BASF’s Styrolution ‘right move’ for chemicals major – analyst

13 July 2011 18:42  [Source: ICIS news]

LONDON (ICIS)--BASF’s Styrolution joint venture with INEOS is “the right move” for the Germany-based international chemicals major as it seeks to reduce the role of basic chemicals in its portfolio, an analyst said on Wednesday.

BASF has been for years now pursuing a strategy to reduce [basic chemicals] as it increasingly bets on specialty chemicals,” said Lars Hettche, analyst at Bankhaus Metzler, a German bank.

As such, it is right for BASF to shift its styrenics operations into the Styrolution venture and to eventually exit that business entirely, he said. 

However, Hettche said it remains unclear when BASF will be able to completely withdraw from styrenics.

“I think it may take two or three years for BASF to completely exit that business,” depending on market conditions and agreements with partner INEOS, he said.

Meanwhile, the €600m ($845m) BASF will receive from Styrolution as part of the deal will help the chemicals major to reduce its debts, the analyst added.

BASF and INEOS signed a contract to form Styrolution in May. The European Commission has approved the joint venture but the transaction has not yet closed.

Hettche said going forward BASF will continue to benefit from its integrated production structure at key hubs such as Ludwigshafen, Germany, and elsewhere.

In addition, BASF’s Wintershall oil and gas business will provide a hedge against rising raw materials costs.

“That means, while competitors will see their margins shrink as oil and gas prices rise, BASF – on a group basis – will not see an influence on results,” he said.

($1 = €0.71)

For more on BASF visit ICIS company intelligence

By: Stefan Baumgarten
+1 713 525 2653

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