Tough Times for BASF

The German chemical giant is hard-hit by the downturn, which is forcing it to reduce global production

By Alexander Neubacher

Driving through Ludwigshafen on the way to the main administration building at BASF, Carl-Bosch-Strasse, gate no. 2, you pass by a small park: a reassuring patch of lawn among all the gray concrete buildings, steel pipes and chimneys. The park belongs to BASF, but it is open to the public, and when plant manager Bernhard Nick, 50, tells visitors about the internal elements that hold together the largest chemical company in the world, he talks about the park and the memorial that can be seen there.

The park features a kind of furnace—five meters (16 ft.) high, one and a half meters in diameter—that stands on the lawn next to a commemorative plaque. This pioneering device was the main component of the first facility to manufacture ammonia (NH3), and it's easy to understand why BASF is proud of it. German scientists Fritz Haber and Carl Bosch, its inventors, were awarded the Nobel Prize in chemistry. The Badische Anilin- und Sodafabrik (BASF) in Ludwigshafen on the Rhine, founded in 1865, rapidly became a major global company.

A few weeks ago, there was a visitor from China who, like Nick, is a chemist by profession and someone who normally doesn't let his feelings show. But when the man stood in front of the old ammonia unit in the park, he became choked up with emotion. The text on the plaque reads: "Without this process, the struggle against hunger would be hopeless." Nick says that they have calculated that in a world without ammonia roughly half of mankind would die of hunger because there would be no chemical fertilizer. That is certainly somber food for thought.

The Promise of a Bright Future

The plant in Ludwigshafen has other points of pride as well. One of those is that production has never been brought to a standstill for long. The ammonia plant weathered the stock market crash of 1929 just as well as it survived the bombings of World War II, the oil crisis of the 1970s and the recession of 2001. "Annual production of ammonia is increasing worldwide with continuously growing demand" is another sentence on the commemorative plaque. For the employees of BASF, this phrase has always held the promise of a bright future.

This makes the events of the past few weeks in Ludwigshafen all the more disturbing. Back in October, the company had to reduce its production of caprolactam, a compound used in making components for the automotive industry. This was followed shortly thereafter by a slump in the production of polystyrene (more commonly known under the brand name Styrofoam). Not a week went by after that without some machine on the premises having to be shut down. It has become unnervingly quiet at BASF. A total of 40 large-scale units worth billions of euros have suddenly come to a standstill.

The slowdown eventually hit A3, as the ammonia facility here is called. On normal days the unit produces more than 1,000 tons. Aside from the symbolic importance of this product, it generates potential sales of roughly €300,000 ($400,000) a day, a significant amount, even for a major player like BASF.

But in mid-November the company extinguished the waste gas plume, the eternal flame of the chemical industry. Since then, the approximately €500-million unit, which is normally operated in shifts, has not produced a single gram. Production at the second ammonia unit nearby, known as A4, has been reduced to a bare minimum. No one knows how long it will continue to run.

Never Experienced Anything Like It

It's a puzzling situation for BASF. Could it be that the world suddenly no longer needs ammonia? "Back in September, there weren't many indications of a crisis," says plant manager Nick. But that made the effects of the recession all the more profound as customers suddenly began cancelling their orders. Within only a few weeks, the market had virtually collapsed. Nick says that he's never experienced anything like it.

The situation at BASF illustrates how the crisis has reached the core of German industry.