Economic and Legal Factors
WACKER sells its products and services to virtually every industry. Although our business divisions are not immune to economic fluctuations, their onset and impact may vary. Our product portfolio and broad customer base enable us to mitigate the magnitude of such fluctuations.
Economic factors impacting our business
The main economic factors influencing WACKER’s business remained unchanged in many areas.
Raw-material and energy costs
As a chemical company, we belong to an energy-intensive industry and require diverse raw materials to manufacture our products. Consequently, raw-material and energy costs have a significant impact on our cost structure. Although energy and raw material prices continued to fall in 2024 amid the general economic slowdown, they remain higher than in 2018 and 2019. WACKER strives to keep costs at a competitive level. It does so by using multiple suppliers for most of its key raw materials and structuring its supply contracts so as to grant itself sufficient flexibility as regards volumes, and by adopting suitable pricing mechanisms to ensure competitive procurement prices. However, a problem is posed by the fact that some prices in Europe are significantly higher than in other regions due to regulatory requirements. Contributory factors include not only the CO2 emissions trading system (ETS), but also energy taxes, anti-dumping import duties and, in the case of electricity, shutdowns of conventional power plants for political reasons, and sluggish grid growth. Although the very high electricity and natural gas prices paid at European industrial sites due to Russia’s attack on Ukraine decreased in 2023 and 2024, they are still markedly higher than in other regions. In 2024, WACKER again strongly advocated the introduction of an industrial electricity price at internationally competitive terms.
Exchange-rate fluctuations
As a rule, WACKER hedges against exchange-rate fluctuations. We hedge about half of our US dollar exposure for the following year with a mix of currency-hedging transactions. In determining sensitivity, we simulate a 10-percent devaluation of the US dollar against the euro. Without hedging, such an increase in the euro against the US dollar would have a negative impact on EBITDA of around €29 million. There are still hedging transactions in Japanese yen (JPY) that were concluded back in 2021 and 2022 and will run until 2033. In 2023 and 2024, no new JPY transactions were concluded.
Incentive and feed-in tariff programs for renewable energy sources, and global trade relations
As one of the world’s leading suppliers of hyperpure polycrystalline silicon, we are sensitive to demand trends in the semiconductor and solar industries. Particularly in the solar power segment, state-managed incentive and feed-in tariff programs for renewable energy sources, which often vary from country to country, play a major role. Both the semiconductor market and the solar power industry are also affected by tariffs and market barriers motivated by trade policy considerations.
