I see that, stepping into 2024, the global chemical giants’ strategic adjustments sound endless, BASF, LG Chemical, Costco, Honeywell, South Korea’s SK and other companies, have announced that there are on-going projects to terminate, there are installations permanently shut down, and, of course, there are also new large-scale cooperation with other companies. The strategic adjustment of these chemical giants has revealed a lot of information to the market, and the global chemical market in 2024 is destined to be an extraordinary year.
According to the recent information on the strategic adjustment of chemical giants, the following directions can be summarized:
First, the chemical giants are actively transforming, selling business, terminating cooperation projects, involving a number of industries
This year, many chemical giants have business termination action to BASF, for example.
As a global chemical leader, BASF has a huge product line, globally distributed production bases and market networks, as well as innovative leadership in materials science and chemical technology, which has a huge influence on the global chemical industry. BASF’s integrated production concept and continuous investment in research and development have given it a competitive edge in cost control and new product development, driving technological progress and market expansion in the chemical industry.
Every step of BASF’s strategic adjustment reflects a lot of information to the market and leads the investment trend of the global chemical industry. Many companies have taken BASF as a benchmark for strategic adjustment, either by building on its strengths and avoiding its weaknesses or by taking advantage of what others have discarded, so that they can avoid head-on competition as much as possible and enhance their own competitive advantages.
I see that in recent times BASF is actively selling off and terminating some of its businesses. Since October 2022, when BASF announced the launch of its “Cost Reduction Program”, it has been carrying out a number of initiatives, including shutting down/reducing production capacity and divesting businesses/subsidiaries, and has already shut down a number of installations and announced the termination of tens of billions of dollars of cooperative projects.
On June 24, 2024, BASF announced that it would terminate the project evaluation of the integrated nickel and cobalt refining facility in Wetar Bay, Indonesia, involving an investment of nearly $2.6 billion ($18.9 billion). The termination of the investment is mainly due to the significant changes in the global nickel market since the project was launched, and in order to ensure a flexible supply of raw materials for batteries, subsequent purchases can be made to meet the demand, so there is no need to make such a large-scale investment.
In July 2024, Forward AM strategically acquired BASF’s Additive Manufacturing business and created Forward AM Technologies, a company that will take over and combine BASF’s current Additive Manufacturing Materials and Solutions business with a focus on Additive Manufacturing related technologies, products and services.
At the beginning of July 2024, BASF announced plans to discontinue the production of glufosinate-ammonium active ingredients in the Knapsack region of Germany and at the Frankfurt plant by the end of 2024, in addition to the discontinuation of glufosinate-ammonium formulations at the Frankfurt plant in 2025, after which both plants will be closed.
On July 2, 2024, BASF will abandon its plans to invest in lithium assets in Chile and has now withdrawn from preliminary negotiations with Wealth Minerals, the company that owns the Chilean exploration project. The project was previously in the early stages of investment and was planned to involve lithium resource procurement, battery material plant construction, etc. In particular, the plant was also proposed to be built in partnership with BYD.
On February 9, 2024, BASF announced that it had begun in the fourth quarter of 2023 to divest its shares in two joint venture companies in Xinjiang, China. The companies are BASF Merkel Chemical Manufacturing (Xinjiang) Co. in the Korla region of Xinjiang and Merkel Meio Chemicals (Xinjiang) Co. As part of BASF’s global strategy for 1,4-butanediol, BASF has assessed the market environment and the carbon footprint of its products and their downstream products from various production locations around the world and found that the BDO value chain is facing increasing competitive pressures, highlighted by a global overcapacity in BDO.
In my view, BASF’s Cost Reduction Program is designed to respond to economic uncertainty and market challenges by optimizing cost structures and improving efficiency. By the end of 2026, BASF plans to achieve additional cost savings of €1 billion per year at its Ludwigshafen site. This includes cost reductions in production and non-production areas, as well as cutting variable costs through process re-engineering. In addition, BASF will adjust its production capacity to market demand and optimize its organizational structure.
