LONDON (ICIS) – Booming selling prices and margins in 2021 are expected to decline over the next few quarters as the high inflationary environment for materials will not be “the new normal,” the CEO of the German chemical company BASF.

The company’s core chemicals portfolio had enjoyed “much higher” margins in 2021, compared to the long-term average, but once demand and supply adjust, a downward correction is expected to happen, said company chief Martin Brudermuller.

BASF released its third quarter financial results earlier on Wednesday, with
increased sales and profits
from year to year.

During the quarter, the company managed to put up selling prices 36% higher than a year earlier, he said, while sales volumes increased by 6%; the increases were particularly healthy in the Chemicals, Materials and Industrial Solutions divisions.

In the Chemicals division, third quarter selling prices increased 95% year on year, while sales volumes increased 12%. In Materials, selling prices increased by 41% and volumes by 7%. Between the two, they represent more than 50% of total sales for the quarter.

“We can’t expect this to be the new normal. At some point when we have a better adjustment of demand and availability, there will be a correction [downward of selling prices and
margins]. We can expect the peak to persist for a long time, ”said Brudermuller.

GAS, SEMICONDUCTORS
The company also revealed that for the year through September, the blow from high natural gas prices stood at 600 million euros, with input costs it expects to increase further in the fourth quarter, because the prices of this raw material remain well above the levels of the last quarter of 2020.

“Our downstream activities are still facing further increases in the costs of raw materials, energy and freight. Price increases in most downstream companies were only able to partially offset these higher costs. Additionally, higher fixed costs weighed on profits, ”the company said.

“The semiconductor shortage severely hampered the global auto industry in the third quarter. The shutdowns and lower production rates had a negative impact on our automotive-related activities, particularly in the surface technologies segment. ”

BASF cited statistics from LMC Automotive earlier this year predicting global vehicle production in 2021 to rise to 87.6 million units, but those figures have been updated to just under 77 million. of units.

“We also cannot rule out the possibility of producing just 75 million vehicles this year… We expect the semiconductor shortage to persist, at least in the first half of 2022,” BASF said.

GERMAN COALITION
Following the
inconclusive general election
At Gemmary in September, the CEO of BASF said he was happy to see negotiations to form a government, likely to be formed by the social democrats of the SPD, the Greens and the liberals of the FDP.

While taxes on citizens and businesses may not increase due to the presence of the FDP in the coalition, climate change policies are expected to increase, which could increase costs for energy-intensive sectors like chemical products.

The German commercial group VCI, of which BASF is a key member, has
required higher investments
state on the green and digital economy as well as lower taxes for businesses.

Brudermuller said you “never like 100%” of what a party has to offer, but he was glad that negotiations for the coalition government didn’t seem likely to drag on until Christmas or beyond, as some analysts had predicted.

“I am positive and I hope they will stay in dialogue with us. I’ve said it time and time again: policymakers can’t just put regulation on the table for us and tell us to go ahead with implementation, ”said Brudermuller.

“We need a new collaboration [for the new
greener economy] and the devil will be in the details of how [to achieve carbon emissions
neutrality by 2050, in line with the EU’s Green
Deal]”said Brudermuller.

Cover photo: BASF’s facilities in Ludwigshafen, Germany
Source: BASF


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