European Industrial Giants Take Action, Cutting Costs at European Sites

Europe: BASF, one of Europe's leading industrial giants, is taking action to reduce costs at its European sites due to three factors: sluggish growth, high energy costs and over-regulation. To counter this, the company's CEO is pushing for expansion into China. This change is intended to be permanent in order to maintain a competitive edge on the global stage.

"These 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," the chemical maker's CEO Martin Brudermueller stated.

BASF has experienced a major increase in Natural gas costs at its European sites in the first nine months of 2022. This includes their largest complex at Ludwigshafen, Germany where they create various products from vitamins, foam chemicals, engineering plastics and pesticides. In total, the costs were around 2.2 billion euros ($2.2 billion) more compared to the previous year.

Spot gas prices in certain parts of the world were extraordinarily high when compared to those in the United States. In reaction, the company is taking steps to adjust production technology, increase prices for some products, and stop producing items that don't sell at higher rates. Ultimately, more permanent cost-saving measures will need to be put in place.

Efficiency is the name of the game in corporate Europe, as energy costs surge due to the Ukraine crisis and inflation spirals to new heights. BASF announced that it plans to reduce its annual costs by 500 million euros in Europe up to 2024, an amount equivalent to 10% of pre-existing expenses. Furthermore, the company has suggested additional restructuring initiatives in Europe early next year.