wdk: Covid-19 pandemic massively affects economic activity of the German rubber industry

As the Association of the German Rubber Industry (Wirtschaftsverband der deutschen Kautschukindustrie e. V. – wdk) reported, the German Federal Statistical Office (Statistisches Bundesamt) recently described 2020 as a "black year for industry" when presenting the key economic figures. Accordingly, total industrial production in Germany fell by 10.8 % last year due to the Corona pandemic.

The hardest setback had occurred in April 2020, with a year-on-year decline of 29.7 %. In December 2019, the decline compared with November was still 1.5 %. The automotive industry in particular, Germany's most important industrial sector, suffered from the lockdown. The 2020 financial year of the German rubber industry reflects this development: The industry was hit hard, in particular due to its strong ties to the automotive industry. In almost all other major customer sectors, business activity also declined noticeably compared with the previous year, but at a somewhat more moderate rate overall. Total rubber industry sales in 2020 amounted to EUR 9.37 billion. This corresponds to a decline of 14.5 %. Thus, the wdk forecast of April 2020 has been confirmed by reality.

In parallel with sales, employment and production in the sector also declined in 2020. Production decreased by almost one fifth. “Companies had to react to the weakness in demand and adjust their capacities despite the government aid,” Michael Berthel, chief economist at wdk, explained the background. The number of employees in the sector fell by 4.5 % to around 70,000. Corona has accelerated necessary adjustments at the companies, Berthel added. It is not expected that the declines in domestic production and employees will be compensated for after Corona. According to the wdk, this is contradicted by recent legislation such as the Fuel Emissions Trading Act or planned projects such as the Association Sanctions Act, which make Germany increasingly unattractive as an industrial location.

In 2020, the two major product areas of tyres and GRG (General Rubber Goods) were affected by the economic downturn, as was the domestic and export business. The production decline in vehicle manufacturing in Germany by almost a quarter burdened sales of tyres to the vehicle original equipment sector as well as the many GRG applications for mobility (including anti-vibration components, seals or fluid systems). The consumer sectors of aviation and railway in the field of mobility fell flat to an even greater extent in 2020. Hardly any impulses came from mechanical engineering and the electrical industry. Business in the construction sector showed slight growth, while there were exorbitant increases in the manufacture of medical and hygienic products, e.g. protective face masks.

For 2021, the wdk expects a catch-up process from Q3 at the latest and a base effect especially compared to Q2 2020. However, the possible double-digit growth in sales in 2021 conceals the fact that since 2018 there has been a trend towards no more domestic growth being generated for the German rubber industry. In addition, turbulent commodity markets and fragile logistical supply chains currently threaten the recovery process. Prices are rising sharply on the commodity and logistics markets. Last year's supply market has turned into a demand market – resulting in rising prices and tight availabilities. For some materials, quantities exceeding previous orders cannot be obtained or can only be obtained with long delivery times of up to six months. In addition, there is an alarming number of force majeure reports in petrochemical feedstocks or other precursor materials. A comparable situation is found in the freight sector: Price increases by a factor of 6 compared to the previous year and a shortage of container capacity.

www.wdk.de

Statistical key figures of the German rubber industry 2020

	Germany	± %	Abroad	± %	Total	± %
Sector sales in EUR million	5,970	- 15.1	3,395	- 13.6	9,365	- 14.5
– Tyres	2,825	- 19.3	850	- 17.0	3,675	- 18.8
– GRG	3,145	- 10.9	2,545	- 12.4	5,690	- 11.5
for automotive	1,465	- 16.9	1,170	- 19.2	2,635	- 17.9
for others	1,680	- 4.8	1,375	- 5.2	3,055	- 5.0
	Tyres	± %	GRG	± %	Total	± %
Investments in EUR million	405	- 1.2	225	- 6.3	630	- 3.1
Production in t	525,000	- 25.5	690,000	- 11.5	1,215,000	- 18.2
Capacity utilisation in %	73.3	- 18.4	75.3	- 8.8	74.3	- 13.8
Number of employees	21,000	- 5.4	49,000	- 4.1	70,000	- 4.5