Germany elections continue to weigh heavily on chemical market dynamics

This content is part of the WPC 2025 series, in which we explore key themes from the 40th annual World Petrochemical Conference.

Market participants across European chemical markets have mixed views on any imminent impact of Germany's elections on market dynamics.

After elections Feb. 23, in which Chancellor-elect Friedrich Merz's Christian Democratic Union and its sister party, the Christian Social Union, emerged as victors and were preparing to form a coalition with the center-left Social Democratic Party, chemical industry stakeholders weighed any benefits from the change in administration against a volatile geopolitical environment and ongoing weakness in end-industry chemical demand.

Defense, infrastructure spending

The election results were a central talking point during the first European Petrochemical Luncheon of 2025 in Antwerp, Belgium, with plans from Merz to create a Eur500 billion infrastructure fund aimed at boosting civil defense spending as one of the few current positive signals for the European industry amid broad pessimism at the conference.

The CDU has targeted confirmation of the funding by the convening of the new parliament March 25, after which any proposal is likely to be blocked by opposing members. As such, Merz needs support from the Green Party ahead of the new government's formation to initiate any spending.

Sources speculated that potential increased military production and construction activity from the investment could stimulate demand for chemicals from key derivatives and prompt a broader German economic recovery.

"The number surprised me, but this investment might fly," a propylene trader said. "... There are many holes to be filled in Germany. Infrastructural repair could be big and would increase domestic chemical demand."

Potential increases in methanol demand were also discussed. One participant expressed hope that the spending plans would stimulate construction, adding that the plans could signal broader EU defense investment.

However, sentiment during EPL was not wholly positive.

"It's a good development in that there is a realization of outdated infrastructure in Germany, which needs to be addressed," a benzene producer said. "But I can't help but feel the ship has sailed for the markets. The lack of competitiveness is huge."

"In my view, this plan is very difficult to build under the current mandate," a second trader said. "Printing more and more money won't solve all the industry's problems."

Ethylene derivative players draw mixed conclusions

In markets such as European polyethylene and glycols, anxiety ahead of the German elections has faded, as most market participants saw the elections concluding better than some players had feared.

Despite this, views on domestic market conditions have remained negative.

"We are all in a very bad shape -- uncertainty around where this will lead," an ethylene consumer said.

In the polyvinyl chloride market, participants were in wait-and-see mode following the result, with no significant decisions heard made amid uncertainty of the direction government will take.

"In Germany we don't see any significant increase in demand following the election," a source said. "This is not something we are currently planning for."

Sources said some of the borrowing would need to be allocated to building housing vs. defense to increase PVC demand. The PVC market also paid close attention to plans aimed at reducing energy prices in Germany, given the energy-intensive nature of production. However, sources showed some skepticism about this materializing in a significant way.

Uncertainty remains dominant industry reaction

Outside of the spending announcement, uncertainty remained the dominant broader reaction to the election.

The German Chemical Association, which represents over half of the country's chemical sector, expressed concerns in its quarterly report dated March 12 regarding rising energy prices, ongoing structural issues and unpredictable tariff policies under the administration of US President Donald Trump. Considering the elections, the body is hopeful that the new government will implement a "radical change of course in economic policy" to support the German chemical industry.

In the markets directly for materials such as polypropylene, sources expressed optimism on the outcome.

"Honestly, I think it was the best outcome that you could have," a converter said. "It was close to being a disaster, close to getting in the disaster of no resolution. I appreciate that other European leaders are on the same page. ... [This] can make a difference and put the European industry in the right direction."

This optimism was not shared in other sectors, such as the rubber market, where participants were skeptical about wider geopolitical conditions in Europe.

"Even with the German election concluded, we have the French election to worry about next," a rubber distributor said. "Everything is still uncertain, and it's creating a mess for the European market."

Meanwhile, sources in the polybutylene terephthalate market expressed little hope for potential impacts to become visible before the third quarter.