Cut Off The 'Gas' Warning! ​Chemical Giants Such As BASF And Covestro Speak Out Urgently!​

Recently, Russian President Vladimir Putin said that Russia will suspend gas contracts if buyers do not pay in rubles. As the matter is still fermenting, what impact will this move have on "unfriendly" countries?

It is reported that the Kremlin said that Putin's order on the payment of natural gas in rubles is irreversible, and Russia will not cut off the supply of natural gas to Europe from April 1, and gas delivery payments due after April 1 will be paid in April. Semi-monthly and May payments. Putin has told German Chancellor Scholz in detail how to pay for gas in rubles, and the proposed "gas-for-ruble" scheme for Germany will apply to all "unfriendly" countries.

Affected by Russia's possible interruption of natural gas supply, German Economy Minister Robert Habeck issued a statement on March 30, saying that if the government must limit natural gas supply, the German natural gas network regulator will give priority to household heating, rather than industrial use, so energy needs. Thriving manufacturers will bear the brunt of the impact.

The recent surge in energy prices has greatly increased the production costs of many European companies, which not only reduced profits, but also suppressed the production boom. Some companies were forced to reduce or even stop production.

On March 30, Martin Brudermuller, CEO of Europe's largest chemical manufacturer and German chemical giant BASF, said in an exclusive interview with the Frankfurter Allgemeine Zeitung that Russia supplies 55% of Germany's natural gas, and a sudden cut off would lead to a "total collapse". , Germany will face high unemployment and many companies will go bankrupt, causing irreparable damage.

On April 21, the CEO of polymer giant Covestro, Dr. Markus Steilemann, expressed his concern about the cut-off of natural gas in Russia at the Covestro 2021 shareholders meeting.

According to Xerox, the immediate imposition of the embargo on Russian natural gas affects not only the chemical industry but all downstream industries, which could lead to the collapse of entire production and supply chains and jeopardize thousands of jobs.

He said that the situation in Russia and Ukraine poses a challenge to both Covestro and the chemical industry. It is clear that we must reduce our dependence on fossil raw materials, especially on Gazprom. This is a huge challenge and we have to work on new technologies.

Not only Covestro, but also a number of chemical giants in Europe have issued warnings.

Dutch coatings giant AkzoNobel said on April 21 that due to the company's suspension of operations in Russia, revenue from Russia will drop by 70% this year, affecting about 5 million euros in operating income in the first quarter, of which 1 million euros are related to the company. Regional accounts receivable and inventory impairments.

The German chemical sector consumes about 15% of Germany's natural gas supply, according to the German Chemical Industry Association (VCI). On average, BASF's plant in Ludwigshafen in southwestern Germany requires nearly 4 percent of Germany's natural gas annually.

Europe is an important production base in the global chemical industry, second only to China, and is highly dependent on Russia for energy. In 2022, the consumption of oil and natural gas in the 27 EU countries in the production of chemical products will account for 44.8% and 35.6% respectively. Among them, Germany, France, Italy and the Netherlands are the major chemical industrial countries in Europe, and the sales of Germany ranks first in Europe and third in the world. As of 2021, Russia's gas imports account for 55% of Germany's total gas imports.

As a gathering place for the global chemical industry, the EU's energy sanctions against Russia may be the first to affect Germany's energy supply and the development of the chemical industry. On April 22, the German Central Bank pointed out in the latest monthly report that if the EU bans Russian energy imports, it will cause a 5% contraction in Germany's total GDP this year, amounting to 165 billion euros.

German Deputy Chancellor and Economy Minister Robert Habeck said a few days ago that Germany is rapidly reducing its dependence on Russian energy imports. It will only be possible to reduce Russian gas consumption to around 10% in 2024.

The warning of "stop production and production suspension" by chemical giants involves the operation of enterprises in the global chemical industry chain and even derivative industry chains, and the most direct impact is to raise the price of chemical raw materials. "The cost of raw materials for our European business is ridiculously high," said Tom Crotty, director of the Swiss petrochemical giant INEOS Group. Energy security poses "enormous challenges".