We are delighted to present another edition of our interview format roeren inside.

With roeren inside, we provide an insight into the topics that shape our day-to-day consulting work. The aim of the format is to bring together well-founded perspectives from industry, associations and science and to create space for classification, reflection and objective discourse beyond headlines and short-term debates.

Sascha Pfordte in conversation with Klaus-Georg Gast, Vice President and General Manager EMEA Silicates at PQ Corporation

The chemical and coatings industry in Germany is under considerable pressure. High energy and location costs, increasing regulatory requirements, uncertainty in investment decisions and a noticeable loss of competitiveness characterize the current situation. At the same time, the pressure to act is growing: How can companies survive under these conditions? What structural adjustments are necessary and where are realistic opportunities for the future of the location?

Klaus-Georg Gast has decades of experience in industry, management and association work. In various management roles and as an active member of central industry committees, he has accompanied the development of the chemical and coatings industry over many years. In an interview with Sascha Pfordte, he assesses the current challenges facing the industry and discusses which structural adjustments are necessary in order to regain room for maneuver under the current conditions.

The German chemical industry between costs, regulation and competitive pressure: challenges and solutions

Sascha Pfordte: Klaus, you can look back on many years of experience in the coatings and chemicals industry – in industry, associations and management positions. If we look at the current situation: In the VCI Study 2024, 74% of companies state that they do not want to expand their capacities in Germany or are very unlikely to do so.

In your opinion, what has changed fundamentally in the market over the past ten years?

Klaus-Georg Gast: We are experiencing a very critical reassessment of investments, especially in Germany. There is hardly any growth anymore, instead we are mainly talking about replacement investments – and even these are becoming increasingly difficult. The main reason is massive uncertainty: a lack of predictability, a lack of political reliability and constantly new regulatory requirements.

In the past, amortization periods of five to eight years were acceptable. Today, projects often have to pay for themselves in less than three years, otherwise they will no longer be implemented. This makes many business cases virtually impossible.

Sascha Pfordte: Energy costs are a key cost factor here. According to the study, these are 50 to 80 % higher in Germany than the EU average. How do you classify the location costs overall – in a European and global comparison?

Klaus-Georg Gast: Energy costs are emblematic of the problem. Many companies no longer generate their profits in Germany. Some production sites here are making losses – the best-known example is BASF in Ludwigshafen.

These costs can only be compensated for through high productivity. This has worked in the past through growth, but no longer at present. A comparison shows this clearly: energy costs in Germany peak at well over 20 cents per kilogram of paint, in Sweden at two to three cents. Competitiveness becomes extremely difficult under such conditions.

Sascha Pfordte: Does this put too much focus on politics? Or do you think there is still untapped efficiency potential in the industry itself?

Klaus-Georg Gast: I am convinced that companies can continue to leverage efficiency potential – through focus and discipline. If you try to cover everything at the same time, you lose effectiveness.

In my view, specialization, cooperation and alliances are crucial. The regulatory effort alone – such as the exchange of around 20,000 raw materials in our industry – ties up enormous resources without directly generating added value. Companies must find ways to remain competitive beyond this.

Sascha Pfordte: We are currently seeing major consolidation steps, for example at BASF Coatings or Axalta. Is this a trend that will continue?

Klaus-Georg Gast: Definitely – and not just for large corporations. Consolidation is also necessary for SMEs. The multitude of costs, reporting obligations and regulatory requirements is hardly sustainable for smaller companies.

The topics of sustainability, new energies and product life cycles are correct in terms of content. But the speed with which they are implemented often ignores economic realities. In the end, companies must remain profitable, otherwise the system will not work.

Sascha Pfordte: At the same time, there seems to be some political movement. Supply chain and sustainability regulations are being partially adapted. Do you see this as a real change of course?

Klaus-Georg Gast: For the first time, I have the feeling that a reality check is taking place. The VCI has initiated a lot here, even if the tone sometimes seems exaggerated. This wake-up call was necessary.

Germany should stop making European rules even stricter. Fewer national solo efforts and more realism in implementation would already help. The Industrial Deal as a supplement to the Green Deal is an important signal in this direction.

Sascha Pfordte : One issue that Europe can hardly control itself is trade restrictions. The number of global measures has more than doubled since 2019. How does the chemical industry view this?

Klaus-Georg Gast: Tariffs and trade restrictions fundamentally inhibit growth. At the same time, open markets only work if there are fair conditions. Massive subsidies – in China, for example – distort competition.

The pandemic has shown how risky dependencies are. Greater regionalization of critical raw materials can make sense, but must be linked to uniform rules. Individual, small-scale measures along the value chain create new disadvantages.

Sascha Pfordte: Would the Mercosur agreement be a possible lever to open up new markets and establish fair rules?

Klaus-Georg Gast: It can work for specialty chemicals. For highly commoditized products with low added value per kilogram, such models quickly reach their physical and economic limits.

I even see the risk that profits will increasingly be generated outside Germany and investments will be relocated accordingly. This is rather critical for Germany as a business location.

Sascha Pfordte: Let’s look at the infrastructure. Germany only ranks 23rd internationally in this area. Where do companies feel the biggest bottlenecks?

Klaus-Georg Gast: Clearly on the road. A shortage of trucks and drivers are the biggest stumbling blocks. Around 70% of the logistical challenges are related to this.

It’s not just about roads, but also about parking spaces, rest periods and working conditions. The profession of truck driver has become unattractive – and that is a structural problem for the entire location.

Sascha Pfordte : To conclude, production output in the chemical industry has fallen by around 20% since 2018. What would have to change in the short term to get back on track?

Klaus-Georg Gast: A decisive factor is trust. Entrepreneurs must believe that political promises will be kept. Without this trust, no risks will be taken.

At the same time, there are real opportunities: decarbonization, green materials, new applications. My own experience shows that targeted investments – in green tires, for example – can work.

If companies focus, consolidate and make bold decisions, the industry may not grow strongly, but it will become more stable and competitive. And artificial intelligence can at least help to make dealing with bureaucracy more efficient.

About our guest

Klaus-Georg Gast, business graduate
is Vice President Corporate Accounts and General Manager EMEA Silicates at PQ Corporation and in this role has overall corporate responsibility for the silicates business in the EMEA region, including profit and loss responsibility (P&L). Previously, he held senior management positions in the coatings and chemicals industry for many years, including Axalta, Nalco Water (Ecolab), PPG and BASF, where he led international industrial businesses with end-to-end responsibility for sales, marketing, research & development and operations. Klaus-Georg Gast has also been involved in key industry and association committees for many years, including as a board member of the Association of the German Paint and Printing Ink Industry (VdL) and as a board member and treasurer of the European association CEPE. He holds a degree in business administration with a focus on controlling and marketing and has extensive international management experience in industrial group structures.

Sascha Pfordte, MBA
is a Senior Consultant at roeren with a focus on production and management in the chemical and process industry as well as related sectors such as logistics and automotive. In his consulting work, he supports companies in increasing operational efficiency, developing and implementing production strategies and in challenging special situations such as transformations, restructuring, integration and interim mandates. Previously, Sascha Pfordte worked for several years in global industrial companies, including Axalta and Kühne + Nagel, where he was responsible for international continuous improvement programs, managed production networks and also assumed operational management responsibility as interim plant manager. He has many years of experience in lean management, operational excellence and task force assignments along the entire industrial value chain. Sascha Pfordte holds a degree in Business Administration (B.A.) and an MBA with a focus on Value-Based Production Management.