The German electrical and electronics industry is recovering steadily from the recession. The executive board of the German Electrical and Electronics Manufacturers Association (ZVEI, Frankfurt / Germany; www.zvei.org) predicts that production and revenues rose by 12% to EUR 162 bn in 2010. Average capacity utilisation is 86%, only 2 percentage points below the previous record, compared with an average of just 74.6% for 2009. The number of employees was back at 815,000 in the third quarter of 2010, after having dropped by more than 2% to 810,000 during the crisis.

“The sector is recovering much faster than anticipated,” reported ZVEI executive director Klaus Mittelbach at a recent press conference in Frankfurt. The association anticipates further growth of 7% to around EUR 175 bn in 2011, indicating that the upward momentum is expected to slow down slightly. In 2012 the value of production is expected to top the pre-recession level, with the record EUR 182 bn achieved in 2008 as the benchmark.

Growth areas include segments geared toward the automotive industry, including electrical and electronic vehicle systems, battery technology and electromobility. Other growth drivers are energy technology, automation and electronic components.

Exports are playing a major role in this success story. To quote Mittelbach: “Never before has the sector emerged so quickly from a crisis”. Unlike domestic sales and order intake, which remain 13-15% below their 2008 benchmarks, export revenues are expected to exceed the pre-crisis level of EUR 144 bn. Statistically speaking, the German E&E sector has the strongest export focus in the country, ranking just ahead of the chemical industry on this criterion.

Growth has been driven predominantly by demand from Southeast Asia and Latin America. Sales to China, Hong Kong, Brazil and Argentina have risen by between 50% and – in the case of Brazil – more than 100%. Nevertheless, Europe remains the sector’s principal market, accounting for two-thirds of exports. Altogether, 90% of companies expect the upward trend to continue, predicting stable or rising exports in the coming quarter.

“However, this should not mask the fact that the losses incurred in 2009 have not yet been fully recouped,” said Mittelbach. For instance, companies are concerned about the increasing shortage of skilled workers, and above all, the availability and price of raw materials. According to ZVEI’s chief economist Andreas Gontermann, raw materials accounted for about one-third of production costs in 2009. Plastics accounted for 12.5% of this, meaning about 4% of the total cost.

The price of important materials such as steel, copper, lead and rare earths has been rising steadily for some time and plastics are no exception, as Plasteurope.com’s A-Plastixx E&E price index (www.pieweb.com/a-plastixx) for thermoplastics used in E&E applications indicates. The biggest driver is polystyrene, where notations have risen by around EUR 750/t since the start of 2009.

At present, the western European E&E sector consumes around 1.7m t of plastics a year. The list is headed by polypropylene, polystyrene and PVC, and followed by ABS and polyamide, which together account for about 1.2m t.

Thanks to its high penetration of other sectors, the E&E sector sees itself as a key driver of German industrial performance. About 30% of ideas for new developments originate in this sector. Chemicals takes second place with around 15%.