In the context of the global energy crisis, the news of the "cut of supply" of chemical giants such as BASF and Dow has aroused market attention. This is related to the upstream and downstream of the global chemical industry chain, and the most direct impact is the increase in the price of chemical raw materials.

  Recently, it has been reported that many chemical giants such as BASF and Dow have "cut off supply" in Europe. The first financial reporter learned exclusively from the company that the reason for the "cut off" is that BASF and Dow have a company located in Belgium. The joint venture plant, which produces propylene oxide (HPPO), was unable to deliver on time due to technical problems.

  BASF blamed "force majeure" for the aforementioned supplier's technical problems.

In an official statement sent to the first financial reporter, BASF responded: "BASF's polyurethane company in Lemförde, Germany, announced on May 5 that it will start a new business in Europe, the Middle East and Africa (EMEA). The product supply of polyether polyols and polyether polyol-based polyurethane systems experienced force majeure. This was due to an unforeseen technical failure of one of the company’s key suppliers that was beyond our control.”

  A relevant person from BASF China told Yicai.com: "The shortage of supply mainly affects the supply chain in the European market, and there is currently no 'disruption of supply' in China."

  A number of other chemical giants also told Yicai that China's supply chain is not abnormal at present.

A DuPont official said: "There is no abnormality in China's supply at present. If there is a problem, we will send a letter to inform customers as soon as possible."

  Chemical giants feel "pain"

  In fact, the intensifying conflict between Russia and Ukraine since the end of February has not only impacted the international energy market, but also has a huge impact on the chemical industry.

A number of chemical companies in the United States and Europe have withdrawn from the Russian market or suspended their local operations as part of the sanctions against Russia.

But over time, its spillover effects continue to emerge.

  As we all know, the importance of natural gas as an energy source is beyond doubt.

At the same time, natural gas is also a very important chemical raw material.

Globally, about 80% of synthetic ammonia and more than 90% of methanol currently use natural gas as raw material.

Today, natural gas plays an increasingly important role in addition to fuel as a raw material for basic chemical products.

  Previously, the US Biden administration has imposed sanctions on Russia's oil and gas fields; Europe has only given a timetable for banning Russian coal imports: that is, giving Russian coal imports a 120-day buffer period.

There has been no consensus in Europe on Russian gas and oil, on which Europe is more reliant.

According to Eurostat data, in 2021, the proportion of oil and natural gas imported from Russia in the 27 EU countries will be about 26% and 40%, respectively, in terms of energy consumption in chemical production.

  It is also the importance of Russia's energy supply. Since April, many chemical giants have issued warnings about the further impact of "cutting supply" while feeling the "pain" of sanctions against Russia.

  According to the first financial card, the Dutch coatings giant AkzoNobel said on April 21 that due to the company’s suspension of business in Russia, revenue from Russia will drop by 70% this year, affecting about 5 million euros in operating income in the first quarter. Of this amount, EUR 1 million relates to the impairment of receivables and inventories in the region.

  BASF warned in an emailed statement that the world's largest integrated production site could be shut down if gas supplies at its Ludwigshafen site in Germany fell to less than half of current demand.

It is understood that the closure of the Ludwigshafen plant alone could lead to the dismissal of 40,000 workers, or at least shortened working hours.

  "In Germany, there is no substitute for natural gas as a raw material or energy source, and a shortage of natural gas will result in insufficient energy for chemical production and a lack of key raw materials for manufacturing products." Dr. Martin Brudermüller, Chairman of the Executive Board of BASF, said that in the In the event of a complete or prolonged cessation of gas and oil imports from Russia, Germany would face unprecedented economic losses.

  In gas exports to Europe, Germany is Russia's main buyer.

For example, the data in 2021 shows that Germany imports about 55% of natural gas from Russia.

  Earlier in early March, BASF announced a freeze on new projects in Russia and Belarus due to the Russian-Ukrainian conflict.

BASF's executive board decided at the time to phase out the company's business activities in both countries, other than the food industry, by early July 2022.

In addition, BASF operates an automotive coatings plant 60 kilometers east of Moscow, Russia.

  Austrian Oil and Gas Group (OMV) CEO Alfred Stern said that Europe is not actually ready to ban natural gas supplies from Russia because of the industrial and economic impact of a stoppage.

