Leuna, Germany – Staring at a pile of freshly cut beechwood, forestry manager Johannes Brodowski wonders if he is looking at the future of Germany’s chemicals industry.

A local factory will use Brodowski’s trees and other organic material instead of climate-harming fossil fuels to make chemical products used in items ranging from packaging to car tyres and fleece jackets.

“The innovative part of the whole thing is that a new product is getting made,” he told AFP. “Namely, chemical materials that were originally made from fossil fuels and now can be made from renewable sources.”

Finnish group UPM Biochemicals unveiled its €1.3-billion biorefinery in the eastern state of Saxony-Anhalt in 2025, taking a big risk at a difficult time for the sector.

Germany’s traditional chemicals industry has been hit hard by high energy prices and cheap competition from Asia, with national output now at its lowest level since 1995.

UPM believes now is the right time to encourage chemical giants to move away from fossil fuels and switch to renewable biomass, in this case wood, which grows abundantly in the region.

“With local supply chains, we can be competitive and meet the needs of international markets,” said UPM site manager Harald Dialer.

About 80 percent of German chemical products rely on imported fossil-based materials, said Paul Muennich of Agora Energiewende, an energy-transition think tank.

UPM signed a supply contract with the forest-rich state of Saxony-Anhalt, using beech tree branches and twigs for chemical processes in its refinery. As a result, beech wood production in this area could rise by 20 to 30 percent, Brodowski said.

He explained that the plant uses tree branches, which are less commercially viable than trunks and are usually incinerated in factories. The wood is processed at the Leuna Chemical Park, home to over 100 different firms.

Most factories emit the smell of rotten eggs, but inside some areas of the UPM site, a sweeter smell fills the air.

Wood chips are treated until they burst like popcorn, turning into a slurry that is fermented in huge metal tanks, said UPM spokesman Martin Ledwon.

At the end of the process, two types of products emerge: liquids used to make clothing or bottles, and a brown powder that can replace carbon black, a filler in tyres and other rubber products.

The UPM site is expected to reach full capacity by 2027, with annual output of 220,000 tonnes of chemicals.

This represents a rare bright spot in Germany’s otherwise stagnant chemicals industry, a trend highlighted in Leuna where US group Dow will soon close two plants.

Opening the plant was a very bold decision, said Dialer, adding that the Covid pandemic doubled the timeline and costs associated with the project.

UPM hopes for support from the German government, highlighting that its project is more environmentally sustainable than oil-based plants that also accelerate climate change.

The federal government, led by conservative Chancellor Friedrich Merz, which took office in May, has been less enthusiastic about environmental and climate protection than previous administrations.

When the project was launched in 2020, sustainability was more central to the debate, Dialer said.

He believes Germany and the European Union should support European industry by imposing quotas on cheap but environmentally damaging Chinese chemical imports.

Muennich of Agora Energiewende also argued that government intervention through subsidies or tariffs would be necessary to shift from fossil fuels to sustainable biomass.