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German chemical sector targets US for investment

11.26.2013  | 

German companies invested €3.2bn in new chemical plants or expansions in the US a year ago, up 54% from the prior year. The US now accounts for 41% of foreign investments, up from 28% in 2005.

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Germany is becoming less attractive as a hub for chemical activity, with many of the nation's companies targeting the US for new investment, according to a new report released Tuesday from German chemical industry trade group VCI.

German companies invested €3.2bn in new chemical plants or expansions in the US a year ago, up 54% from the prior year. The US now accounts for 41% of the German industry’s foreign investments, up from 28% in 2005.

Overall, the year 2012 marked the first time since 2001 that foreign investments from German companies exceeded domestic investments.

“Our chemical companies are facing significant pressure in Germany, because of the increases in energy costs,” said VCI general manager Utz Tillmann. “Abroad, and particularly in the US, the firms obviously find better conditions for their production, helping them to preserve their competitiveness.”

VCI said that Germany’s electricity costs are 2.5 as high as the US, while natural gas prices are about three times as high.

If Germany wants to increase its domestic investment, the country needs to ensure that its plan to exit nuclear power and build up its renewables sector remains affordable for producers, Tillman said.

Otherwise, the development could turn into a trend, he warned.

On the whole, foreign investments from Germany’s chemical industry rose 25% to €7.7 billion in 2012, while domestic investment stagnated at €6.3 billion.

The full VCI report can be read here.



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