BASF Joins List of Chemical Companies Planning Global Capacity Reductions

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Researched by Industrial Info Resources (Sugar Land, Texas)--The chemical industry is beginning to respond to a slowing global economy that looks like it will remain slow well into next year. BASF AG (OTC:BASFY) (Ludwigshafen, Germany) this week announced intentions to temporarily close up to 80 plants around the world and reduce production at many more. Industrial Info has identified over $1 billion of planned grassroot construction by BASF, most of which is certain to be delayed or postponed. LyondellBasell Industries (Houston, Texas) confirmed this month the idling of its 1.7 billion-pound-per-year ethylene unit located at its La Porte, Texas, plant site. This unit is among the largest individual ethylene units in the Gulf Coast region and is expected to remain offline until the first or second quarter of next year.

Flint Hills Resources LP (Wichita, Kansas) has announced plans to permanently close its olefins complex in Odessa, Texas, by June of next year. This closure means the loss of an estimated 800 million pounds per year of ethylene capacity plus a long list of related olefin products. These closures and capacity curtailments are the unfortunate effects of a dramatic decline in demand at a time that inventory has been kept high as a result of the chemical processing industry's (CPI) operating at very high utilization rates for an extended period of time.

Despite these cutbacks and closures, the CPI remains one of the strongest markets for industrial spending in North America, especially in the Southwest and Gulf Coast regions of the United States. Combined, these two regions are home to more than 700 operational CPI plants where annual spending for capital projects often reaches several billion dollars in new construction. Considering the current economic climate around the world, additional project delays or cancellations are certain to be announced in the coming weeks or months. Even with the anticipation of markets not improving substantially until next year, the CPI is expected to spend big in the coming year to meet demand for niche markets, environmental compliance, energy reduction and reliability projects.

Industrial Info Resources (IIR) is a marketing information service specializing in industrial process, energy and financial related markets with products and services ranging from industry news, analytics, forecasting, plant and project databases, as well as multimedia services.