BASF Ludwigshafen: 500 million savings and massive job cuts!

BASF Ludwigshafen: 500 million savings and massive job cuts!

BASF is facing challenging times in Ludwigshafen. In order to remain competitive, the chemical company has announced that it will reduce operating costs at its main plant by a remarkable 500 million euros by the end of 2023. This savings target is a step towards the target of 1.1 billion euros by the end of 2026, meaning that almost half of this target may already have been achieved. Katja Scharpwinkel, board member and responsible for the site, is optimistic about the progress, but also notes that the plant has recorded losses since the Ukraine war and the subsequent high energy prices as well as the lack of cheap Russian gas deliveries. To respond to this, BASF has already shut down several energy-intensive plants.

The pressure on the chemical industry is enormous. According to a report by KPMG, high costs and competition, especially from Asian companies, are placing a heavy burden on German companies. Commodity prices have been volatile in recent years, and fossil fuel costs in particular have risen significantly. A switch to sustainable raw materials, such as bioplastics, could make sense in terms of environmental support, but would also increase production costs by around 20%. BASF is part of this industry and faces the same challenges.

Job cuts and structural adjustments

Despite the current savings, job cuts are a hot topic. Around 2,500 jobs have already been cut in Ludwigshafen since 2023, and negotiations are currently underway regarding a new location agreement. Although redundancies are ruled out until the end of the year, BASF apparently plans to cut even more jobs and possibly close additional plants. However, further details have not yet been communicated.

A look at the competitive landscape shows that around two thirds of the production costs in the chemical industry are energy costs. One more reason for BASF to invest in modern technologies and automation in addition to cost reductions to ensure the timeliness and efficiency of their production processes.

Future outlook: expansion into China

A glimmer of hope on the horizon is the planned construction of a new large site in southern China, which is estimated to cost around 10 billion euros. However, Scharpwinkel emphasizes that no production capacity will be relocated from Ludwigshafen to China. The new plant is primarily intended to serve growing demand in Asia, while Ludwigshafen can continue to supply European customers and thus cover the most important markets in the region. It's a balancing act: the traditional components of the headquarters, such as the company's own wine cellar and the BASF after-work house, must be preserved.

Like the entire chemical industry, BASF must find innovative ways to survive in a challenged market. For the Ludwigshafen location, it is of utmost importance to make the internal structures as flexible as possible in order to be able to meet the challenges arising from rising raw material prices and the pressure from international competitors. The coming years will show how well BASF manages to master the tightrope between cost optimization and growth.