Germany's chemical industry remains in a structural crisis despite a brief reprieve from Middle East conflict disruptions, according to the VCI lobby group. The association expects a 1.5% production drop by 2026, citing weak sales, rising costs, and low investment.

First-half 2026 output fell 3%, while sales declined 1% to 123.4 billion euros as producer prices rose 2%. VCI President Markus Steilemann called the results "disappointing," noting the group withheld forecasts in March due to uncertainty.

Conflict-related supply disruptions temporarily aided European producers while hurting Asian rivals dependent on feedstock, but VCI said this wasn't enough to offset broader demand and investment declines. The outlook contrasts with optimism from individual firms like Evonik Industries and Brenntag, which recently raised full-year profit estimates.

As Germany's third-largest industrial sector and a manufacturing bellwether, the chemical-pharmaceutical industry supplies materials across agriculture, textiles, and autos, making its trajectory critical for the broader economy.