The business climate in Germany's chemicals industry has returned to positive territory for the first time since the start of the full-scale war in Ukraine in February 2022, the Ifo economic institute said on Thursday.

Ifo's indicator on the sector rose to 5.8 points in May, from -5.2 points in April, with improving demand and volumes brightening companies' outlook, it said.

"Confidence is returning to the German chemical industry," Ifo analyst Anna Wolf said.

In the first quarter, some companies saw signs of recovery in orders and volumes driven by the improving economic situation and higher demand from outside Europe.

"However, the losses of previous years have not yet been recouped, which means that the majority of companies are still struggling with a barely satisfactory to poor earnings situation", Wolf said.

The chemical industry has long suffered from weak demand and high production costs. After the start of the war in Ukraine, many materials became much more expensive, as did energy, which had a negative impact on energy-intensive production.

German industry association VCI in May said it expects production in the sector to grow by 3.5% this year and revenues to rise by 1.5%. (Reporting by Tristan Veyet in Gdansk, editing by Thomas Seythal and Miranda Murray)