Leading international chemical firms are drawn to Germany because of its highly qualified workforce, an excellent research landscape, state-of-the-art logistics, and the presence of world-class infrastructure, according to German Trade & Investment, the foreign trade and inward investment agency of the Federal Republic of Germany.

Germany's chemical industry has a 427,000-strong, highly trained workforce . According to an Ernst & Young survey, Germany's chemical employees are highly educated, attentive to detail, and they lead the industry to success.

According to Dr. Utz Tillmann, director-general of the German chemical industry association , last year, German chemical companies hired around 12,000 new personnel. This corresponds to an increase by three percent to currently 427,000 staff. There are two reasons for job creation: the good economic situation and demographic change in the society. Companies are preparing for a future where qualified staff will be hard to find. Consequently, they are acting now to secure suitable people early, he pointed out.

With 58 university chemistry faculties (including bio- and food chemistry), 24 universities of applied science offering chemistry, 68 non-university research institutes for the chemical industry and numerous regional chemical cluster initiatives,Germany offers one of the most innovative chemical landscapes. Moreover Germany offers numerous incentives for all investors - regardless of whether they are from Germany or otherwise.

Germany’s chemical industry is  the biggest in Europe and fourth biggest worldwide in sales terms.  Businesses and research institutes involved in the sector invest substantially in research and development. This makes the industry a driving force for innovation. Germany was one of the countries along with England, where the chemical industry started, and has always maintained its leadership in chemical engineering

By developing new materials, active pharmaceutical ingredients and high-performance chemicals and plastics, the chemical industry  has set benchmarks for advancing state-of-the-art technologies. This has  benefited a number of different fields such as energy efficiency ciency, renewables, energy storage and mobility.

Germany’s central geographical location at the heart of Europe provides a further decisive advantage, giving access to a market of more than 500 million customers in the European Union.

During the period 1960 to 2010, chemical industry revenue in Germany increased from euro  12 to euro 171 billion  resulting in an average nominal growth rate of 5.4 per cent per year . Over the same period, the number of employees decreased from 458,000 to 415,000; increasing productivity 16-fold indicated by revenue per employee levels of euro  412,000 in 2010.

As far as  chemical production is concerned, Germany is a global heavyweight, ranking first in Europe. With a turnover of euro  180 billion (Eurostat) in 2010, the German chemical industry played a leading role in European performance, generating a quarter of total EU-27 sales of euro  721 billion.

Germany has occupied the world number four spot in global chemical revenue ranking for a number of years, being passed only by China (euro  694 billion), the US (euro  584 billion) and Japan (euro 214 billion).

German companies have long been at the forefront in developing innovations and trends and continue to consolidate their global prominence.

In fact, the country’s top producers account for no less than six of the top 40 chemical companies, headed up by such illustrious names as BASF, Bayer, Henkel, Evonik, Linde, and Merck.

With around 11 per cent of total manufacturing industry turnover, the chemical industry is the third largest industrial sector in Germany after the automotive and mechanical engineering sectors.

Previously an industry which was strongly influenced by domestic considerations well into the 1990s, the chemical industry has undergone major structural transformation brought about by constantly changing world market conditions over the past two decades.

The export strength of the German chemical industry  remained untouched by the changes. Germany’s chemical industry could make  a dramatic recovery from the recession of 2008-09 and posted extremely strong results in 2010 and early 2011.

In 2010, Germany was the world’s largest exporter of chemical products – with market share of 11.5 percent. Of these exports, 62 percent remained within the EU-27 zone, while 12 and 10 per cent were exported to Asia and North America (NAFTA) respectively.

The rebound was driven by Germany’s prowess as an exporter of a wide range of manufactured products, not just chemicals.  However, the upturn ground to a halt in mid-2011 due to stalling global economic growth and mounting concerns over the eurozone sovereign debt crisis. Industry executives and analysts are cautiously optimistic that the German chemical industry can ride out the current turbulence and achieve record sales in 2011 followed by growth, albeit at a much lower rate, in 2012.

Germany’s chemical industry hit a peak in the first three months of 2011, achieving record quarterly output volumes. Unexpectedly strong production growth of 3.2 per cent compared with the previous quarter and average plant utilization of 87 per cent  prompted VCI to raise its full-year 2011 output growth forecast for the German chemical sector from 2.5  to 5 per cent .

