BASF warns of output cuts if gas supply halved

German chemicals company BASF has warned of an effect on its operations from any cuts to gas supply, saying it will halt production at its Ludwigshafen complex if it cannot meet half of its current demand.

The warning followed Germany's activation yesterday of its emergency gas plan after Russia said it may require payment in roubles for future supply. G7 countries including Germany have rejected paying for gas in roubles, and German economy minister Robert Habeck has said there are no supply bottlenecks.

"The chemical industry supplies the base products for almost all manufacturing industries," BASF told Argus Media. "Therefore, severe bottlenecks in gas supply and resulting impairments or shutdowns in BASF's production can be expected to lead to serious interruptions in many value chains of our downstream customers."

It said "almost all industries" would be affected, including agriculture, food, automotive, cosmetics/hygiene, construction, packaging, pharmaceuticals and electronics.

As an example, BASF pointed out Ludwigshafen makes substances used in medical products like disinfectant and protective clothing that are needed for the Covid-19 pandemic. The complex also makes products used for items like food packaging and hygiene products.

BASF said its European gas purchasing is used 60pc to generate energy for production and 40pc as a raw material in that production, so any shortage would hit hard.

It cited ammonia as an example of a process that uses gas. Ammonia, in turn, is used to make fertilizer, availability of which would be cut if BASF reduces ammonia output. This could shrink yields in food production. These markets have already felt the affects of the Ukraine conflict, as Russia is a major exporter of ammonia and fertilizers.

"A reduction in gas supplies in Germany would further exacerbate the shortage of fertilizers worldwide, reduce food production and cause prices for basic foodstuffs to rise further," BASF said.

Another process that uses gas is acetylene, which is then used as a building block for other products including, BASF said, "the automotive, pharmaceutical, construction, consumer goods and textile industries."

By Eoin Hughes