German chemicals company BASF has announced the closure of one ammonia production plant at its headquarters in Ludwigshafen due to high energy costs.
The site was impacted the most by additional energy costs of €3.2 billion which were recorded by BASF globally, with higher natural gas costs accounting for 69% of the overall increase.
BASF aims to save costs of more than €500 million in non-productive areas by the end of 2024, and lower fixed costs by over €200 million annually by the end of 2026 in Ludwigshafen.
Around 700 positions in production are likely to be impacted at the headquarters. BASF, however, is “confident” it will be able to offer most of the affected employees employment at other plants.
One measure to lower fixed costs at the site is to close its caprolactam plant, which is one of the two ammonia plants and associated fertiliser facilities.
The company said that a further production plant in Belgium is sufficient to serve “captive and merchant market demand” in Europe going forward.
Cost-saving and structural measures
A cost-saving programme implemented in 2023 and 2024 aims to generate annual cost savings of more than €500 million in non-productive areas, of which half is expected in Ludwigshafen.
Non-productive areas include service, operating and research and development divisions, and the corporate center. These measures are expected to have a net effect on around 2,600 positions, including the creation of new positions.
Structural measures to make the Ludwigshafen site better equipped for the intensifying competition in the long term also include:
- Reduction of the adipic acid production capacity and closure of the plants for cyclohexanol and cyclohexanone, as well as soda ash;
- Closure of the Toluene Diisocyanate (TDI) plant and the precursor plants for Dinitrotoluene (DNT) and Toluenediamine (TDA).
BASF’s European customers will instead be supplied with TDI from BASF’s global production network with plants in the US, South Korea and China.
The company believes in the future of the Ludwigshafen site, which is now in its 158th year. “We remain committed to this site and have the courage to develop it further,” chair of the board of executive directors, Dr. Martin Brudermuller said.
BASF
Announcing cost-saving measures focused on Europe and measures to “adapt the production structures” in Ludwigshafen, Dr. Brudermuller said:
“Europe’s competitiveness is increasingly suffering from overregulation, slow and bureaucratic permitting processes, and in particular, high costs for most production input factors.
“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.”
The reduced power and natural gas demand at the site will cut its carbon dioxide (CO2) emissions by around 0.9 million metric tonnes per year, leading to a 4% reduction in BASF’s global CO2 emissions.
BASF aims to secure greater supplies of renewable energy for the plant. “We want to develop Ludwigshafen into the leading low-emission chemical production site in Europe,” he said.