No sign of closure at Ludwigshafen

14 March 1994 00:00  [Source: ICB]

BASF SEES no real possibility to close any cracker capacity at Ludwigshafen at present, deputy chairman of the board Dr Wolfgang Jentzsch has told ECN.

However, the company would be prepared to reconsider its position if alternative long-term propylene supplies could be secured, he says.

Once the new 600 000 tonne/year Antwerp cracker is fully on stream, BASF's 400 000 tonne/year share of the ethylene offtake will take it into a slight surplus, he concedes.

But he emphasises that its continuing large propylene purchase requirement is a major hurdle to any thoughts of axing older capacity at Ludwigshafen.

Jentzsch's statement leaves wide open the longstanding debate over which, if any, of Europe's steam crackers will close to help narrow the continuing severe oversupply situation.

A popular theme for some time has been the logic that those opening new crackers should close older capacity to compensate.

But this way of thinking makes no allowance for the parallel need for European producers to raise critical mass and concentrate production if they are to improve global competitiveness.

And it patently does not derive from the type of strategy in operation at BASF (see next week's ECN) where the driving force for petrochemical production is the maintenance of secure raw material supplies for derivatives operations.

In fact, only BP Chemicals has adopted the start/shutdown approach, compensating for much of the new Grangemouth capacity with the closure of Baglan Bay, and this decision was clearly driven in part by the internal imbalances the Grangemouth start-up generated.

When Antwerp reaches full production, BASF will still be forced to buy between 300 000-400 000 tonne/year of propylene, excluding the arrangement with ICI for continuing propylene supplies from Wilton to back the newly acquired PP businesses.

And the pressure on BASF's propylene position will mount through the decade as the ICI supplies are phased down and European propylene supplies tighten.

BASF would be prepared to consider cutting operating rates on its 560 000 tonne/year Ludwigshafen cracker production if some means of resolving its supply needs could be achieved, Jentzsch says.

This was a key issue in last year's ill-fated APPE cracker closure negotiations, with BASF keen to explore closure possibilities in exchange for secure long-term propylene supplies. But it proved impossible to reach agreement on the issue even within the framework of industrywide discussions.

In the absence of an alternative propylene supply, BASF will continue to run its crackers flat out as its derivatives demand dictates, Jentzsch says.

Ludwigshafen will effectively be swing plant as the Antwerp capacity is absorbed over the next couple of years, he says, but the Antwerp plant will run flat out from the outset.

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