In the event of an acute shortage of gas, the chemical industry faces serious problems – and thus also the global market leader BASF. Despite the crisis, people in Ludwigshafen are cautiously optimistic: if the last emergency level were to be declared, there would probably be enough natural gas for reduced operations.
Even in the worst case scenario, the world’s largest chemical group, BASF, expects to have enough natural gas to continue operating its main plant in Ludwigshafen – at least to a limited extent. “Should the federal government declare the third and final level of emergency, we are currently assuming that BASF would still receive enough natural gas to maintain operations at the Ludwigshafen site with reduced load,” said CEO Martin Brudermüller on the presentation of detailed figures for the second quarter.
According to him, BASF plays an important role as a supplier of all possible starting materials for industry and agriculture and assumes that this will be taken into account. However, he cannot say what happens in extreme cases at the Ludwigshafen site. “But we assume that we can do it and that we won’t be shut down, but nobody can guarantee it,” said the BASF manager. At the end of April he had already said that operations in Ludwigshafen would have to be shut down if necessary.
The background is the throttled natural gas supplies from Russia. “If the natural gas supply does not fall below about half of our maximum requirement, we can continue to operate the Verbund in Ludwigshafen with reduced load,” said Brudermüller, describing the location as “the largest natural gas consumer in Germany”. He is confident with a view to Schwarzheide. The location in Brandenburg is the second largest of the group in Germany. There, the company could generate all the electricity and steam it needs with heating oil. In Ludwigshafen, around 15 percent of the natural gas required for this could be saved by using heating oil.
In addition, according to Brudermüller, BASF has already taken some measures to minimize the risk. In plants that require large quantities of natural gas – for example for the production of ammonia – production has been throttled. In Ludwigshafen, around a quarter of the natural gas used as a raw material has so far been used to produce this nitrogen compound, which is required for the production of fertilizer, for example. In the case of ammonia, external purchases are also possible.
The confident tone is also influenced by the new business figures. Although the chemical giant is being hit by the rapid increase in energy costs and restrictions due to renewed lockdowns in China, it was able to pass these cost increases on to customers in the form of higher prices.
The Dax company raised its targets for 2022. For 2022, it now expects sales to increase to between 86 and 89 billion euros. The group had previously expected a decline to 74 to 77 billion euros, after 78.6 billion euros in 2021.
In terms of operating profit, BASF raised the lower end of the forecast range and is now targeting at least 6.8 billion euros instead of the previous 6.6 billion. The company confirmed the upper end of the profit target with 7.2 billion euros. In 2021, BASF reported earnings before interest and taxes (EBIT) adjusted for special effects of EUR 7.8 billion. BASF expects a gradual slowdown in global economic development in the second half of the year.
BASF intends to counter the economic risks with cost reductions. The time extension of investments, hiring and infrastructure measures such as renovations were mentioned. But that doesn’t mean there will be a hiring freeze, Brudermüller clarified. “But we will look three times” to see whether adjustments are necessary and who is needed.
The company had already presented key data for the second quarter in mid-July. According to this, sales increased by 16 percent year-on-year to 23 billion euros. The bottom line is that BASF earned a good quarter more than a year earlier, at EUR 2.1 billion.
