analysis
The world’s largest chemical company BASF is under pressure. Sales and profits have recently collapsed, and entire facilities at the Ludwigshafen headquarters are being closed. At the same time, the company is investing billions in China.
“You can’t imagine that this plant would suddenly partially dismantle and partially close instead of expanding. It has always expanded,” says Fritz Hofmann, former BASF works council in Ludwigshafen. This is a shock for many colleagues. Hofmann knows what is at stake for the workforce. He worked at the main factory in Ludwigshafen for more than 30 years. At the turn of the year, around 38,700 people were employed there – 430 fewer than the year before.
Many employees are unsettled by the company’s tough austerity measures and are worried about their jobs: “Of course you have the feeling that everything should or will come to China and that more and more will perhaps be cut here,” says a BASF employee wonders what will happen to his job in the future.
BASF stated in writing that it wanted to “continue to invest in maintaining, modernizing and expanding the Ludwigshafen site.” But first, eleven production plants will be closed, including a fairly new so-called TDI plant for the production of foams. The loss: around one billion euros. According to BASF, the systems at the home location are no longer profitable. However, it is assumed that the majority of the affected employees can be placed in other positions in production and technology.
Beginning of the end of the German Chemical industry?
According to its own information, the chemical company made a profit everywhere last year, except in Germany. The board complains that energy costs are too high, too much bureaucracy and over-regulation. This is partly responsible for the fact that Germany is becoming increasingly unattractive as a location. The result: BASF is saving and cutting jobs in this country. At the same time, the company is investing heavily in China – a country that is threatening to invade Taiwan.
Ten billion euros are being invested in the construction of a new mega-factory in the south of China alone. In Zhanjiang, a factory for chemical raw materials that will later end up in hundreds of consumer products is being built on an island off the coast. The giant work is scheduled to be completed in 2030. Many in the region hope this will provide opportunities; unemployment in China is high among young people.
Environmental protection versus economic interests
Numerous factory chimneys next to the BASF construction site are already smoking. The air is full of smog, but hardly anyone dares to talk openly about environmental pollution. Years ago there were repeated violent protests in China against the establishment of chemical factories – mostly in vain. Today the protests have largely died down. Economic growth comes before environmental protection. But residents say the air has become very bad and are worried that water in the region is being contaminated by chemicals.
During on-site measurements, Chinese researchers have found pollutants that, according to an environmental study, have negative effects on ecosystems and human health. The new BASF factory is also mentioned in the study. Due to the large amount of pollutants that would be caused by the establishment of chemical companies, it is feared that the air quality in Zhanjiang will deteriorate significantly. In a statement, the company writes: “BASF adheres to the legal requirements of the respective countries in which it operates.”
BASF has been operating a large integrated plant in Nanjing for years, located in a large chemical park. It is difficult to determine which pollutants are released there. Unlike in the EU, there is no register in China in which releases of dangerous chemicals must be reported and published. Environmental regulations in China are to become stricter, it is officially said, but implementation and controls remain largely unknown.
Criticism of business in China is becoming louder
Environmental associations repeatedly demand that chemical companies themselves take care of the disposal and repair of environmental damage. Binding rules are needed to contain the risks and dangers that arise from the production of chemicals. However, the World Climate Conference at the United Nations in autumn 2023 ended without a binding set of rules. Countries like China and Russia are not participating in the adoption of new sustainability goals.
Working conditions and compliance with human rights in China are also highly controversial. In Xinjiang, a province where BASF has been doing business for some time, the Muslim Uyghur minority has been oppressed for years. A Chinese partner company is also said to have helped to persecute Uyghurs.
After public criticism grew, BASF announced that it would be separating from the controversial joint venture and withdrawing from the Uyghur province. Other business in China continues.
Group defends strategy
“We actually don’t know enough about what’s really going on there and what’s happening there in terms of the environment,” says Fritz Hofmann, criticizing BASF’s business in China. The ex-works council from Ludwigshafen is therefore demanding more transparency from his former employer. He would also like an open exchange between German BASF employees and their colleagues in China – as was previously possible at other locations.
But that is undesirable in China and independent unions are banned there. For his home location in Ludwigshafen, he hopes that environmentally friendly and useful products will be produced there and jobs will be maintained – also for future generations.
The former CEO, Martin Brudermüller, who headed the chemical giant from 2018 to April 2024, defended the group’s austerity measures and Asia strategy until the end. At the last general meeting in April, he spoke of “stormy times” for chemistry in view of the economic situation. Investments in countries like China are therefore important in order to increase market opportunities and survive in global competition.