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BASF To Downsize In Europe Because Of High Energy Costs & Overregulation

October 28, 2022

By Paul Homewood

From the FT:




BASF, the world’s biggest chemicals company, says high energy costs make Europe increasingly uncompetitive
BASF has said it will have to downsize “permanently” in Europe, with high energy costs making the region increasingly uncompetitive.
The statement from the world’s largest chemicals group by revenue came after it opened the first part of its new €10bn plastics engineering facility in China a month ago, which it said would support growing demand in the country.
“The European chemical market has been growing only weakly for about a decade [and] the significant increase in natural gas and power prices over the course of this year is putting pressure on chemical value chains,” chief executive Martin Brudermüller said on Wednesday.
BASF, which produces products from basic petrochemicals to fertilisers and glues, spent €2.2bn more on natural gas at its European sites in the first nine months of 2022, compared with the same period last year.
Brudermüller said the European gas crisis, coupled with stricter industry regulations in the EU, was forcing the company to cut costs in the region “as quickly as possible and also permanently”.
The company announced two weeks ago that it would reduce costs by €1bn over the next two years, targeting mainly “non-production areas” such as IT, communications as well as research and development.
Brudermüller, who has previously warned that an embargo on Russian gas would plunge Germany into its biggest crisis since the second world war, said on Wednesday the cost cuts were necessary to “safeguard our medium and long-term competitiveness in Germany and Europe”.
The chief executive’s comments came as BASF reiterated its full-year sales forecast of between €86bn and €89bn, and earnings before exceptional items of €6.8bn to €7.2bn.
Sales grew 12 per cent to €21.9bn in the third quarter, compared with the same period last year, which the company said was mainly because of higher prices.
Profits before tax fell €538mn to €1.2bn, which the company said was partly because of lower earnings in its chemicals division, including rubber additives, salts used for solar panels and solvents for paints. The company also pointed to lower earnings from one of its existing plants in China.
Germany remains BASF’s most important market for revenues, accounting for 18 per cent of its sales in the year to date, compared with 14 per cent from China.

Financial Times, 26 October 2022

This follows on the heels of BMW’s decision to move production of the new electric Mini to China. No doubt many more businesses will follow suit.

  1. October 28, 2022 11:34 am

    No company can compete against Chinese manufacturers, with their cheap electricity from coal. This is obvious to all but politicians and bureaucrats, especially those under WEF influence.

    • October 28, 2022 1:37 pm

      Steel, Aluminum, chemicals-there are so many things that need cost effective energy. Do our great and the good not realise they are not only putting our core industries at risk but directly ensuring imports will result that will come from countries with vast amounts of coal to burn and do not worry about supposed consequences.

  2. In The Real World permalink
    October 28, 2022 11:36 am

    It is all just part of the scheme by the Socialist Green loonies to destroy Western economies so that they can bring about a ONE WORLD SOCIALIST GOVERNMENT.
    The UN leaders admitted a long time ago that the whole global warming scam was nothing to do with the climate , but to destroy capitalism .

    So Green taxes , massive increases in energy costs and all of their lies are designed to stop manufacturing in Western countries and make everybody poor so the left wing politicians can take over .

  3. It doesn't add up... permalink
    October 28, 2022 11:37 am

    The businesses will wind up being owned by China. The intellectual capital and knowhow to operate them will disappear from Germany. It will end up poor. China will cease to care about foreign markets.its concerns will, only be for ensuring its own supplies and for itself.

    • Mr Robert Christopher permalink
      October 28, 2022 10:22 pm

      At the current rate of decent, German politicians will have no concerns for supplies, only for meeting Agenda 2030 targets.

  4. ancientpopeye permalink
    October 28, 2022 11:39 am

    More netzero crock ruining businesses in the western democracies whilst the biggest emmiters snub their noses and laugh all the way to the bank?

  5. GeoffB permalink
    October 28, 2022 11:55 am

    Eventually the mist clears and the overall plan is revealed for the West.
    No Industry, No Agriculture, No Jobs, No Life.
    So who is going to benefit? The so called elites in the WEF or China? My bet (having run a factory there, 20 years ago) is China, controls the raw materials, cheap power, cheap labour, communist outlook (cradle to grave welfare with punishment against non conformance). The population of the mad green obsessed west is about 1.3 billion, China is about 1.8 billion. As the West dies the East takes over.

