As Chemical Output Hits a Twenty-Year Low, Germany's Industry Faces Reform Ultimatum

Germany’s chemical sector, a traditional pillar of the country’s export economy, is in its deepest downturn in two decades. Capacity utilisation across the industry has slumped to 70%, while productivity has dropped by approximately 20% compared with 2018. Industry experts now estimate that as many as 50,000 jobs are at immediate risk.

The spiralling situation has pushed politicians, unions and employers into a tense negotiation over how to halt the decline. With production at its lowest point in 20 years, the pressure on Berlin to act before the summer recess of 2026 is mounting.

A Wage Freeze, Then Modest Increases

For the 585,000 people employed in the chemical industry, the current bargaining round has delivered no immediate relief. Under the new collective agreement, workers will receive a zero pay increase for the whole of 2026. Wages are scheduled to rise by 2.1% in January 2027, followed by a further 2.4% in 2028. The contract runs until May 2028.

A demographic fund, designed to cushion the impact of job cuts, has been expanded. Companies will pay €300 per employee and €150 per trainee into the fund each year. In total, more than €350 million has been earmarked for employment security measures.

BASF’s Figures Paint a Stark Picture

The troubles are starkly visible at BASF, the industry’s largest player. In the first quarter of 2026, the company booked revenue of €16.02 billion, a decline of nearly 8% compared with the same period a year earlier. Earnings per share stood at €1.06.

On the stock exchange, the share price reflected the muted mood. In early June, BASF shares traded at €50.42, a slight decline from their April high of €55.05. The stock’s 12-month low, recorded in June 2025, was €40.97. Analysts currently forecast a dividend of €2.28 for the 2026 financial year.

Investment Flows Abroad as Home Base Lags

While Germany struggles, BASF is pushing ahead with major projects overseas. In Bécancour, Quebec, the group has secured a site for cathode materials and battery recycling. The plant is designed to handle up to 100 kilotonnes of material per year. The original target for commissioning was around 2025, but the project has been delayed. The location benefits from low-cost hydropower and efficient logistics.

Back in Germany, the outlook is far less optimistic. About one in five chemical companies are considering closing sites or partly relocating production. Boehringer Ingelheim has already halted planned investments of roughly €900 million intended for German sites through to 2030, citing deteriorating framework conditions and healthcare budget cuts.

Reform Debate Heats Up

The crisis has intensified calls for structural reform. The IG BCE trade union has proposed moving the top income-tax rate to an annual salary threshold of €100,000, a measure intended to ease the burden on skilled workers. To compensate for the lost revenue, the union suggests higher taxes on large fortunes and inheritances, with the proceeds used to fund infrastructure and defence.

Business associations and some political factions are urging the government to deliver a comprehensive reform package before the summer break. Key demands include cutting red tape, overhauling the pension system and offering tax relief. However, members of the Bundesrat have warned that any such package could be blocked if the financial burdens on the federal states become too high.

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