BASF’s cost reduction program will bring huge cost savings to BASF and also provide room for the development of Chinese chemical companies. BASF as a global chemical leading enterprises, the production capacity of some of its products accounted for a relatively large, and rich product structure, flexible industrial chain production, each of their strategic adjustments, can provide a trend for the development of Chinese chemical enterprises to learn from.
Second, the international leading enterprises are actively seeking “strong combination”, “green low-carbon” and other business directions
According to my observation, the recent international leading enterprises are also actively seeking new directions, in particular, to seek solutions to the impact of China’s rapid growth in production capacity, including “strong alliances” with international leading enterprises, as well as global low-carbon development of innovative business models. These strategies can help companies enhance market competitiveness, resource sharing and technology synergies, while responding to the challenges of global climate change, meeting increasingly stringent environmental regulations, and catering to consumer demand for sustainable products.
In July 2024, China’s polyurethane additives supplier Jiangsu Meishi Chemical Co., Ltd. held a signing ceremony with Costron and the Institute of Forestry and Chemical Industry of the China Academy of Forestry Sciences at the Costron Asia Pacific Innovation Center in Shanghai, where the three parties will carry out open-ended cooperation between industry, academia, and research institutes in order to work on the circular economy, promote sustainable development, and achieve the “dual-carbon” goal. The three parties will work together on circular economy, promote sustainable development and realize the “dual-carbon” goal. The products included are non-food bio-based polyurethane additives, and low carbon development solutions in the polyurethane field.
In July 2024, Honeywell and Anhui Fengyuan Group announced that they will build a sustainable aviation kerosene and other projects in Bengbu, Anhui Province, to provide clean coal fuel for the development of a green and low-carbon aviation industry.
In July 2024, SK Innovation, a large energy and chemical company in South Korea, news that a consortium of Goldwin (project owner, Japan, a world-renowned skiwear company), Mitsubishi Corporation (Japan, a globally renowned chemical company), Chiyoda Corporation (Japan, a world-renowned general engineering company), SK Geo Centric (South Korea), Indorama Ventures (Thailand, the world’s largest producer of recycled PET), India Glycols (India, a globally recognized chemical company), and Neste (Finland, the world’s largest producer of renewable diesel fuel), a consortium of seven companies from five countries, have established the world’s first carbon dioxide-derived materials (CO -carbon monoxide – paraxylene) as well as renewable and bio-based materials for a sustainable polyester fiber supply chain.
On June 24, 2024, BASF announced that BASF and Siemens Smart Infrastructure Group launched the first SIRIUS 3RV2 circuit breaker containing biomass-balanced plastic components, which includes biomaterial components and other products, to jointly advance the bio-based application of smart materials and create a new trend of low carbon and environmental protection.
On July 5, 2024, Wanhua Chemical and Fuller Group signed a strategic cooperation agreement, aiming to further promote cooperation in multiple fields on the basis of their previous cooperation, which includes resource sharing, complementing each other’s strengths, deepening joint innovation, and expanding business layout.
According to the recent strategic adjustments of international chemical giants, most of them are choosing low-carbon and green development direction. The development of low-carbon chemical enterprises not only helps to reduce greenhouse gas emissions and protect the environment, but also enhances their brand image and market competitiveness. By adopting clean energy, circular economy models and green processes, chemical companies are able to adapt to increasingly stringent environmental regulations, meet consumer demand for green products, and at the same time reduce operating costs and realize sustainable development.
However, for Chinese enterprises, bio-based chemicals started relatively late, and there is no obvious competitiveness in comparison with petroleum-based products, the international leading chemical companies hope that bio-based to realize the “curved road overtaking” of China’s chemical industry, which has certain reference significance for Chinese enterprises.
In my opinion, the international chemical giants’ strategic adjustments through mergers and acquisitions, divestitures, and capacity optimization can help them reshape the global market pattern and increase industry concentration. But these adjustments may also lead to intensified market competition, forcing companies to accelerate innovation and cost control, and may also trigger supply chain reorganization and changes in market demand.
For China’s chemical industry, the giants’ moves could further intensify the competitive landscape in China’s chemical industry. There are still many companies in China that are relatively weak in competitiveness, and Chinese companies should also make proactive strategic responses to meet the more intense competition in the globalized market.