INTERVIEW: LANXESS prepared for worst-case Europe gas scenario with targeted shutdowns – CEO

Joseph Chang


NEW YORK (ICIS)–Germany-based LANXESS is prepared for the worst-case scenario if all Russian gas supplies to Europe are cut off, as it can reduce production or shut down gas-intensive units, allowing most of the rest of its operations to continue, its CEO said.

“We are prepared – we have done our detailed assessments on what happens if no gas is going to come from Russia. We have a few plants that are very gas intensive and therefore by reducing production at these plants or shutting down two very gas intensive production units, we can mitigate completely the gas coming from Russia,” said Matthias Zachert, CEO of LANXESS, in an interview with ICIS in New York.

The two production units, which product lines were not identified, are at the company’s largest site in Leverkusen, Germany where it has 23 production units.

At its Leverkusen site, LANXESS produces basic chemicals, precursors and active ingredients for pharmaceuticals and crop protection products, raw materials for paints and coatings, products for water purification, and plastic additives.

The shutdown of the two units would reduce natural gas consumption at Leverkusen by 50%, allowing its other units to produce at sufficient volumes, he noted.


The current sky-high level of natural gas prices in Europe is unsustainable, as both consumers and industry are already cutting down usage, according to the CEO.

“There is a lot of panic priced into the market – we have seen price hikes of 1,000-2,000% – that’s absurd but sometimes markets overreact in one direction and then overreact in the other,” said Zachert.

“If now consumers consume less because of the price, and also the industry produces less because they cannot roll over the pricing to the end customer, consumption will go down. Gas is a commodity, and when consumption and demand go down, of course the price should correct as well,” he added.

The key question is: Where will the new normal for energy prices be for the industry? The jury is still out, he noted.

On 25 August, the ICIS benchmark for European gas prices – the front month Dutch TTF – hit a record high of over $91/MMBtu. Prices were mostly in the single digits through the first half of 2021 before the start of higher volatility. Volatility intensified after the start of the Russia-Ukraine war in February and the subsequent reduction of Russia gas flows into Europe.

The LANXESS CEO expects a peak in European energy prices soon.

“Let’s face it – we have reached a situation where it really cannot get that much worse. The capital markets are factoring in a tough recession – a hard landing. Energy prices have reached a peak – the worst scenario – and therefore there are little further negative shocks that can occur,” said Zachert.

“We see industry players shutting down plants – fertilizer plants for instance. They absorb huge amounts of gas. If all of them are stepping down – the private consumer and industry consumer, demand will go down,” he added.

Capital markets tend to anticipate “pitch black” – or the worst-case scenario – 3-5 months before it actually happens, he noted, pointing to the COVID-related stock market collapse and trough in March 2020 – months ahead of the severe slowdown in volumes starting in June.


In the meantime, LANXESS is not having problems sourcing key raw materials such as gas-intensive ammonia, despite widespread shutdowns in Europe, according to the CEO.

“There are ammonia plants that have closed down in Europe but ammonia is a global commodity and you can still source it from other parts of the world which we do. Our production site [using ammonia feedstock] is directly in the harbour, so we get ships from overseas,” said Zachert.

LANXESS uses ammonia feedstock in the production of caprolactam (capro) at its Antwerp, Belgium site, which then feeds into nylon 6 (polyamide 6) at the site.

The company has capro capacity of 220,000 tonnes/year at Antwerp, according to the ICIS Supply and Demand Database.

“As far caprolactam is concerned, there are two competitors in Europe that have had to close down and reported force majeure. We didn’t because if you look to our capro production process, first, we are less gas intensive,” said Zachert.

“Second, if you look at the Antwerp site and the configuration, we have excess steam production in other parts of our production units at Antwerp that supply the capro stream… We are basically to a large extent self-sustained,” he added.

In Europe, LANXESS has built up inventories in certain unspecified raw materials to mitigate the risk of force majeures.

“Everybody does their own thing, but we decided in the last 6-12 months to have safety stocks because of the logistical constraints and disrupted value chains, so we stocked up on some raws where we knew supply was tight,” said Zachert.

“In the current environment where you have no normal established raw material flows… you have to build enough safety stocks and liquidity. If you don’t, you run into a force majeure which is always more painful for customers. As a reputed chemical company with international reach, this is something we definitely decided to do,” he added.


On the demand side, the softening in Q2 is continuing into Q3 “but there is no sudden brutal double-digit volume decline – this is not happening,” said Zachert.

“We see clearly that automotive and construction are softening but there are other industries that are growing like the agrochemical markets which had been in a trough for the last 5 years,” he added.

LANXESS’ Consumer Protection segment, which includes flavours and fragrances, material protection products (disinfectants, preservatives), liquid purification technologies (water treatment) and agrochemical and pharmaceutical ingredients, is doing “reasonably well” but there are logistics constraints in shipping from the US to Europe, as well as Europe to Asia because of congested ports and other issues, he noted.

“Logistics constraints are no longer getting worse. Here and there logistics are mildly improving but it’s still very constrained, so we still see this as a major issue on the radar, and our assumption is that it will not improve before the second half of 2023,” said Zachert.

Improvement in the back half of 2023 will come from increasing shipping capacity from ocean freight companies as well as an expected weakening of business conditions which will reduce demand, he added.

Meanwhile, China demand is ticking up but it’s still too early to tell if this can be sustained.

“What took me by surprise was that China started to rebound a little. Now we have to see if this was just a [blip] or if this is kicking in with more momentum now that the severe lockdowns are no longer done country-wide,” said Zachert.

Interview article by Joseph Chang


Global News + ICIS Chemical Business (ICB)

See the full picture, with unlimited access to ICIS chemicals news across all markets and regions, plus ICB, the industry-leading magazine for the chemicals industry.

Contact us

Partnering with ICIS unlocks a vision of a future you can trust and achieve. We leverage our unrivalled network of industry experts to deliver a comprehensive market view based on independent and reliable data, insight and analytics.

Contact us to learn how we can support you as you transact today and plan for tomorrow.