German chemical makers may follow BASF's example

FRANKFURT (Reuters) - Germany's chemical makers are bracing for harder times, getting ready to follow the example of BASF (BASF.DE), which on Wednesday unveiled plans to curtail production.

BASF, the world's largest chemicals maker by revenue, lowered its 2008 profit outlook for the second time in two months and said it would temporarily shut down 80 plants worldwide and cut production at a further 100 sites, citing a "massive" decline in demand.

Meanwhile, its national peers are considering similar measures, including running down working-time accounts, since key customers such as carmakers are reeling from the economic crisis.

The country's chemical makers generate about 10 percent of sales from the global automotive industry alone.

Germany, the largest chemical producing nation in Europe, accounting for a fourth of the region's chemical output, entered into a recession in the third quarter.

Healthcare-chemicals hybrid Bayer (BAYG.DE) said it was ready to suspend production at its plastics and foams unit should demand weaken further.

"Should there be the need for further adjustments, we are prepared," a spokesman told Reuters.

The group as a whole, however, should cope with the crisis better than most of its peers because it derives only 30 percent of sales from chemicals, with drugs and farming pesticides accounting for the rest, the company has said.

Lanxess (LXSG.DE), a specialty chemicals supplier spun off from Bayer in 2005, said last week it was feeling the impact of a weakening economy and was cutting capacity.  Continued...