High energy costs put BASF’s European sites in doubt

German chemicals group BASF did not rule out shifting production for “energy-intensive” processes as soaring gas prices make it harder to keep operating sites in Europe, the group’s CEO said Thursday.

“The question is whether basic products can still be produced competitively in Germany and Europe in the long term,” CEO Martin Brudermueller told German financial daily Handelsblatt.

“Adjustments are needed in production” on top of a one-billion-euro (dollar) cost-cutting plan unveiled by the chemicals group in October, Brudermueller said.

The group’s plans would be announced in the first quarter of next year, he said, adding that the focus was especially on “energy-intensive” products such as ammonia, where 80 percent of the production costs were accounted for by energy inputs.

BASF, Germany’s largest consumer of gas, has seen its bill for the fuel triple over the first nine months of the year when compared to 2021, Brudermueller said.

The group has reined in its consumption by making production more energy efficient and generating more power from oil instead of gas.

“But the majority of savings have sadly come from production stops,” Brudermueller said.

Even if gas prices were to stabilise, BASF estimated that “in the long term they will be three times more expensive in Europe than in the United States because of the higher cost of imports of (liquefied natural gas)” replacing gas from Russia, he said.

Brudermueller caused a stir in late October when he said the chemicals group would have to “permanently” cut costs in Europe, while investing more in China.

Between July and September, “the European chemicals market shrank by six percent”, Brudermueller said in the interview.

The boss of the Ludwigshafen-based group also criticised “excessive regulation” under the European Union’s plans to reach climate neutrality by 2050.

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