But the rebound had come to a standstill by the second quarter of  2011  as the global economy started to cool, and the recovery went into reverse in the third quarter. Chemicals output decreased two per cent  between July and September compared with the previous three-month period, although production levels were still 2.5 per cent higher than in the third quarter of 2010. The decline reflected destocking by customers as a result of the economic slowdown, and anxiety and uncertainty over the eurozone debt crisis. Sales by the German chemical industry also slipped one per cent in the third quarter, to €44.5 billion compared with the previous quarter.

The slowdown has been complicated by rising raw material costs that are undermining profitability across the chemical industry worldwide, analysts said. After the roller-coaster ride of the past three years, it is safe to say that the first signs of softening in the market are causing a few jitters,they added .The first two quarters of 2011 saw prices recover rapidly. However, rising costs, in particular for raw materials and energy,  proved difficult to contain and are ate into margins,they pointed out

However according to Dr. Utz Tillmann, the German chemical industry can look back on a successful business year 2011since  production rose by 2.2 per cent and sales improved by 7.7 percent to well over 184 billion euros though chemical business weakened considerably in the second half of 2011, with chemical production in Germany falling from month to month. Though fourth  quarter did not bring the hope for turnaround, the mood in the  industry has been picking up again since December 2011.

"At the same time, confidence has returned to chemical companies. The economic picture further brightened in the first months of the present year, and business expectations are once more positive. We seem to have passed the turning point: chemistry – being Germany’s third largest industry – mostly had a good start into the new year. Production is back on the increase" , he said.

"We assume that upward forces will prevail in the coming months. But chemical companies continue to take a rather short-term approach in the operating of their plants – due to persisting, major risks to the global economy. These include, for example, the debt crisis in the European Union and further developments of costs for raw materials and energy. As regards output, it should be difficult to achieve further improvements over 2011 on the annual average: in the present year, chemical production in Germany needs to grow vigorously from quarter to quarter so that – statistically speaking – no negative production figures are recorded for the overall year 2012 in the end" , he added.

"Against this backdrop, we are expecting chemical production 2012 to remain at the high level of 2011. With a likely increase by 1 percent, prices for chemicals will rise less strongly. Also chemical industry sales are forecast to increase by one  percent to a total of 186 billion euros. After two years of successful catching-up efforts, chemistry has more than made up for the dramatic production decline and is taking a growth pause this year. The special role of chemistry in the value chains Germany’s strength lies in its traditionally grown, interconnected structures in the industrial landscape. In Germany, the contribution from industry to the gross domestic product is higher than in any other modern industrial nation and accounted for nearly 22 per cent in 2011" , he said.

The past has shown that success is only possible within a joint network where all players work together: key industries in Germany – such as car making, mechanical engineering and the electrical and metal industries – are linked with each other through manifold supply relations.

This network makes them globally competitive. The greatest challenges of the future according to him include better research and energy efficiency; expansion of alternative energies; adequate supplies of foodstuffs and goods to the growing world population, and coping with demographic change. Solutions to all of these challenges require processes and products from industry.

While the defining characteristic of the European chemicals industry is and remains its innovative strength associated with enormous productivity, Germany stands out in particular, both in terms of innovative capacity and practical application in the industry.

Due to this Germany could  retained its world number three spot for global chemical patent registrations with a share of 17 percent.

According to an analyst, close collaboration between German chemical manufacturers and their customers is a critical strength. Germany’s strong industrial landscape is essentially the backbone of the success of the industry. While the automotive, mechanical-engineering, electronics, and metal industries all are globally renowned, the chemical industry is a decisive element in the value chains of these and many other sectors, with its innovative materials and specific solutions acting as a driving force for new product lines and processes in other fields of industry. This cross-pollination gives the industry a competitive edge on world markets. The country’s network of chemical parks and the widely employed principle of integrated chemical production, are additional structural advantages, he pointed out.

The close partnership between the German chemical industry and its customers is underpinned by intensive levels of R&D activity. The most valuable assets of Germany’s chemical industry have always been its experts, specialists, and researchers. Though the country  may not be having the raw materials, it has  the best brains. It is this focus on innovation and technology that is drawing many others to the German chemicals industry, he added .