28.06.2013
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German industry fleeing the Energiewende?

BASF as a gas consumer

In this first installment of our series on German industry fleeing the Energiewende, we take a look at chemicals giant BASF.

This month, I asked readers to begin giving me examples of specific industrial firms that are allegedly leaving Germany because the Energiewende is raising the price of energy for them too much. Today, we start with BASF, the largest chemicals firm in the world. Last month, a report over at Deutsche Welle claimed that the firm, along with Wacker (whom we will come back to later), was indeed expanding to the US and quoted the German Chamber of Commerce saying that German industry is generally more willing to move to the US "rather than to fellow European nations."

Here, we can already see a bit more context. Industrial firms that do business internationally always have offices and production plants in numerous countries. Crucially, I could find no news about BASF shrinking its facilities or workforce in Germany, either on the firm's own website or on the web. In April, the firm announced that it would be laying off 500 people in "specialized chemical units", but this report says that "most jobs would affect the Basel region in Switzerland" and adds that the announcement of 215 layoffs in March would mainly affect "British facilities."

 - Is the Energiewende scaring away German industry? If you have read such a claim about a specific firm, post a link in the comment section below, and we'll look into the matter.
Is the Energiewende scaring away German industry? If you have read such a claim about a specific firm, post a link in the comment section below, and we'll look into the matter.
M.E. / pixelio.de

In fact, the most recent article about Europe (not Germany!) driving away BASF to the US is from January 2012 and concerns European resistance to biotech, not the cost of renewables. Finally, the expansion in the US announced in May is being made in the "printing, packaging, and industrial coating markets," which does not sound like the same jobs as those being produced in Europe in "plastic additives, pigments, and specialized chemicals for use in a range of leather and textile products." Likewise, the jobs being cut mainly in the UK pertain to "water, oil field, and mining chemicals."

But actually, BASF is largely unaffected by the Energiewende anyway. As I recently explained, the firm produces almost all of its electricity (and process heat) from its own natural gas turbine, so it is not greatly exposed to changing wholesale power prices (which, it is worth keeping in mind, are actually going down in Germany, not up). It is, however, exposed to fluctuations in natural gas prices. But overall, the firm does not seem to be reducing its commitment to Germany, and expansion abroad seems within the range of normal adjustments to changing markets.

Here, we see why the US is indeed more enticing than Europe for firms like BASF: lower gas prices. On Monday, I'll take a look at what is behind the difference in gas prices between the US and Europe and what the near-term future holds for power and gas.

In the meantime, use the comment boxes below to send me additional links about specific industrial companies that are allegedly fleeing the Energiewende, and I'll try to look into the matter. (Craig Morris)

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2 Comments on "BASF as a gas consumer "

  1. Malaclypse - 28.06.2013, 22:41 Uhr (Report comment)

    In an article from 2011, Bayer CEO Marijn Dekkers was quoted as saying that he wants to focus new investments in their chemical and plastic sector (BayerMaterialScience) on china, due to energy prices.
    In the same article 1&1 CEO Robert Hoffmann was mentioned as seeing similar sentiment in the IT sector,without being specific, other than to say that they are looking for new locations where they can get "green electricity without the premium".
    http://news.toptarif.de/strom-zu-teuer-unternehmen-verlassen-deutschland/ http://www.n24.de/n24/Nachrichten/Wirtschaft/d/1330398/bayer-droht-mit-exodus-wegen-hoher-strompreise.html
    In an article from May this year, Dr. Thomas Vahlenkamp (McKinsey & Company) concluded that there "definitely isnt a general trend", but some companies in the chemical industrie are looking closely at the option of moving *some* processes to the US.
    http://www.unternehmerpositionen.de/rubriken/positionen/2013-05/gedaempfte-aussichten-fuer-die-chemische-industrie-in-deutschland/
    In light of all the alarmism specifics are surprisingly scarce...

  2. Thomas - 28.06.2013, 12:24 Uhr (Report comment)

    Great post Craig,
    but you forgot to mention a very important detail about BASF and their role in the energy debate. BASF generates 1/3 of it's revenue from it's oil & gas producing subsidy Wintershall that has made substantial investments into Russian gas fields and pipelines (Northstream) in cooperation with Eon Ruhrgas. In essence the BASF Group could actually profit from rising natural gas prices in Europe, despite having to pay themselves a little more for their own consumption.
    So what ever they say has to be analyzed knowing that they are in no way an impartial "nobel industry" player in the German energy debate.
    Currently renewables are decimating the consumption of natural gas in the power sector and unless the ETS gets fixed, this will stay this way until renewables pass the 40% share in electricity threshold.
    If you sell gas, that sucks = explains the current bitching by BASF & E.On.

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