BASF opened its first China plant 20 years ago. Its Asian strategy focuses on China, Japan, S Korea and India.
Thus yesterday’s comments by vice chairman Martin Brudermüller deserve careful study by any company or investor who is interested in the outlook for the region.
The background was an unexpected 5% fall in BASF’s regional sales in Q1. Of course, Q1 2011 had been very strong, as buyers built stocks whilst crude oil prices rose. But crude also rose in Q1 this year, so clearly something else has been happening.
Brudermüller suggested that “the region is becoming more vulnerable”, and highlighted two key issues, which will both be familiar to blog readers:
• China’s political direction. He expressed a “certain amount of unease” over the leadership transition now underway, and added that “the struggle over China’s future direction seems to be harder fought than we had imagined.”
• India’s slowdown. “The political paralysis in certain areas does hold things up, and its sad to see how the country is currently falling short of its potential.”
BASF is not about to retreat from the Asian positions it has worked so long to develop. And it continues to consider further expansion in SEA, even into Myanmar, as part of its next leg of growth.
But when BASF worries about something, then the blog worries with it.