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Due to high energy and raw material costs, exacerbated in large part by the war in Ukraine, chemical giant BASF announced a series of “concrete measures” in its latest 2022 business report to improve competitiveness. In his speech last month, Chairman of the Board Dr. Martin Brudermüller announced a restructuring of the Ludwigshafen plant and other cost-cutting measures. It will cut about 2,600 jobs as part of its “resize” efforts.
While BASF reported an 11.1% increase in sales to €87.3bn in 2022, this increase was mainly due to “rising prices in almost all areas due to rising raw material and energy prices.” BASF’s additional electricity costs of €3.2 billion impacted global operating income, with Europe accounting for about 84 percent of the increase. BASF said it mainly affected its 157-year-old integration site in Ludwigshafen, Germany.
BASF predicts that the war in Ukraine, the high cost of raw materials and energy in Europe, rising prices and interest rates, and inflation will have a profound impact on the economy as a whole until 2023. The global economy is expected to grow by a modest 1.6% in 2023, while global chemicals production is expected to grow by 2%.
“European competitiveness is increasingly affected by excessive regulation, slow and bureaucratic licensing procedures and, above all, the high cost of most factors of production,” Brudermüller said in his presentation. “All of this is hindering market growth in Europe relative to other regions. High energy prices are currently placing an additional burden on profitability and competitiveness in Europe,” he said, before describing BASF’s efforts to address the growing crisis. storm.
The savings plan, which includes the aforementioned layoffs, includes some operational modifications. Upon completion, savings of more than 500 million euros per year in non-manufacturing areas are expected. About half of the savings will go to the Ludwigshafen base.
It is worth noting that BASF will close the TDI plant in Ludwigshafen and the plants for the production of DNT and TDA precursors. In its report, BASF notes that demand for TDI has not lived up to expectations, especially in Europe, the Middle East and Africa. (This compound is used in applications such as polyurethane production.) As a result, the TDI complex in Ludwigshafen is underused while energy and utility costs skyrocket. European customers will continue to receive TDIs reliably from BASF’s factories in the US, South Korea and China, BASF said.
BASF also announced the closure of the caprolactam plant in Ludwigshafen, one of the two ammonia plants and related fertilizer plants, as well as the cyclohexanol, cyclohexanone and soda ash plants. The production of adipic acid will also decrease.
About 700 manufacturing jobs will be affected by the changes, but Brudermüller stressed that he thinks these employees will want to work at different BASF factories. BASF said the measures will be phased in by the end of 2026 and are expected to reduce fixed costs by more than €200 million a year.