High European energy costs are leading materials giant BASF SE to cut costs by 500 million euros ($499 million) by the end of 2024.
Ludwigshafen, Germany-based BASF announced the cost savings program as part of its third-quarter financial results on Oct. 26. In a news release, board chairman Martin Brudermüller described the program as a response to deteriorating earnings development in Europe and Germany.
"The European chemical market has been growing only weakly for about a decade," he said. "The significant increase in natural gas and power prices over the course of this year is putting pressure on chemical value chains."
Officials said that in the first nine months of 2022, additional costs for natural gas at BASF's European sites amounted to around 2.2 billion euros ($2.19 billion) compared with the same period in 2021.
"Challenging framework conditions in Europe endanger the international competitiveness of European producers and force us to adapt our cost structures as quickly as possible and also permanently," Brudemuller said.
"We, as a company, must act now. Our cost savings program aims to safeguard our medium- and long-term competitiveness in Germany and Europe. We must take decisive action to fulfill our responsibilities to our employees, shareholders and society."
No details on how the cuts would affect plastics or BASF's other businesses were included in the release. Earlier this year, BASF said it would stop production of ethylene in Ludwigshafen if its gas supply there falls under 50 percent for a prolonged period of time. The firm operates almost 1.4 billion pounds of ethylene capacity at that site.
European natural gas prices now are up by multiples vs. their average compared with the past decade. The Ukraine crisis has cut off the availability of Russian natural gas to the region.
BASF makes a wide range of specialty plastics and chemicals. Globally, the firm employs more than 110,000 and had 2021 sales of almost $80 billion.