The Quarter European Chemicals Stopped Shrinking
EU chemical production went from minus 3.6% in the first quarter to plus 1.5% in the second, and BASF's half-year report says the demand arrived through the hole Hormuz left. Europe spent three years removing the plants that would have absorbed it.
We ended last night on a conditional.
"If the demand comes back before the river does, the arithmetic gets much less forgiving."
BASF published its half-year report at seven this morning, Ludwigshafen time. Thirteen pages in, in the economic-environment section that most readers skip on the way to the segment tables, sits the sentence that closes it.
"After the Strait of Hormuz was closed for exports of basic chemical products, some of the global demand for chemicals shifted to Europe."
And then the numbers behind it.
Against the prior-year period, EU chemical production fell 3.6% in the first quarter. In the second quarter it rose 1.5%.
US production went the other way, down about 1.4% across the two quarters together. Chinese growth collapsed from more than 8% in the first quarter to 1.9% in the second, which BASF attributes to the same conflict.
So the demand came back. The river has not, and neither have the plants.
Three years of fitting the continent to the decline
Everything Europe removed since 2023 was removed on the assumption that the decline was structural.
Take the one site the whole continent indexes off. On February 24, 2023, BASF laid out what was coming out of Ludwigshafen: the caprolactam plant, one of the two ammonia plants and the fertilizer units behind it, the adipic acid capacity, cyclohexanol and cyclohexanone, soda ash, and the 300,000 tonne TDI plant along with its DNT and TDA precursors.
That list was 10% of the asset replacement value of the site, around 700 production positions, and more than 200 million euros a year of fixed cost.
Eighteen months later, in August 2024, the rest of the adipic acid went, and CDon and CPon with it. Adipic acid moved to Onsan and the Chalampé joint venture.
CDon and CPon deliveries stopped in coordination with customers, which is the polite phrasing for a grade that no longer exists in your supply base.
None of that comes back if demand improves for two quarters. Ammonia plants do not get un-decommissioned.
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