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The world’s biggest chemicals company, Germany-based BASF, will cut 2,600 jobs and close some plants due to the high energy costs in Europe that have burdened operations and profitability over the past year.
In 2022, BASF Group’s operational earnings were burdened by additional energy costs of $3.4 billion (3.2 billion euros) globally, the company said on Friday. Europe accounted for around 84% of the jump in energy costs, which mostly impacted the Verbund site in Ludwigshafen. Higher natural gas costs accounted for 69% of the overall increase in energy costs globally, BASF added.
“Europe’s competitiveness is increasingly suffering from overregulation, slow and bureaucratic permitting processes, and in particular, high costs for most production input factors,” BASF’s chief executive Martin Brudermüller said in a statement on 2022 results and the outlook for 2023.
“All this has already hampered market growth in Europe in comparison with other regions. High energy prices are now putting an additional burden on profitability and competitiveness in Europe,” Brudermüller said.
To cope with high costs, BASF will implement a cost savings program, which will lead to the loss of 2,600 jobs, or 2% of the company’s workforce, mostly in Germany, where some factories and units at facilities will close. The cost savings program this year and next will focus on rightsizing BASF’s cost structures in Europe, and particularly in Germany, to reflect the changed framework conditions, the company said. Around half of the expected savings of $530 million (500 million euros) in non-production areas such as service and corporate are expected to be the Ludwigshafen site in Germany.
At Ludwigshafen, BASF will close the caprolactam plant, one of the two ammonia plants and associated fertilizer facilities, reduce the adipic acid production capacity, and close the plants for cyclohexanol and cyclohexanone as well as soda ash.
Today’s detailed cost-saving program follows BASF’s warning from October 2022 that it would seek permanent cost-saving measures in Europe due to the high energy prices endangering its competitiveness.
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews.