COVID-19 is Coming for the Chemical Industry in 2020, BASF Predicts
BASF Group is worried about 2020. Specifically, it’s worried about the coronavirus. In a statement issued February 28 alongside its FY 2019, the German chemical company said that the viral infection could result in a second year of falling profit for the company and reduce global chemical production to about 1.2%. That would be the worst growth for the sector since the Great Recession in 2008 and a significant dip compared to 2019, when it grew 1.8%.
The outbreak is inconveniently timed for BASF. The company began construction on a Zhanjiang, China plant complex in November 2019. The “smart Verbund project” is only a first step in a planned investment of $10 billion: BASF has plans to ramp up its investment in the Asia Pacific region to 41% from 27% through 2025. The planned site, once finished, is set to be BASF’s third-largest site worldwide after its headquarters in Germany and a location in Belgium.
BASF is already experiencing hard times, according to Chairman Martin Brudermüller. His company faced “strong global economic headwinds” last year, he said, due to factors like Brexit—which reportedly depressed key sales markets for BASF—and the US-China trade conflict. Demand from industries like the automotive market fell significantly.
As a result of those pressures, BASF global sales fell 2% compared to last year, and earnings before taxes and interest (excluding special items) fell almost 30%. Looking ahead to 2020, BASF predicted sales growth to between 60 billion euros and 63 billion euros ($65.8 billion and $69.1 billion). BASF earned about $65.1 billion in 2019.
According to Brudermüller, BASF expects slight growth in most customer industries. A notable exception is cars, one of BASF’s more profitable markets: “For the automotive industry, however, we anticipate a continued decline in production,” he said. The automobile market makes up about 20% of BASF sales.