He cited Austria as an example, the average household consumes about 20% of natural gas every year, nearly 35% is needed for energy production, and nearly 40% is used for industry, "But now that's not the point, the point is that we want to maintain our economic activity, And that will no longer be entirely possible."

  In addition, chemical giant ExxonMobil withdrew from the Russian-led energy development project "Sakhalin 1" in the Russian Far East Sakhalin state, and Shell also withdrew from the "Sakhalin 2" natural gas project in which Gazprom participated.

The oil reserves involved in the above two major oil and gas projects are about 100 million tons, and the natural gas reserves are more than 400 billion cubic meters.

Exxon Mobil announced on April 29 that the loss related to the withdrawal of "Sakhalin 1" will be about $3.4 billion from January to March 2022 alone.

  Influence geometry

  Recently, the price of chemical raw materials has continued to rise due to the tight global supply chain.

In response to this situation, a relevant person from Huntsman, a specialty chemical manufacturer, told the First Financial Reporter: "The price increase may be related to high logistics costs, and downstream demand is also affected."

  A person from Clariant, a polypropylene (PP) catalyst manufacturer, told the First Financial Reporter: "We are also concerned about the recent increase in the price of raw materials, but it depends on different businesses, and the factors that affect the price are not just as simple as logistics. "

  "The increase in the price of oil and natural gas will definitely cause the price of chemical raw materials to rise. Oil and natural gas are the basic raw materials." Ma Dawei, an academician of the Chinese Academy of Sciences and a researcher at the Shanghai Institute of Organic Chemistry, told Yicai.com.

  In order to ease the pressure on the global supply chain, many manufacturing companies in Shanghai are actively promoting the resumption of work and production.

Clariant has also been in closed-loop production during the epidemic, and was included in the "second batch of resumption of work and production list".

"Our factory has not stopped, and workers are managed in a closed-loop. The next step is to arrange to return to the laboratory at the headquarters." A Clariant person told Yicai.com.

  3M, a company headquartered in China in Shanghai, told Yicai.com: "3M is actively cooperating with the Shanghai government's guiding policy on resumption of work and production, and on the basis of doing a good job in epidemic prevention and control, it is going all out to promote the resumption of work and production. "

  As of May 7, 3M's four factories in Shanghai have all resumed closed-loop production, and are focusing on promoting production capacity in an orderly manner.

  However, 3M also revealed to the first financial reporter: "Although the transportation of raw materials and finished products has been greatly improved compared to before, the current logistics is still facing relatively big challenges, and the resumption of work by professional transportation companies in the market is still relatively slow. We We have obtained a pass for inter-provincial and municipal transportation, which has solved our previous logistics and transportation problems to a certain extent, but it is still far from enough compared with the transportation volume we need."

  "We hope to do our best to deploy nationwide production, warehousing and logistics to minimize the impact on customer supply. To protect customer and consumer demand, AkzoNobel Shanghai's factories in Songjiang and Pudong are currently cooperating with local epidemic prevention. At the same time of control, we are preparing for closed operation and resume work and production one after another." AkzoNobel responded to the first financial reporter.

  However, according to Oxford Economics' latest Global Risk Survey at the end of April, the situation in Ukraine is viewed by the business community as the biggest downside risk facing companies in the near term.

At the same time, business pessimism about the inflation outlook has intensified.

Average expectations for global consumer price inflation in 2023 are now about 1.5 percentage points higher than Oxford Economics' baseline forecast, while medium-term concerns from businesses about stagflation have risen markedly.

  The survey also showed that companies surveyed believe that the impact of the situation in Ukraine on supply chain disruptions is expected to last longer.

Nearly one-fifth of companies surveyed do not expect the disruption to end until 2024 at the earliest.

As a result, most companies surveyed said they are taking steps to improve supply chain resilience, particularly through supplier diversification across geographic regions.

  In addition, Oxford Economics' global business climate index fell further in April, still far below the level before the Russian-Ukrainian conflict; business uncertainty about the global economic outlook also continued to rise.

  “The latest Global Risks Survey highlights the ongoing blow to business confidence from the situation in Ukraine and growing concerns among businesses that geopolitical tensions could weigh on global growth in the medium term. We saw no signs of a recovery in confidence in April.” Oxford Economics Jamie Thompson, head of macroeconomic scenarios at the Institute, told Yicai.com.

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