic, ideology-free solutions and must be willing to compromise. The time for an awakening has come," says Markus Steilemann, President of the Chemicals Industry Association. The transformation of the chemicals industry towards more efficient processes, digital technologies and sustainable product solutions is a challenging endeavour. However, industry experts believe that it also offers enormous opportunities. It is more important than ever before to invest in future-oriented projects and make the right decisions, as was highlighted in a recent study conducted by the consulting firm Boston Consulting. If the German chemicals industry succeeds to do this, it will be well-equipped to defend its role as a global leader.