    • October 28, 2022 12:39 pm

      Because of the after-effect of China’s one child policy, the population of China s falling rapidly, so China won’t be able to take over.

      • GeoffB permalink
        October 28, 2022 1:30 pm

        Your observation is valid, but there is a transfer from agriculture to industry that will drive the increase in manufacturing, Meanwhile a horror story of my first encounter with the regime in China.

        The one child policy was active during my time in China (2000 to 2006), it just meant the second child got no free benefits like health and education, but if you had the money you just paid for it. Our Shanghai agent had 3 kids!
        I was General Manager, the factory had 750 female plus 200 male workers, I had to sign off (or chop (stamp)) on their lives, marriage, education, health and abortions. The abortion was actually punishment and needed 6 t0 8 weeks off as the cervix was deliberately mutilated, so the girl could never carry a baby again. I tried to bypass this by flying the first girl needing an abortion to Hong Kong and having a civilised one, but of course the visas were unobtainable and then I was warned off for trying to organise one privately locally.
        The policy has since been relaxed but the birth rate has not increased

  6. zrpradyer permalink
    October 28, 2022 12:33 pm

    Perhaps I could post this here (I have yet to check its authenticity) because it is just a little heartening – Sweden will not meet its Agenda 2030 targets –

  7. David permalink
    October 28, 2022 12:59 pm

    I am so angry with our latest Prime Minister that I am, almost for the first time in my life, speechless.

  8. Kelland Hutchence permalink
    October 28, 2022 1:29 pm

    The more who leave, the better. Then when unemployment is five times worse and earnings are hitting bottom they JUST MIGHT wake up and ask why. Then they’ll realise that they’ve all been had for fools.

  9. October 28, 2022 1:37 pm

    The US posted GDP growth this past quarter even though it has felt like a slowdown for the last 6 months due to higher energy prices which abated some this past summer. The WSJ reported that most of the growth was due to export of oil and gas, in spite of the desires of the current administration. Personal spending slowed and business investment activity declined. The US is likely to get much of the fertilizer business and the plastics business tends to move towards customers who mold products so it will be split between the US and China.

  10. Gerry, England permalink
    October 28, 2022 2:22 pm

    Missing from the EU-loving FT piece is the EU Chemical Strategy for Sustainability which we all know will just add more costs as every piece of green sustainable BS does. For the first time ever, the EU is importing more chemicals than it exports. The latest in the line of short-lived Prime Ministers, Sushi has signed his government’s death warrant by banning fracking again. Still, when his time is up he can trot off back to India where Tata Chemicals are seeing their profits soar.

    • Dave Andrews permalink
      October 29, 2022 4:47 pm

      The EU is gung ho, like others, about making all vehicles electric.
      Meanwhile the European Commission is currently evaluating a proposal by the European Chemicals Agency to classify lithium chloride and lithium hydroxide as materials hazardous to human health. Though the proposal will not directly ban import of lithium it will lead to more stringent requirements for processing, packaging and storage of lithium related products than in the past. This will increase the costs of the lithium processors. If it comes into law expect other manufacturers to follow BMW to China.

  11. Gamecock permalink
    October 28, 2022 2:30 pm

    Prosperity begets decadence.

    Sunak bans fracking as Germany loses a key industry due to gas shortage. British elite think they can destroy that which keeps them alive without consequence – to themselves.

    You don’t matter.

  12. johnbillscott permalink
    October 28, 2022 4:39 pm

    I guess this is the reason Shultz is winging it to China to negotiate his cut for allowing this to happen to the BSAF decision to relocate. Did the Germans learn nothing from Mutti’s great gas sellout to Putin which is working out well for Putin. Methinks the NetZero madness may disappear if we have a cold winter with blackouts, death of poor people who cannot keep warm or feed themselves. As the French chanted during the revolution “a la Lantern” for the elites.

  13. Ben Vorlich permalink
    October 28, 2022 10:54 pm

    The cost of Carbon Neutrality doesn’t come cheap either
    We’ve discovered that the cost of ‘deep retrofit’, retrofitting a home to the highest levels of energy efficiency, is at least double the expected amount – averaging around £69,000.
    Nottingham city’s housing stock is made up of 164,460 homes, so the costs of deep retrofitting houses alone would be in the region of £6.7-7.2 billion.”

    • Dave Fair permalink
      October 29, 2022 10:26 pm

      Where’s Robin Hood when you need him? The Sheriff of Nottingham is out of control again.

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