Chemical makers feel the crunch
23 Jan 2009
London – Chemical majors are undergoing a renewed phase of operational and employment cutbacks in response to the continuing sharp fall off in demand, particularly from customers in the automotive and construction markets.
Among recent announcements, Huntsman Corp. is cutting 1175 positions - more than 9% of its 12,770-strong workforce - while another 490 full-time contractors will also lose their jobs. Huntsman also announced that its Pigments Division plans to close its 40ktpa titanium dioxide plant in Grimsby, UK. Production at the plant is to cease during the first quarter of 2009 with the loss of 200 jobs.
Meanwhile, Bayer MaterialScience (BMS) is holding talks with employee representatives to agree measures in response to a sharp decline in orders and declining capacity utilisation. The negotiations are aimed at reaching an agreement on the introduction of short-time working, the company said 26 Jan.
According to BMS, the short-time working plan would cover 1,500 employees at its German plants. The measures, it said, are to be implemented in Leverkusen, Dormagen, and Krefeld-Uerdingen as from February, and in Brunsbüttel as from May. Cutbacks for managerial employees of Bayer MaterialScience are also being discussed.
Similar measures have already been taken or are planned for the BMS sites abroad. The company has a workforce of around 15,200 worldwide. A total of 5,500 people are employed in Germany, of whom some 2,500 work in production.
The Bayer group company has already brought forward maintenance work, and either cut back or temporarily halted production in many of its plants throughout the world at the end of last year. Employees also made use of flexible working hours or took unused vacation days.
BASF has already introduced short-time working at several of its European sites in response to a significant global business decline in December 2008 and no sign of a turnaround. In all regions, demand for chemical products has not picked up in the first half of January and customers are continuing to destock, the company said.
According to BASF chairman, Dr. Jürgen Hambrecht: “The situation remains tough and difficult to predict. We do not expect the economic environment to improve in the coming months.” The decline in business is greater than expected in November and will negatively impact earnings."
BASF reduced capacity utilisation at its production plants at its six sites worldwide in mid-November. On average, the capacity utilization rate within the BASF Group is currently less than 75%. Only demand for crop protection products and products for the food industry was reported as remaining high.
Since implementing the production capacity reductions, BASF has used flexible working time arrangements such as reduction of overtime and holiday accounts at the affected sites worldwide. The process, it said, is helped by the company's integrated approach to production, which allows employees to be transferred between plants with varying capacity utilization rates.
Flexible working time arrangements are no longer sufficient to absorb the effects of production cuts everywhere. This applies primarily to sites that manufacture products for the automotive industry. For example, short-time working will be introduced in February for approximately 1,500 employees at BASF Coatings’ site in Münster, Germany, and for 180 employees in Schwarzheide, Germany.
Working hours have already been reduced for about 150 employees at two smaller coatings sites in Italy. BASF cannot rule out the introduction of short-time working at further sites. In Ludwigshafen and Antwerp, it can be avoided for the time being thanks to the use of flexible manpower planning, said BASF.
BASF previously announced that it was to shut 80 plants worldwide and reduce output at 100 more facilities. Products affected include low density polyethylene, the polyurethane feedstock TDI, nylon and caprolactam. An estimated 20,000 employees will be affected by the cut-backs, of which some 5,000 are based at the BASF Ludwigshafen complex in Germany.
Among other companies taking drastic action is Dow Chemical, which recently announced the elimination of 11,000 jobs globally as it closes 20 plants permanently and temporarily shuts a further 180 units. The plants being idled represent 30% of Dow’s global production. Cuts are being implemented across the board. In engineering plastics
Another victim, Rohm and Haas Co, which is being acquired by Dow, has announced a second phase of cutbacks, further to its actions announced last June of last year. The latest measures will impact around 900 positions across almost all regions and businesses within the company in 2009.
Similarly, annual cost savings of up to Euro100 million is the targeted for Dutch chemical company DSM, as it attempts to lose some 1,000 staff by 2010, while DuPont announced that it is shedding 6,500 jobs. And French producer Arkema is to close or reduce output at 40 sites worldwide, with an associated cost reduction programme of Euro500m up to 2010.
The Saudi group SABIC reported an 86% fall in operating profit, at SAR1.61 billion net profits for the fourth quarter of 2008, compared to the prior year period. Operating profit for the twelve months to 31 Dec came in 9% lower at SAR37.27 billion.
SABIC linked the sharp decline in the results of the fourth quarter of 2008 to the decline in demand for petrochemical products and metals because of the global recession, as well as difficulties for consumers in obtaining necessary finance.
"This led to an acceleration in the pace of declining petrochemical product prices, said a SABIC statement. The decline in demand for petrochemical products, particularly specialty plastics, arising from the crisis afflicting the global automotive industry and building and construction sectors, has had a strong impact on the performance of SABIC affiliates outside Saudi Arabia - as reflected by a recent announcement that Sabic Innovative Plastics is cutting production by up to 20% at all of its sites worldwide.
However, SABIC added that its "investment in the past few years will contribute to boosting current production capacities, therefore having a positive impact on the company¹s performance and financial results in future years."
