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Energy Cost Explosion: BASF To Shift Its investments Outside Europe

Chris Bryant, Financial Times

BASF, the world’s biggest chemical maker by sales, will make the most of its capital investments outside Europe for the first time, as it responds to the continent’s higher energy costs and growing demand in North America and emerging markets such as China.

Compared with the US, where chemical companies are enjoying a resurgence thanks to low-cost shale gas, and China, where producers are switching to inexpensive coal as a feedstock, European chemical makers are competing at a significant disadvantage.

Meanwhile, Europe’s chemical market is stagnating because of the recession, making investments in the US and emerging markets appear more attractive.

Therefore over the next five years BASF plans to invest 49 per cent of its €20.2bn capital expenditure budget in Europe, compared with two-thirds of total capex (including acquisitions) in the 2009-2013 period.

“In Europe we have the most expensive energy and we are not prepared to exploit the energy resources we have, such as shale gas. We have relatively high wage costs and we have a stagnating market,” said Kurt Bock, BASF chief executive.

Mr Bock has been a prominent critic of German and European Union climate and energy policies, arguing these are ineffective, raise costs for industry and cause job losses.

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